Precedent forming case won by the lawyers of FBK Legal at the SCA of RF
Interests of Gazprom YGRM Trading CJSC, subsidiary of Gazprom OJSC, were protected by the lawyers of FBK Legal in the dispute with Inter-district Tax Inspectorate for Yamalo-Nenetsky district resolved by the RF Supreme Court of Arbitration (SCA)
Right of taxpayers to reduce taxable profit for the amounts of currency losses related to the costs that were not included for reduction of profit tax was the subject of dispute.
In our case it was considered, whether it’s possible to recognize currency losses arisen out of obligations to pay dividends in foreign currency. Currency losses arisen due to increased euro exchange rate to ruble were recognized by the company as nonoperational costs.
But tax authority resolved that such reduction of taxable profit was not allowed, since allocation of currency losses shall comply with the ‘fate? of the costs. It?s commonly known, that dividends shall be paid from profit after tax and in that way may not reduce profit tax basis.
The lawyers of FBK Legal succeeded to prove before the SCA that currency losses shall be recognized for profit tax purposes, regardless if the costs causing those currency losses were recognized for tax purposes or not. They emphasized that shall the court agree with the tax authority?s position it will actually mean that tax is imposed on the maximal exchange rate deviations, and this is the obvious contradiction with the sense of Chapter 25 of the Tax Code (?Profit Tax?).
SCA of RF accepted the lawyers? position as well reasoned and took the taxpayer?s side. ?Decision taken by the court was just and legal. This precedent is very important, since it relates to very bride range of taxpayers. There are a lot of companies in our country that have obligations nominated in foreign currency, e.g. return of loans or credits, payment for imported goods etc.?, - says FBK partner, Galina Akchurina who represented Gazprom?s subsidiary before the court, - “Conclusions contained in the court award may be applied not only to currency losses arisen out of dividend payments, but to all payments in foreign currencies. We are glad to have succeeded in satisfying the court and protecting not only interest of our customer, but also those of wide range of taxpayers?.
Right of taxpayers to reduce taxable profit for the amounts of currency losses related to the costs that were not included for reduction of profit tax was the subject of dispute.
In our case it was considered, whether it’s possible to recognize currency losses arisen out of obligations to pay dividends in foreign currency. Currency losses arisen due to increased euro exchange rate to ruble were recognized by the company as nonoperational costs.
But tax authority resolved that such reduction of taxable profit was not allowed, since allocation of currency losses shall comply with the ‘fate? of the costs. It?s commonly known, that dividends shall be paid from profit after tax and in that way may not reduce profit tax basis.
The lawyers of FBK Legal succeeded to prove before the SCA that currency losses shall be recognized for profit tax purposes, regardless if the costs causing those currency losses were recognized for tax purposes or not. They emphasized that shall the court agree with the tax authority?s position it will actually mean that tax is imposed on the maximal exchange rate deviations, and this is the obvious contradiction with the sense of Chapter 25 of the Tax Code (?Profit Tax?).
SCA of RF accepted the lawyers? position as well reasoned and took the taxpayer?s side. ?Decision taken by the court was just and legal. This precedent is very important, since it relates to very bride range of taxpayers. There are a lot of companies in our country that have obligations nominated in foreign currency, e.g. return of loans or credits, payment for imported goods etc.?, - says FBK partner, Galina Akchurina who represented Gazprom?s subsidiary before the court, - “Conclusions contained in the court award may be applied not only to currency losses arisen out of dividend payments, but to all payments in foreign currencies. We are glad to have succeeded in satisfying the court and protecting not only interest of our customer, but also those of wide range of taxpayers?.
