The Legal 500

Legal Developments worldwide

• Tax regime for severance pay

  Separate taxation at the average rate of the last year with professional activity
  - Claeys & Engels law firm

• Harmonised dismissal rules: Proposal

  The draft bill concerning the introduction of harmonised dismissal rules was introduced in the House of Representatives on 21 November 2013.
  - Claeys & Engels law firm

• New Criteria for the Good Faith Test in the Court Practice

  Presumption of good faith of the parties and their actions adopted initially in the Concept of the development of the civil legislation of the Russian Federation dated 7 October 2009, article 10 of the Civil Code of the Russian Federation (hereinafter - the Civil Code), has been developed by the Presidium of the Supreme Commercial Court of the Russian Federation (hereinafter - the SCC).
  - Lidings Law Firm

• Other Treaty Interpretation Mistakes in Case Law

  Further to the above issues that have a degree of uncertainty requiring court analysis and judgement, sometimes you can face fairly odious errors in tax treaty application. These include such "casualties" as the Promleasing case, where both the taxpayer and the tax authorities were drawn into an embarrassing discussion proving that a Russian LLC is a Russian enterprise because its CEO is a Russian citizen, evidently misinterpreting the term "enterprise" for treaty purposes (see Resolution No. КА-А40/6805-11 dated 08 July 2011).  Another renowned case included a court ruling that the Protocol to the Russia-Germany Double Tax Treaty expressly specifying an additional guarantee of unlimited interest cost deduction could not apply at all, because this benefit discriminates against Russian companies qualifying as Russian subsidiaries of German residents (See the Rulog case No. А40-37344/11-107-160 dated 19 November 2012). This statement is as outrageous as the suggestion that an international tax treaty is required for Russia not to discriminate its Russian companies against one another. No practical advice can be given for avoiding such an odd situation other than ensuring that development and presentation of the legal position in a tax dispute is assigned to adequate professionals. Normal 0 false false false RU ZH-CN AR-SA /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:Arial; mso-bidi-theme-font:minor-bidi; mso-ansi-language:RU; mso-fareast-language:EN-US;}
  - Goltsblat BLP

• Are Formalities Still Important for Tax Agents?

  The turn in the direction of denying formal approaches discussed above does not work equally in all respects. Given the above SCC position that the full amount of tax not withheld can be claimed from the tax agent, it is in the interests of Russian paying entities to invest sufficient efforts in ensuring the formal side of the matter where a double tax treaty exemption applies. The core recommendation is simple: to obtain, in a timely fashion, an adequate and duly apostilled tax residence certificate for the payee that is entitled to double tax treaty exemption. If this seems natural with independent parties, it is often an annoying routine with group companies: why bother obtaining new certificates if the parties are quite sure where the parent company is located and tax resident? Yet it is crucial to prepare all the documents beforehand, since these formalities might take a substantial time and, if you fail to present the documents during a tax audit, you might lose the case. Normal 0 false false false RU ZH-CN AR-SA /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:Arial; mso-bidi-theme-font:minor-bidi; mso-ansi-language:RU; mso-fareast-language:EN-US;}
  - Goltsblat BLP

• Reclassifications and Substance over Form: Closing the Loopholes

  Interestingly, where courts notice alleged tax base erosion, they try to go further than the existing legislation allows and expand it by referring to tax treaties. Among recent examples is the United Bakers case, where the court ruled that thin capitalisation rules may apply to a foreign sister company, a case not envisioned in the Tax Code, by referring to Article 9 of the Luxembourg-Russia Double Tax Treaty, claiming that these are associated enterprises (see No. А52-4072/2012 dated 18 September 2013). Normal 0 false false false RU ZH-CN AR-SA /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:Arial; mso-bidi-theme-font:minor-bidi; mso-ansi-language:RU; mso-fareast-language:EN-US;}
  - Goltsblat BLP

• Adverse Treaty Interpretations: Thin Capitalisation and Non-Discrimination

  From our recent practice, we see a general decline in respect of double tax treaty provisions by law-enforcers and growing apprehension and concerns on the part of clients applying tax treaty benefits. We believe that this incorrect interpretation of double tax treaties has been provoked by inaccurate wording of the SCC Resolution on the Severny Kuzbass case (No. 8654/11 dd. 15 November 2011). In this infamous ruling, the SCC overthrew the stable case law based on consensus that the Russian thin capitalisation rules could not apply where double tax treaty non-discrimination provisions were in place. The court found the rules applicable to Russian corporates with foreign capital only as being non-discriminatory and stated that the treaties did not interfere in Russia's right to apply domestic thin capitalisation rules as it saw fit. Normal 0 false false false RU ZH-CN AR-SA /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:Arial; mso-bidi-theme-font:minor-bidi; mso-ansi-language:RU; mso-fareast-language:EN-US;}
  - Goltsblat BLP

• New Tax Environment: Will Courts Continue Mistreating Double Tax Treaties?

  Evgeny Timofeev, Partner, Head of Russian/CIS Tax Practice, Goltsblat BLP
  - Goltsblat BLP

• Croatia: Defining public authorities' role in market price negotiations

  In one of the last sessions convened before the expiry of three Competition Council members' mandates, the Competition Agency terminated the proceedings against undertakings operating in the dairy products market on the grounds that there were no longer any legal grounds for further conduct. read more...
  - Schönherr

• Czech Republic: New collective investment vehicles under the new Civil Code

  The New Czech Civil Code (Act No. 89/2012, Coll., the Civil Code) will become effective as of 1 January 2014 and will practically rebuild the entire area of civil law in the Czech Republic. 
  - Schönherr