For the first time, the Federal Tax Service of Russia won a lawsuit, based on interaction with the Indian tax authorities, against an Indian pharmaceutical company. Jodas, an Indian pharmaceutical manufacturer, failed to convince a Russian court that operations with an intermediary company from the British Virgin Islands were aimed not at understating Russian income taxes, but logistic considerations. As a result, 200 million rubles were assessed. taxes, penalties and fines. The case looks like a precedent - information about the cost of production of Jodas FTS of Russia was presented by the tax service of India.
As it became known to Kommersant, the Federal Tax Service won in the Moscow Arbitration Court the case A40-196412 / 18 against the Indian manufacturer and distributor of drugs Jodas Expoim Private Limited, as well as its Russian subsidiary LLC Jodas Expoim and the company from the British Virgin Islands (BVI) Temront Enterprises. It was about the legality of the addition of the FTS to more than 200 million rubles. taxes on profits, penalties and fines in respect of the Russian LLC on operations for the supply to Russia of medicines from the list of vital and drug products.
Recall that in relation to drugs from the list of vital in Russia, a control regime has been established that does not allow overpricing the cost of drugs when selling on the Russian market. As follows from the case file, Indian Jodas shipped drugs to Russia, which were documented as exports from BVI: according to the documents, the Russian company purchased the drugs from Temront. The use of international channels of exchange of information between the tax authorities gave the FTS the opportunity to present two facts to the court, showing that it is a question of concealing profits from operations in Russia in the low-tax jurisdiction. The first is affiliation of the Indian and Russian divisions of Jodas and Temront with BVI: they had identical founders until 2011, Lumba Jyoti and Parsad Singh Shashi Shankar, and since 2011 the only participant of the Russian LLC is an Indian company. The second is the overpricing of supplies through Temront by the Indian parent company Jodas to their Russian subsidiary: the Indian authorities presented the release certificate for Jodas in India. Finally, Jodas’s cargo deliveries were made directly from India to Russia by air, and there were no BVI marks on customs declarations in the supply of medicines.
Despite the simplicity of such tax optimization, it would be almost impossible to prove the existence of the FTS scheme without effective exchange of information with colleagues - in fact, the key information for presentation to the Russian court is presented by tax colleagues from India. As a standard, it was previously impossible to obtain any information about the prices of the producer’s supplies to the national market from a third country — de facto it was a trade secret that the supplier himself could reveal, and his counterparties had no motivation to inform the foreign tax service with which they unrelated to, data operations with a partner in their own country.
Finally, data on the beneficiaries of Jodas is also obtained during the exchange. As the Federal Tax Service warned the Federal Tax Service in April 2018 (Letter of the Federal Tax Service on April 28, 2018 No. SA-4–9 / 8285), this mechanism is in effect, the BVI, after excluding from the “problem” lists of tax jurisdictions in 2017, discloses data on the owners of companies. According to the Federal Tax Service, in the case of Jodas, this is not the first case in which such an exchange and the emergence of data on beneficiaries allowed for additional taxation in Russia. Thus, in the case of the suit of Mon`delis Rus LLC to the FTS (case No.A11-6203 / 2016), the FTS of Russia proved the legality of additional taxation of transactions involving the merger of confectionery holdings Cadbury and Kraft Foods, on the basis of information obtained by exchanging from the fiscal authorities of Great Britain, Denmark, a number of other European jurisdictions, as well as Mexico, India and the USA.