The Federal Tax Service has published information on the legal positions formed by judicial practice and applied by arbitration courts in resolving disputes on business fragmentation. Acsour experts reviewed the Letter from the Federal Tax Service and determined exactly how the tax service will determine the presence of violations.
The Federal Tax Service of Russia has analyzed judicial practice in cases of business fragmentation: in the Letter from the Federal Tax Service of Russia dated 07/16/2024 N BV-4−7/8051@, legal positions that are used by arbitration courts in resolving these litigation were highlighted. The list includes the following provisions:
The Federal Tax Service recalled that, according to the position of the Supreme Court, business fragmentation is an artificial distribution of income from the sale of goods between several persons, which covers the actual activities of one business entity that does not meet the conditions established by law for the application of preferential tax treatment.
Acsour experts note that most of the tax disputes are related to business fragmentation cases. In 2023, the percentage of cases when the court sides with the taxpayer was only 21%: for correct business conduct in accordance with tax legislation, contact Acsour.
The Federal Tax Service of Russia has analyzed judicial practice in cases of business fragmentation: in the Letter from the Federal Tax Service of Russia dated 07/16/2024 N BV-4−7/8051@, legal positions that are used by arbitration courts in resolving these litigation were highlighted. The list includes the following provisions:
- when expanding a business, it is impossible to create new legal entities if the group’s activities are common, and the only purpose of separation is the tax benefits of applying a special regime;
- if a part was artificially isolated from a single business, and then transferred to a controlled person in a special mode, the actions are recognized as unjustified;
- business fragmentation is considered to be an activity in a situation where the interdependence of participants has affected the results of work. At the same time, they can be recognized as interdependent not only on the grounds that are directly established in the Tax Code of the Russian Federation;
- if the activities of a taxpayer and an interdependent person are an artificially separated single production process, the tax benefit may be recognized as unjustified;
- if members of the same family run a business, this does not mean fragmentation. However, formally involving them in work for tax savings is illegal.
The Federal Tax Service recalled that, according to the position of the Supreme Court, business fragmentation is an artificial distribution of income from the sale of goods between several persons, which covers the actual activities of one business entity that does not meet the conditions established by law for the application of preferential tax treatment.
Acsour experts note that most of the tax disputes are related to business fragmentation cases. In 2023, the percentage of cases when the court sides with the taxpayer was only 21%: for correct business conduct in accordance with tax legislation, contact Acsour.
