The business splitting amnesty: uncertainties arising from the bill

As our readers will be aware, on 3 June 2024 the Ministry of Finance of Russia presented the State Duma with a bill[1] amending Parts One and Two of the Tax Code of the Russian Federation and certain other legislative acts of the Russian Federation (“the Bill”), which includes, among other things, a proposal to grant an exemption from taxes, fines and penalties for offences relating to business splitting that were discovered over the period 2022-2024 (“the Amnesty”).

Insofar as the Amnesty is concerned, the text of the Bill differs little from the version that was previously submitted to the Government of Russia (some minor editorial changes have been made).

However, the current wording of the Bill leaves a number of questions unanswered, including the following:

• The Amnesty applies in cases where the occurrence of business splitting has been discovered in audits for 2022-2024 (the type of audit is not specified). In this regard, it is stated as a condition of the Amnesty that it must be confirmed by a field tax audit for 2025-2026 that no business splitting occurred during that period. There is uncertainty over whether the Amnesty would be applicable in the following cases:
  • if the occurrence of business splitting has been discovered in a desk tax audit for a tax/reporting period falling within 2022-2024
  • where a field tax audit was conducted for a period that partially coincides with the period 2022-2024 (for example, 2021-2023)
• The application of the Amnesty is partly conditional on the conduct or otherwise of a field tax audit for 2025-2026 (if no field tax audit takes place, the Amnesty takes effect from 01.01.2030). If a field tax audit only examined one year (2025 or 2026), would the Amnesty for 2022-2024 be applied, and if so, when?
• If business splitting has been found to occur in the period 2022-2024 but no field audit takes place for 2025-2026, must the taxpayer voluntarily discontinue business splitting in the period 2025-2026 and notify the tax authorities of that fact in order for the Amnesty to be applied before 01.01.2030?
• According to the Bill, the suspension of the entry into force of a decision on the imposition (non-imposition) of sanctions for the commission of a tax offence (“Decision”) does not prevent the taxpayer from appealing against that Decision to a higher tax authority and to the courts in the manner and within the timeframes prescribed by the Tax Code; nor does it interrupt the running of the time limit for appealing against such a Decision. In this regard:
  • an administrative appeal may be lodged with a higher tax authority before the date of entry into force of the Decision being contested[2]. How in this case should the time limit for contesting the Decision be counted? Should the taxpayer calculate the time limit based on an estimate of when the Decision would have entered into force if it had not been suspended?
  • a petition for the invalidation of a Decision may be filed with an arbitration court within three months after the taxpayer became aware of the violation of its rights and legitimate interests[3]. Implementation practice proceeds from the assumption that appeals are made against decisions that have entered into force[4] (except in certain cases, such as where an administrative appeal has not been considered on time, which are directly addressed by the Tax Code[5]). Given this fact, can a suspended Decision be appealed to a court and how would the three-month time limit be counted?

In our view, these provisions of the Bill need to be formulated with greater precision and should be revised accordingly as and when the bill passes through approval stages.