11.05.08

In a recent difficult tax situation, a Russian organization had performed construction services through a separate subdivision on the territory of a foreign country, including paying taxes in that country. However, the Russian Ministry of Finance does not see any grounds for recognizing taxes paid in another country as expenses for calculation of profit tax.

The Ministry explains the reasons for it in the Letter # 03-03-06/1/281 from April 14, 2008. Chapter 25 of the Tax Code (TC) allows deduction of expenses, incurred by a company as a result of profits received from sources abroad, including taxes and fees. However, the provision is only valid for taxes and fees paid in accordance with legislation of the RF, as stated in article 264 of the TC.

The Ministry also does not approve of ‘foreign’ taxes included as “miscellaneous production expenses not otherwise listed by name” allowed by Article 264, paragraph 1, subparagraph 49. The reason: tax expenses are listed in article 264, but not in subparagraph 49 of paragraph 1.

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Source: Российский налоговый портал