The period 2020-2021 has become one of the busiest ones for the business community in terms of tax and customs controversy related to intragroup payments.
In terms of tax implications, the Russian tax authorities have issued special guidance on the tax treatment and qualification of intragroup services. In this guidance, the tax authorities define specific tests and requirements to be met in order to allow a tax deduction of the related charges, such as a reality test, benefit test, no duplication with any other function, proper documentary support, arm’s length tests and no charges representing shareholder functions. Where services do not meet any of the above tests, the respective fees will not be deductible. Moreover, in case a service is reclassified into shareholding activity, the fees are likely to be treated as a hidden dividend subject to withholding income tax.
In addition to the tax implications outlined above, the customs authorities have also undertaken a significant number of customs audits during the last few years, where, inter alia, a common theme was the inclusion of various intercompany payments (including dividends) in the customs value of imported products. Court practice on this issue is still developing. Whilst there may be arguments that some of the intra-group payments should not be included in the customs value because they are not related to the imported products and (or) cannot be viewed as a condition of sale of such products, there is already an unprecedented number of controversy cases around this issue with some large multinational companies receiving customs assessments.