On April 21, 2016 the Commercial Court of Chelyabinsk Region
rendered a decision on the case of OOO Gazpromneft Chelyabinsk, No.
In this decision the commercial court declared economically
justified the system of revolving loans existing under cash pooling
agreements between OAO Gazprom Neft, its subsidiaries and
The court found that the tax authority’s claims against
OOO Gazpromneft Chelyabinsk (the
“Company”), which is a wholly-owned
subsidiary of OAO Gazprom Neft (the “Parent
Company”), consisted in the fact that, in the tax
authority’s opinion, the Company’s actions were not
economically justified when it disbursed short-term loans to the
Parent Company at a lower interest rate than the rates at which the
Company itself paid interest on loans raised from the Parent
Company in the same periods.
The court found that the Company had disbursed short-term loans
to the Parent Company as part of a cash pooling system in which
fund balances on the accounts of the Parent Company’s
subsidiaries, including the Company, were accumulated on the Parent
Company’s accounts and redistributed by the Parent Company as
needed among those subsidiaries with the help of revolving loan
agreements. The court agreed with the Company that the cash pooling
system makes it possible to avoid considerable costs associated
with raising short-term loans from lending institutions, which
offer higher interest rates, allows it to effectively control cash
flows within the group of companies and to minimize the
group’s credit risks associated with raising bank loans. The
court also bore in mind that use of the cash pooling mechanism is
expressly set forth in the Gazprom Neft Group’s fiscal
At the same time, the Company demonstrated to the court that it
had raised borrowed funds from the Parent Company on long-term
financing principles and this was intended to achieve investment
goals, namely, for the Company to acquire a chain of gas stations
and tank farms. The Company was able to prove, in particular,
profits from the Company’s day-to-day operations were
insufficient to achieve those capital goals;
raising a long-term loan and spending it on investments led to
an increase in the Company’s key production and financial
indicators, a rise in the number of its employees, increased
revenue of the Company and, as a consequence, in the amount of
taxes paid by the Company;
the purposes of loans provided by the Company as part of the
cash pooling system and loans provided to the Company to resolve
investment tasks differ considerably (targeted financing of a
long-term investment program and short-term placement of available
cash) and in terms of their repayment dates, which makes it
impossible to directly compare interest rates on these types of
As a result, although interest rates differ, the court declared
that it was lawful for the Company to deduct all of the expenses
(interest) for loans provided by the Parent Company, thereby
indirectly confirming that it is possible to use the cash pooling
system in Russian tax regulation.
At the same time, it should be noted that in its decision the
court relied on quite a broad base of evidence showing that the
transactions carried out had real economic substance and
transparency. One may suppose that absent such evidence the
court’s findings on whether it was lawful for the Company to
deduct the disputed interest could have been entirely
The lawyers of Dentons’ Tax practice follow the
development of practice and are available to provide you with the
necessary assistance to elaborate a position in the event of
unjustified tax claims when applying the cash pooling system and
other mechanisms for optimizing financial flows within a group of
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