The provisions of Article 45 of the RF Tax Code (the Tax Code) did allow in the past for the possibility of collecting tax debts through a court not from the delinquent taxpayer itself, but from third parties. At issue here are cases where a taxpayer organization owes tax following a tax audit and does not pay the tax for more than three months.
The possibility of foreclosing on third-party property is limited by a number of conditions that can be divided into two groups:
- The debtor organization and the third party from whom the debtor's tax arrears can be collected must be related, and
- The taking of certain actions evidencing that money or assets are being dissipated (i.e. sold or otherwise transferred from the debtor organization's assets and are therefore no longer available for foreclosure)
Previously execution could be levied only on the property of those organizations that were subsidiaries or dependent, or main companies with respect to the debtor. Dependence was defined according to criteria set by the civil legislation (more than 20% equity participation).
In 2013 the scope of application was expanded and it became possible to foreclose on the property of other organizations that could be deemed related based on other criteria widely used in tax law.
The federal law of 30 November 2016 set forth a new version of this rule. What at first glance is a minor amendment replaces the word "organization" with "person," but at the same time opens up new prospects for collecting tax arrears. Apparently, now organizations' participants or other individuals able to exercise actual control will be among those who could pay the organizations' tax debts. This approach completely erases the boundaries of financial liability in relationships between business entities and their participants for tax purposes.
At the same time, editorial changes were made to the Tax Code making it possible for a third party to perform a tax payment obligation for the taxpayer. One cannot help but note that this change appeared amid the numerous criminal cases opened in 2015-2016 over tax evasion against individual participants of business entities and terminated according to the procedure of Article 28.1 of the RF Criminal Procedure Code. The thing is that in order to terminate the criminal prosecution, being an individual, the defendant must compensate the treasury for damage by paying taxes for the taxpayer organization. It was difficult to do this until the amendment was made, because it was thought that the duty to pay tax is personal and may be performed only by the taxpayer itself.
Evidently at the first signs of inability to collect arrears from organizations, the tax authorities will shift the burden of paying the tax to their participants (or beneficiaries), forcing them to "voluntarily" perform that duty under threat of criminal prosecution.
The erosion of the principle of dividing tax payment liability goes hand-in-hand with the stricter court practice of applying Article 45 of the Tax Code. Worthy of special note here is case No. А40-77894/15 considered in September 2016 by the Judicial Panel on Economic Disputes of the RF Supreme Court.
In that case the court declared it permissible to collect the tax debt of one business from another company that, making use of the personnel, client base and business contacts of the debtor taxpayer, began to carry on similar business. The novelty of this case is not that the court declared companies related based on signs that cannot be considered clear cut. Following the logic of the court, any company that distributes the same goods, purchasing them from the same source can be considered related. The precedent is dangerous in that the court entirely ignores those provisions of Article 45 of the Tax Code that limit the ability to collect tax debts from third parties to two cases: (a) when the debtor taxpayer sells goods (or realizes works or services) and the person related to it receives revenue from that sale, and (b) when one person transfers assets to a related person without consideration due to a threat of additional taxes being charged. The key element in both cases is the violation of the principle of equivalency when the debtor taxpayer has the right to consideration in the form of payment of money but does not exercise that right, instead creating conditions for the related person to receive either payment or savings.
The facts found in the case show that none of those situations occurred. The person from whom the tax authority attempted to collect another taxpayer's debt received revenue from the sale of its own goods which it had purchased itself.
If we consider that the basis for collecting from the third party is not revenue but property transferred to it which, following the logic of the tax authority and the court, should be understood to include personnel, the client base and business contacts, then in this case the court entirely ignored the provisions of paragraphs 9 and 10 of Article 45(2)(2) of the Tax Code. According to those provisions, the amount collected from a third party is limited to the residual value of the transferred property according to the accounting records. Obviously, neither the client base nor business contacts are assets that are reflected in accounting, and they do not have an accounting estimate. As a matter of principle, personnel cannot be considered property, as they are employees who, showing foresight, seek a new job without waiting for the shutdown of operations caused by the tax claims. Thus, in the case considered here, no property that would have any residual value was transferred. Consequently, the tax authority had no grounds to demand the entire amount of the tax arrears from the third party. It turns out that if those types of assets had an objective valuation much lower than the tax claim amount, it would limit the amount of collection. By equating these attributes of business to assets not having a valuation, the court allows for full collection, which worsens the standing of the person against whom such a claim is brought.
It is not difficult to predict where such an expanded interpretation will lead. Undoubtedly it will find expression in uniform court practice. Easily overcoming the lowered evidentiary barrier, the tax authorities will collect debts from third parties without heeding the restrictions set forth in law, which, in turn, will lead to subsequent bankruptcies.
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