Interdependent persons in tax law: problems of law enforcement

Sekretaryov Roman Viktorovich PhD in Philosophy Associate Professor at the Department of Private Law of Vladivostok State University 690014, Russia, Primorsky Krai, Vladivostok, Gogol str., 41, sq. 5502 rvsvldv@mail.ru Other publications by this author

In 2012, the legal definition of "interdependent persons" appeared in Russian tax law (Article 105.1 of the Tax Code of the Russian Federation, hereinafter referred to as the Tax Code of the Russian Federation). Over the past time, solid law enforcement practice has been accumulated, which has given rise to theoretical research and generalizations. Thus, an overview of the most significant norms governing the methodology for determining market prices between participants in civil turnover, which are recognized as interdependent for tax purposes, was made by E. G. Vasilyeva ^[1]. The economic content of the scheme for determining interdependence using the methods of "legal design" was described in more detail in their articles co-authored by A. E. Ivanov, E. A. Dzyuba ^[2]; M. O. Kakaulina, S. V. Khmura ^[3]; V. A. Tipikina, M. A. Bondarev ^[4]. After conducting relevant research, O. S. Sobol rightly noted that interdependent individuals have "a tendency to underestimate the price parameters of transactions" ^{[5, 118]}. But V. V. Terekhova and A.V. Dyuzhov, in their overly abstract article on interdependent persons, limited themselves to extremely stingy references to the norms of the Tax Code of the Russian Federation, which, in our opinion, does not allow us to establish the author's position on the raised issues ^[6].

Of course, taking into account the freedom of contract, participants in economic turnover have the right to conclude civil law transactions of their own free will and at their discretion, thereby realizing their own relative legitimate interests, as indicated by S. A. Yadrikhinsky ^{[7, 67]}. But at the same time, it is unacceptable to abuse the right and extract unjustified economic benefits, which taxpayers do not always pay due attention to. As G. N. Semenova and L. Ya. Marshavina correctly pointed out ^{[8, 226]}, correct interaction between regulatory authorities and taxpayers is very important to prevent possible illegal actions related to unjustified tax evasion.

N. D. Eriashvili and A. I. Grigoriev cite a very interesting judicial practice on the recognition of interdependence in their article ^[9]. They note that sometimes the fact that a chief engineer holds a position in different organizations may be enough to confirm the fact of interdependence. In another case, this interdependence was established "based on internal beliefs and a combination of indirect circumstances." The court attributed to indirect circumstances, among other things, the content of one of the Internet forums where users shared complaints against former employers. A number of relevant court cases on the illegal extraction of tax benefits are listed in articles by Yu. A. Meteleva ^[10] and Yu.V. Rytova ^[11]. However, when preparing this study, our attention was drawn to more recent and relevant cases; given the severity and relevance of the problem under consideration, there is no shortage of relevant law enforcement practice.

Not only commercial, but also non-profit organizations strive to optimize tax obligations. Thus, in case no. A54-3763/2022, the tax authority indicated that three Ryazan branches of the fire company were interdependent at once, one of which filed an appeal against the court's decision, which satisfied the claim, which contained a reference to the omission of the statute of limitations by the tax authority. The interested parties decided to minimize the tax consequences through the bankruptcy of the first fire company in the chain, continuing the same activity through new legal entities with similar names and similar functionality. However, the "long-tested scheme" with bankruptcy failed, the courts supported the conclusion of a "different dependence" of interrelated legal entities and collected tax arrears at the expense of the existing organization.

Justifying the possibility of applying Article 105.1 of the Tax Code of the Russian Federation, the court of appeal referred to the Ruling of the Supreme Court of the Russian Federation dated 16.09.2016 No. 305-KG16-6003, although formally a judicial act in a particular case cannot serve as a guiding basis for the consideration of other cases and the formation of consistent judicial practice. The appellate instance went even further along the path of analogies with a dogmatic interpretation of subparagraph 2 of paragraph 2 of Article 45 of the Tax Code of the Russian Federation, referring to a number of rulings of various courts of cassation, which formulated the rule that it is impossible to consider tax obligations repaid until the appropriate amount of tax arrears actually reaches the budget. And only after its actual repayment, according to various district courts, there are legal grounds for excluding these amounts from the register of creditors. Although this approach is indisputable from a formal legal point of view and the general concept of bankruptcy, I cannot disagree with this approach. Our own experience of representing the interests of tax authorities in courts at the turn of the XX – XXI centuries allows us to note positive trends in modern tax law enforcement.

In addition, in case no. A54-3763/2022, the court pointed to the established presumption of the imaginary loan agreement concluded by the defendants to maintain a simplified taxation system by a person on whose accounts profits were generated from the activities of a group of interdependent organizations. The personal composition of the defendants' management, indicated on their official Internet resources, coincided. The payment for the domain name of one of the defendants was made by another defendant, whose contact details (phone numbers) also matched. A similar payment scheme was carried out for current business activities — when paying salaries, paying utility bills, and making targeted contributions. The documents of the three interdependent organizations were kept in the same safe, which was established during the tax audit. All the organizations were housed in one three-story building. A lease agreement was concluded between the defendants for the entire building, but the lessor continued to stay in the leased building, and there was no actual transfer of the building to the lessee, i.e. for all the defendants it was not a matter of principle that the actual relationship between the parties did not comply with the obligations stipulated in the lease agreement.

