On 24 July, the Supreme Commercial Court of the Russian Federation (the “SCC”) reviewed a case on assessing an organisation’s additional profit tax, as the organisation did not have the original documents to confirm the losses it had claimed to have incurred.
The organisation was able to write off losses following reorganisation and consolidation with another organisation. Since the storage period of the primary accounting documents that confirm the expenses incurred by the consolidated organisation had expired by the time a tax audit was conducted, the reorganised organisation submitted only: (i) a certificate of record in the Uniform State Register of Legal Entities; (ii) the transfer act and tax registers of the consolidated organisation; and (iii) the tax declarations of the latter. However, the tax authorities did not accept these documents as sufficient proof of the losses incurred.
The courts of the first three instances supported the position of the organisation, indicating that tax legislation does not specify a requirement for a particular organisation to maintain the primary accounting documents for the entire period during which losses may be carried forward. However, the SCC reversed the decisions of these courts and rejected the claims of the organisation, stating that losses must be confirmed using primary accounting documents, as provided for both under tax legislation and legislation on accounting.
It is clear that it will be burdensome for organisations that would like to carry forward losses to subsequent periods to comply with the requirements of maintaining the primary accounting documents for such an extended period of time.
[Decree No. 3645/12 of the Presidium of the Supreme Commercial Court of the Russian Federation, dated 24 July 2012, is available in Russian here]