The Federal Tax Service of the Russian Federation (the "Tax Service") has clarified that when trying to prove that tax benefits were unjustified in respect of a company's business transactions, the tax authorities are obliged to base their investigation on a body of facts.

Therefore, (i) unauthorised individuals signing tax invoices; (ii) suppliers failing to file tax returns; or (iii) failure to pay taxes are not enough per se to recognise tax benefits as unjustified.

Accordingly, the Tax Service indicates that tax benefits may be recognised as unjustified only when the tax authorities have proved that the business transactions are fictitious (not real).

[Letter No. SA-4-9/8250 of the Federal Tax Service, dated 24 May 2011]