The next notable case is No. A52-434/2023, the plot of which boils down to the following. One of the Moscow tax inspections appealed to the court to recognize LLC Euro-Ceramics of Pechora (hereinafter referred to as LLC 1) and LLC Euro-Ceramics (hereinafter referred to as LLC 2) as interdependent and to recover from LLC 1 the main debt on tax obligations, as well as penalties and fines. The courts of the first and appellate instances satisfied the stated requirements. LLC 1 indicated in the cassation appeal that the unpaid amount of penalties should not be imposed on an interdependent person, on the plaintiff's omission of the limitation period and on the incorrect calculation of the amount of the principal debt. During the consideration of the case, LLC 2 was declared bankrupt. The property of LLC 2 turned out to be insufficient to satisfy the claims of creditors, including the tax authority. However, the latter established that before the bankruptcy of LLC 2, all financial and economic activities were transferred by him to LLC 1.

At the same time, contracts with the counterparties of LLC 2 were concluded by LLC 1 on the same essential terms; the real estate was re-registered ahead of time, and the employees were transferred to LLC 1. The court considered the evidence of the coordinated actions of both companies provided by the plaintiff to be convincing, and the cassation appeal was not satisfied by the district court. A cassation appeal to the Supreme Court of the Russian Federation was also unsuccessful.

In case no. A35-6646/2021, the tax authorities of the Kursk region insisted on the dependence of LLC Agrocomplex Jubilee (hereinafter referred to as LLC 3) and LLC Esculap (hereinafter referred to as LLC 4) and, in this regard, requested that LLC 3 collect more tax arrears in the amount of over 70 million rubles, which was initially It was formed in connection with the failure to fulfill obligations to the budget of the bankrupt LLC 4. In a parallel bankruptcy case, the bankruptcy trustee of LLC 4 asked the court to invalidate the real estate transfer transactions concluded between LLC 3 and LLC 4. The specified requirements were satisfied, the transfer of property in favor of LLC 3 was recognized as illegal.

However, the invalidation of civil law transactions on the transfer of property did not affect the legal qualification for the interdependence of LLC 3 and LLC 4 on the basis of subitems 1, 3 of paragraph 2 of Article 105.1 of the Tax Code of the Russian Federation, since the personal composition of their participants largely coincided. In fact, the same citizens carried out economic activities through two different companies, and it was not fundamentally important for the persons controlling them to generate profits on the accounts of which company and losses on the accounts of which. The profits generated by one of the companies were distributed proportionally among the participants, and the losses of the other company served as the basis for its bankruptcy.

The amounts that are collected from interdependent persons in accordance with Articles 20, 45, 105.1 of the Tax Code of the Russian Federation are sometimes quite significant. Thus, in case no. A43-20736/2023 (at the time of writing this article, it is at the stage of cassation appeal), LLC Yuta-NN (hereinafter referred to as LLC 5) and LLC Yuta (hereinafter referred to as LLC 6) were recognized as interdependent. At the same time, more than 1 billion rubles of tax arrears were collected from LLC 6. In relation to LLC 5, the tax authority initiated a bankruptcy case, which was terminated due to the debtor's lack of property sufficient to finance bankruptcy proceedings.

The evidence of the interdependence of LLC 5 and LLC 6 was as follows. The companies had the same personal composition of the founders and management, they were engaged in the same type of business activity, alcoholic beverages were purchased from a foreign supplier by LLC 6, and sold through LLC 5. The interviewed counterparties of the companies indicated that, at the initiative of LLC 5, they were forced to conclude contracts of similar content with LLC 6, otherwise the original contracts would have been terminated. At the same time, the tax authorities have established that the contact details of the companies match, as well as the IP addresses used by the companies in their current activities. The interests of the companies in the tax authorities are represented by the same persons, who at the same time have the authority to manage the movement of funds in the bank accounts of the companies. Website https://uta-nn.ru / until 2019, LLC 6 was administered, and since 2019— LLC 5, while the specified corporate website refers to the activities of both companies.

In addition to the corporate website, LLC 6 vehicles were re-registered on LLC 5 in 2019. At the same time, the tax authority has not established any compensation in transactions involving the transfer of these funds. A significant part of the employees worked at both LLC 5 and LLC 6 at different periods of time. In the present case, it can be predicted that after the cassation proceedings in the district court are completed, the losing party will file a cassation appeal with the Supreme Court of the Russian Federation (despite a significant increase in fees and an increase in the cost of legal proceedings for the parties), which will put the final end to the case.

Based on the results of the study, the following conclusions were drawn.

1. The number of court disputes involving the taxation of interdependent persons is currently very high and continues to increase. This confirms the hypothesis that the situations under consideration are conflicting, when the interests of private and public actors turn out to be diametrically opposed. Consequently, the issues raised in the article cannot be considered exhausted even as of today, but will require the close attention of legal scholars in the future.

2. The study of judicial arbitration practice has revealed the following most typical tax optimization tools: registration of several legal entities at the same address with a significant overlap in the composition of participants, personalities of managers, types of activities; coincidence of contact details used to communicate with potential clients and counterparties under contracts; renegotiation of civil law contracts with identical terms and variability persons on the contractor's side; the actual fulfillment of contractual obligations by the same employees, regardless of which particular legal entity they are employed in at a particular time.

3. The tax authorities carry out systematic and consistent work on an ongoing basis to identify unjustified tax evasion. When exercising control functions, the activities of interdependent persons are studied very scrupulously, and logistics chains of movement of inventory are built to match financial transactions. A proper legal assessment of labor relations is given in relation to the economic feasibility of employing specific employees in a particular legal entity. This allows us to understand the exact picture of the actual activities of taxpayers and identify the real amount of their tax obligations, and subsequently ensure not only additional payment of unpaid tax payments, but also their actual collection to the budget.