Russian companies with foreign subsidiaries and subsidiaries of foreign companies trying to liquidate their business in Russia cannot be separated due to difficulties in interacting with the Federal Tax Service. This was said by the experts of the consulting company “Business Solutions and Technologies” (DRT, ex Deloitte). author RBC.
The delay in liquidation began even before the new wave of anti-Russian sanctions and the mass exit of foreign businesses from Russia. However, the events of the last nine months have exacerbated this trend.
One of the most important problems: the head offices of companies abroad prohibit their subsidiaries from paying taxes to the Russian budget. At the same time, DRT experts emphasize that this is at least an independent decision by American companies, as the US allows US-controlled companies to pay taxes in Russia until March 2023, despite sanctions.
Even if a foreign company or its Russian branch has declared liquidation, it is not exempt from paying taxes. At the same time, the management of firms is punished, including criminal ones, for tax evasion or failure to file tax returns.
Many companies that announced they would leave Russia and liquidate their businesses are under threat of fines and criminal proceedings, but did not name specific legal entities, experts said. According to analysts, such situations have become challenging for foreign firms: they find themselves between the conflicting instructions of the parent company and the requirements of Russian law.
“We’ve had a lot of requests from foreign customers: what happens if they stop paying taxes and file returns,” said Anton Zykov, DRT partner and head of tax dispute resolution group.
Irina Barchuk from DRT sought the most painless way to get out of a problematic situation. For this, a foreign company must continue to provide accurate reports and statements. Then the Federal Tax Service will be able to independently collect money from the company’s accounts in accordance with Article 46 of the Tax Code of the Russian Federation. Thus, the legal entity will bypass the ban on paying taxes to the Russian budget of the foreign headquarters.
If you do not make a statement, you must pay two penalties at the same time: non-payment of taxes and failure to submit reports. And the heads of local branches in this case face administrative and criminal liability depending on the amount of unpaid tax.
According to Barchuk, another reason why foreigners could not timely liquidate the Russian branches (a year is set aside for this according to the law) was on-site inspections of the Federal Tax Service. Now in Russia, the Ministry of Finance has a moratorium on scheduled labor inspections that have been extended since the pandemic. However, it does not apply to field tax audits.
The problem is that if a company is undergoing on-site inspection by the Federal Tax Service, it cannot be liquidated – you have to wait for its completion and the corresponding decision. And this can take months. Therefore, after the start of such a control, legal entities are advised to immediately apply for the termination of liquidation – since the procedure can be resumed only after six months.
Yury Aksyonov, a partner at Orchards law firm, said that on-site tax audit is standard practice for a foreign company that has announced its liquidation and previously engaged in commercial activities. “In modern conditions, tax control measures can de facto aim at protecting not only budgetary interests, but also employees and counterparties of the liquidated organization,” Aksenov said.
As a result, experts came to the conclusion that at the moment in Russia there are a large number of companies and branches of foreign legal entities that are in the process of liquidation. The Federal Tax Service requires all of them pay their taxes before they leave. Therefore, to facilitate exit, these firms should initiate the payment themselves.
According to Rostrud’s September 2022 data, from March to July, about 3,000 foreign companies announced that they liquidated their businesses in Russia or temporarily stopped their operations. Experts report that many of them have officially left – transferring assets to local government, continuing to offer goods and services under other brands.
On December 1, President Vladimir Putin said that companies that had left the country and sold their business due to the sanctions imposed on Russia then wanted to return to the Russian market.
“Someone is leaving by transferring a multi-billion or multi-million dollar property to management for one dollar, obviously in hopes of returning by making secure deals,” the head of state said.