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The Russian Federal Tax Service (the “FTS”) has issued a letter clarifying the provisions of Article 54.1 of the Russian Tax Code on tax avoidance, outlining a methodology for tax inspectorates on how to identify misrepresentations of business operations, check material facts and intent to use sham or “fly-by-night” companies. It also provides taxpayers with criteria for counterparty due diligence, which should eliminate the possibility of their subsequent tax liability.

In addition, the FTS has finally admitted the need for so-called “full tax reconstruction” (a comprehensive reclassification of transactions previously applied only by the courts) and the ability to deduct actual expenses for corporate profits tax purposes and to offset input VAT on transactions with sham companies. However, this is possible only if a taxpayer discloses the actual suppliers and financial terms in such transactions.

COVID-19 pandemics has triggered insurance claims based on business interruption and other relevant policies all over the world. In this alert we would like to:

invite you to participate in a poll aimed to examine policyholders’ experience in dealing with pandemics-related insurance;
inform you on the recent UK Supreme Court landmark judgment regarding application of business interruption policies coverage to the COVID-19 related financial losses; and
update you on some developments in Russia regarding insurance coverage of the COVID-19 related financial losses.

Baker McKenzie’s newest report, Russia: Corporate Anti-Corruption Enforcement Trends, aims to provide both international companies operating in Russia and Russian businesses with an international footprint with practical and informative guidance on evaluating their corporate compliance programs. Focusing on the risks of prosecution under Russian law, this report will be particularly valuable…

New amendments to the Russian Tax Code1 (“Law”) will allow individuals to reduce the Russian individual income tax on profit distributions from foreign companies and unincorporated vehicles (e.g., trusts) sourced from dividends originally paid by Russian companies that are subject to Russian withholding tax (“indirect tax credit”).

The Law eliminates the existing double taxation and economically equates ownership of Russian assets via Russian and foreign companies (trusts). At the same time, the Law eliminates the 0% tax rate previously available for Russian companies on dividends received through intermediary foreign companies that are not beneficial owners of income. This will allow, for example, the application of the 15% Russian withholding tax rate on dividends paid to Cypriot and Luxembourg intermediary companies under the recently amended tax treaties. Some historic holding structures will get a deferral; for them the new rules will apply as of 2024.