10 november 2015

The Arbitrazh Court of the City of Moscow took the side of a supplier of alcoholic products in a tax dispute on an interest-free loan and bad debt

On November 10, 2015, by decision of the Arbitrazh Court of the City of Moscow in case No. А40-128776/2015, the decision of the IFNS of Russia No. 21 for the city of Moscow, issued in regard to the company Alkomir, which was engaged in wholesale trade in alcoholic products, was declared invalid.

In the opinion of the Inspectorate, the company, when calculating its tax base for profit tax for the year 2011, illegally included losses among its nonoperating expenses in the form of bad debts assigned to previous tax periods and discovered by the company only when inventory was done in 2011.

As the company had existing losses during previous tax periods, the errors in calculating the tax base of previous periods discovered in 2011 did not lead to excess payment of taxes, due to which, in the Inspectorate's view, the company was not able to do a recalculation of the tax base in the period when the errors were discovered.

In a different episode the Inspectorate considered that the signing of an act of reconciliation of mutual settlements under a loan agreement between the company Alkomir (lender) and a third party (borrower), which did not record the amount of interest to be charged for use of the borrowed funds, does not mean that the loan became interest-free.

The stance of Jus Aureum concerning the recording of bad debts consisted in the fact that the discovery of an error leading to an increase in the value of the losses in the past will lead to excess payment of taxes during that period when the taxpayer calculates its tax base without reducing it by the loss from the previous tax period in the increased amount established as a result of discovery of the error.

In the second episode the lawyers proved that the compilation of a reconciliation act from which it results that the borrower lacked any debt to the lender for payment of interest for use of the borrowed funds starting from a certain calendar date signifies that the loan agreement concluded by the parties was appropriately amended, becoming interest-free, and grounds for including the interest not received from the loan among non-operating income are absent.

Upon the results of the court hearing, the decision of the IFNS of Russia No. 21 for the city of Moscow was recognized as invalid in full.

Despite the fact that practice in tax disputes has become significantly stricter and the number of decisions handed down by courts in favor of the budget has sharply risen, the adopted judicial act testifies to the preservation of the possibilities for taxpayers to gain victories in the courts.

The office's team was headed by partner Tatiana Vladimirova, with the support of senior attorney Nikita Shcherbakov and attorney at law Aleksandra Ambrasovskaya.