The further development of the Russian anti-abuse tax practice

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

The further development of the Russian anti-abuse tax practice

Sponsored by

sponsored-firms-kpmg.png
This remains an area of uncertainty requiring clarification or amendments to the law.

Dmitry Garaev of KPMG Russia discusses how the understanding around tax anti-abuse provisions continues to evolve through contrasting approaches from the judiciary and the legislators.

Tax anti-abuse provisions initially appeared in Russian practice during October 2006 and were introduced by a ruling – rather than through a law - from the Supreme Arbitration Court (Ruling No. 53). Ruling No. 53 introduced the concept of unjustified tax benefit, which meant that if transactions and deals are driven merely by the intention to receive a tax benefit (e.g. tax deduction, reduced rate), then such a tax benefit should be ignored and the tax consequences should be assessed based on the parties’ true intentions.

In 2017, a legislator decided to introduce tax anti-abuse provisions into the Russian tax legislation. Thus, the Tax Code saw Article 54.1 “Limits on the exercise of rights relating to calculation of the tax base and (or) the amount of tax, a levy or insurance contributions” added to it. Quite surprisingly (in contrast to Ruling No. 53), Article 54.1 was silent on whether transactions aimed primarily at avoiding tax payments should be accounted for in light of the parties’ true intentions and their real economic substance. In other words, there were no provisions in Article 54.1 requiring the authorities to reconstruct the transactions’ real substance and tax consequences. 



At first glance this may appear excessive, since it is reasonable to expect that the tax effect of any transaction should be evaluated based on its real economic substance. In practice, this has allowed the authorities to take a somewhat odd approach: they have started to deny the deduction (an offset) of all costs (related input VAT), if one of the steps in a transaction chain was undertaken merely to avoid (or minimise) taxation. For instance, if instead of buying inventory directly from a supplier, the parties agreed to squeeze into the supply chain an intermediate company which: inflated the cost of the inventory; collects money from the buyer; and then disappears without paying taxes – then the authorities can deny deduction of the entire cost of the inventory, and not just the part artificially inflated by the intermediate reseller.



In one of its clarifying letters (No. 01-03-11/97904 of December 13 2019), the Finance Ministry supported its fiscal subdivision in this interpretation of the law. The arbitration court practice is very limited at the moment and cannot be viewed as consistent, as some courts have supported denying the deduction of only artificial costs, which seems reasonable, whereas others have supported the authorities’ approach. This is clearly an area of uncertainty requiring either amendments to the law or clarifications from the Supreme Court. 





Dmitry Garaev

T: +7 916 584 01 13

E: dgaraev@kpmg.ru


more across site & shared bottom lb ros

More from across our site

Effective audit management requires more than documentation; it’s the way taxpayers engage that can shape audit direction, manage procedural ambiguity, and preserve options for appeal or litigation
American advisers are falling short of client expectations when it comes to providing value-added services, but remaining tight-lipped won’t make the problem go away
Awards
The Social Impact Awards unveil new categories to reflect a changing legal and social landscape
Australia's approach to tax policy has undergone significant shifts in recent years, reflecting global trends and unique domestic considerations. These developments merit close attention from tax professionals
The UK has temporarily dodged the 50% rate due to a trade deal signed with the US in May; in other news, Ryan acquired a Northern Irish tax firm
Following a $28 million funding round, Aibidia wants to ‘double down’ on the US market via partnerships with the ‘big four’, the Finnish TP tech provider’s CEO tells ITR
The Luxembourg-based TP leader tells ITR about relishing the intellectual challenge of his practice, his admiration for Stephen Hawking, and what makes tax cool
The case to determine whether the tariff regime is constitutional will eventually find its way to the US Supreme Court, ITR has also heard
In other news, the Council of the EU pledged support to a CBAM simplification and exemption initiative, and Portugal issued new VAT filing guidance
While Brazil’s sweeping tax updates are a triumph for modernisation, Giuliano Gioia of Sovos warns that MNEs with a Brazilian footprint should be prepared for a short and sharp adjustment
Gift this article