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Draft Law on Consolidated Group of Taxpayers Alexei Spirikhin Alinga Consulting Group 19 October 2011.

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Presentation on theme: "Draft Law on Consolidated Group of Taxpayers Alexei Spirikhin Alinga Consulting Group 19 October 2011."— Presentation transcript:

1 Draft Law on Consolidated Group of Taxpayers Alexei Spirikhin Alinga Consulting Group 19 October 2011

2 Contents: 1.Draft law: definition, status and establishment of consolidated group of taxpayers (CGT); 2.Liable participant of consolidated group; 3.Collection of unpaid taxes of the Group. Suspension of bank operations; 4.Tax control over consolidated group of taxpayers; 5.Conclusions.

3 Definition, status and establishment of CGT Consolidated group of taxpayers (CGT):  voluntary union of profit tax payers aiming to compute and pay profit tax based on aggregate financial result;  Not a legal entity;  Established based on the Agreement concluded between the participants of the Group for the period not less than 2 years; Aggregate financial indicators of all the participants for the preceding year should not be less than:  15 billion rubles of paid taxes (Profit tax, VAT, excise tax and Mineral Extraction Tax);  100 billion rubles in revenues and other income;  300 billion rubles in assets (1 000 billion RUR in first draft)

4 Definition, status and establishment of CGT CGTs are only Russian legal entities where: Share of direct or indirect interest of one participant of the group in respect of each separate participant is not less than 90%; Amount of net assets exceed the amount of Charter Capital; Participant is not undergoing re-organization, liquidation or bankruptcy; Participant is not a resident of Special Economic Zones, does not apply special tax regimes and not a part of other CGT; Participants do not apply 0% tax rate ; Others

5 Liable participant (LP) of consolidated group Liable participant (LP) of CGT Liable participant (LP) of CGT:   Acts on behalf of the CGT;   Fulfills rights and obligations of CGT as a taxpayer;   Maintains tax registers of CGT;   Collects profit tax declarations from the participants;   Files profit tax declaration of CGT;   Bears responsibility for paying tax arrears, fines and penalties of the CGT.

6 Collection of unpaid taxes. Suspension of bank operations. Draft law sets out special procedures for collection of taxes which were not paid by the Group: Collection of taxes is made at the expense of LP’s cash in banks; If LP’s cash funds are not sufficient, taxes are collected at the expense of other participants; If the Group’s cash is not sufficient, collection is made at the expense of other assets. Suspension of the accounts is subject to the same procedures as collection of unpaid taxes.

7 Tax control over CGTs On-site tax audits in relation to CGTs On-site tax audits in relation to CGTs:  May be conducted on the territory of LP and on the territory of other participants of CGT simultaneously;  Individual filed audits of the participants’ taxes, different from profit tax, may be conducted at the same time as consolidated tax audit;  May not last more than 2 months, but may be increased for the number of months equaling the number of participants (apart from LP) but not more than for 4 months;  May be extended to 9 months or 12 months in exceptional cases. CGTs are not subject to Transfer Pricing rules!

8 Conclusions In our opinion the following factors affects the value of the draft law in current edition:   CGTs may only be established by a few number of taxpayers due to tough eligibility criteria (taxes, revenues and assets);   Difference in selection criteria of participants for TP and CGT means it is necessary to maintain two sets of tax accounts (additional administrative pressure);   Foreign related parties may not be the part of CGTs and as a result such operations are still subject to TP rules;   Procedures for collection of unpaid taxes at the expense of participants (if LP’s funds are not sufficient) and suspension of bank accounts are not clearly determined;   In some cases lack of clear tools of realization of LP’s and other participants’ rights and obligations.

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