FBK Legal’s Director of Transaction Tax Structuring Maria Semenova on New Trends in Challenging Intermediary Markup

Pravo.ru published an article on disputes regarding tax deductions for intermediary markups:

Maria Semenova, Director of Transaction Tax Structuring Department at FBK Legal, pointed out an emerging trend where tax authorities successfully challenge deductions for intermediary markups when dealing with entities exhibiting signs of ‘technical companies’ (for corporate profit tax purposes).

For example, in Case No. А19-5629/2024, a company transferred funds to a foreign firm exceeding the transaction price. These payments were unrelated to goods sales and involved no reciprocal obligations. The tax authority deemed them gratuitous and classified the amounts as passive income unrelated to business activities.

Such income is subject to 25% withholding tax. However, the company neither withheld nor remitted the tax, while including the transaction costs as expenses. The Commercial Court of Irkutsk Region ruled in favour of the tax authority, stating that when calculating withholding tax it is irrelevant how funds are subsequently moved – even if part of the amount is returned to the Russian company.

Maria noted that previously, tax authorities had only challenged the inclusion of such costs in deductible expenses without additionally assessing withholding tax (e.g., Case No. А19-12789/2019). Current practice, however, is evolving differently, potentially indicating a new trend.

The full text: Tax Digest for June: New FTS Powers and Tightened Control of Entrepreneurs