On 20 September 2016 the Commercial Court of Moscow delivered a
decision in case No. А40-13165/16-107-106.
In that case the court examined a dispute between TK Miratorg
LLC and Federal Tax Service of Russia Inspectorate No. 24 for
Moscow (hereinafter the "Inspectorate"). One of the
episodes examined by the court concerned recognition for profits
tax purposes of the taxpayer's (seller's) rebate amounts
paid to a customer for volume of purchases.
According to the case file, in 2012-2013 TK Miratorg LLC sold
its products to Miratorg-syrye LLC under a supply contract
concluded in 2010. Then TK Miratorg LLC undertook on the basis of
addenda, starting in 2012, to pay the customer quarterly bonuses
for volume of purchases.
The specific amounts of the bonuses were determined in
calculations that were approved by protocols signed by the parties.
Sales volumes were determined in the calculation for a specific
quarter with adjustments for past periods that were identified in
the current period. Such a calculation procedure was clarified in
an addendum executed in 2015 that covered the parties'
relationship as of 1 January 2010. Applying that addendum obviously
resulted in an increase of TK Miratorg LLC's expenses on
bonuses in 2012-2013, which is why they were challenged by the
The Inspectorate was of the opinion that calculating bonuses
with adjustments for past periods identified in the current period
contradicted Law No. 381-FZ "On the Fundamentals of State
Regulation of Trade in the Russian Federation".
The court disagreed with the Inspectorate's position and
found its decision illegal, based on the following:
The possibility of extending the terms of a contract to the
parties' past relationship is expressly provided for in Article
425(2) of the Russian Civil Code. Accordingly, retroactive setting
of the payment terms and procedure for calculating bonuses is not
an obstacle to recognizing expenses;
The right to recognize as expenses bonuses paid to a customer
for reaching certain purchasing volumes is expressly provided for
in clause 1(19.1) of Article 265 of the Russian Tax Code;
The Retail Law cited by the Inspectorate has its own
industry-specific subject of regulation and, therefore, cannot
regulate tax relations, including those related to the recognition
of bonuses as expenses for tax purposes.
The taxpayer's successful defense of its position in court
does not negate the fact that the tax authorities are paying very
close attention to retroactive bonuses paid by taxpayers. And, if
the very right to recognize such bonuses as expenses has been in
less doubt in recent years, the procedure for calculating and
documenting them is still scrutinized.
Worthy of separate note in this case is the taxpayer's use
of the civil-law mechanism for extending the effect of a contract
to the parties' past relationship. Per our experience this
mechanism is often treated unfavorably by judges hearing tax
disputes, so it should be used carefully.
Based on their considerable relevant experience of tax
consulting and litigation, the lawyers of Dentons' Tax practice
are ready to provide manufacturers, wholesalers and retailers with
tax support in various aspects of trade transactions: analyzing and
elaborating terms for providing bonuses and rebates; documenting
the arrangement of promotional and marketing events; elaborating
methods of accounting for inventory losses and many other issues.
By cooperating with Dentons, trading companies can look forward to
effective management of their tax risks and optimal use of all
legal mechanisms in the course of tax disputes resolution.
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