Transcript Document

MOSCOW • ST. PETERSBURG • YEKATERINBURG • VIENNA
Russian holding structures and
M&A deals structured abroad:
EVALUATION OF LEGAL AND CORPORATE RISKS
General
questions
1. Tax planning ?
2. Tax avoidance ?
3. Tax optimization ?
Tax planning
Russian legislative
Foreign legislative
Mechanisms
Mechanisms
Russian M&A
M&A main issues
Jurisdiction
Governing
Law
SHA
SPA
SPV and
structure
Two Main regularly used Legal Recommendations:
1. Using NON - RUSSIAN structure for the deal;
2. Using NON – RUSSIAN governing law.
Taxation
Russian holding
Holding structure
main issues
Jurisdiction
Governing
Law
SHA
SPA
SPV and
structure
Taxation
Two Main regularly used Legal Recommendations:
1. Choose between RUSSIAN and NON - RUSSIAN “mother
company” for the structure with the Russian assets;
2. Using DOUBLE TREATY taxation agreements preferences.
Advantages
Advantages of using foreign structures in M&A and holding structurising.
o Flexible corporate law;
o Additional level of the legal defense (foreign court institutes);
o Tax preferences for (depends on the jurisdiction):
-- dividend payments;
-- M&A deals;
-- operational activity;
-- internal holding transactions.
o Confidentiality of an ownership;
o Investment opportunities.
Legal doubts
RUSSIAN STATE AUTHORITIES LEGALLY DOUBT
HOLDING STRUCTURES USING
FOREIGN COMPANIES
TAX AVOIDANCE AND TAX
OPTIMIZATION
GOING OFFSHORE
LACK OF THE ECONOMIC SENCE OF
THE TRANSACTION
INTERNAL TRANSACTIONS FOR NON
MARKET PRICE
Legal Risks
1. Bad image. Negative (usually not publicly demonstrated) attitude of state
supervising authorities as well as of many private organisations (registrars,
banks, depositaries) towards foreign holding structures based on Russian assets;
2. Illegal framework. Usage by Russian tax authorities and state arbitral courts of
legal methods and definitions, methods of judicial proceedings not stipulated by
Russian law:
o Usage of “scheme” or “creation of tax avoidance scheme” definitions;
o Extrajudicial reassessment (diverse) of the transactions;
o Unlawful expansion of “legal entities interrelationship” understanding;
o Exploitation of spot inspections results (in most cases negative) for overall
evaluation of entire activities of legal entity subject to inspection;
o Engagement as so called “written evidence” in court proceedings of natural
persons (including the legal entity’s employees) interviewing and questioning
results obtained during tax inspections held by tax and law-enforcement
authorities officers;
o The growing trend in courts and law-enforcement authorities manipulating
with such definitions as “business goal” and “preferential tax terms” which are
out of Russian legislation framework;
Legal Risks
•
Non-coordination. Lack of coordination between federal, regional, and
municipal legislation;
•
Sanctions. Applying the sanctions under the tax law to the transactions
between the legal entities within one holding (owned by one beneficiary);
•
Fake Legal Entity. Exploitation by the tax authorities and the Russian courts of
“fake legal entity” definition (which is stand alone definition apart from the
“flight-by-night company”, and the major difference between these two
definitions is in object of evaluation of activities; for example, when the “fake
legal entity” is mentioned, its activities and economical impact can be
considered as activities of any legal entity of the holding with respective tax
and other consequences being applied to the entire holding);
•
Penalties. Officially supported by legislators and commonly used by courts
practice of applying of Russian Civil Code clause 169: mismatch of tax claims
amount and the amount of sums charged for the public revenue.
Risk avoidance
Methods for minimizing the risks with the
Investigated M&A deals structured abroad
Non demonstration any
profit from the
transaction in Russia if
it was structured abroad
Explanation of the
economic sense of
the deal
Antimonopoly issues
(even for not direct
control)
Explanation of the economic
sense of every legal entity
included in the M&A model
Doing M&A in Russia
Russian Federation
Yekaterinburg
620075, Business Center
“Antey ”,
Krasnoaremyskaya str. 10,
16th floor, Office 1608
Austria
Vienna
Gonzagagasse, 4, 1010,
tel./fax: +43 1 533 0 533
Russian Federation
Moscow
113035, Business Center
“Riverside Towers ”,
Kosmodamianskaya nab.
52, bld. 3, 9th floor
tel/fax: +7 (495) 644 00 41
tel/fax: +7(343) 379 57 57
Russian Federation
St. Petersburg
199178, Business Center
“Senator”
18th Line V.O.,
Lit. A, 31, Office 430A
tel/fax: +7 (812) 332 7632
www.incoralliance.com