03.10.07

The court of the Federal Antimonopoly Service for the Ural Region ruled that outstaffing can be considered a “tax scheme” to minimize payments of Unified Social Tax (UST). A company in Perm established several small enterprises, transferred them to the simplified tax system and registered all of its employees under these enterprises. The only source of income for smaller enterprises was personnel outstaffing services given to the main company. Thus, the company was able to avoid UST payments altogether. The tax authorities considered it illegal and demanded the company pay the difference in taxes, as well as penalty fees and fines. Court decision # N Ф09-4597/07-С2 from June 19, 2007, unexpectedly sustained the claim of tax authorities, ruling that companies formed to provide one company with outstaffing services are not economically justifiable. It created a dangerous precedent for companies to abuse outstaffing arrangements.

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Petr Semyonov, Auditor, Alinga Consulting Group

Today courts’ position towards organizations using outstaffing schemes is well-known, and this decision cannot be considered new or out-of-ordinary. It is not the first one of this kind (in May 2006, the Arbitration Court of the Tver Region adopted a similar decision). Therefore when using outstaffing schemes it is important to remember that using such schemes is risky if:

• company personnel was “transferred” from a company paying UST to company on the simplified tax system, without changing the physical location of work (changed only formal characteristics);
• companies offering outstaffing services work with one client only; 
• companies offering outstaffing services are founded by the company employing the personnel of these created companies.

For these transgressions tax inspectors can charge the UST that should have been paid in addition to fines and penalty fees. We are convinced that the list of criteria is not final and it will be extended. Companies using outstaffing and companies offering outstaffing services must seriously consider it and draw appropriate conclusions, and also take necessary steps for avoiding a risk of similar encounter with tax inspectors.