A New Chapter Regulating Issues Related to Consolidation of Taxpayers into a Group for Profits Tax Purposes Was Introduced to the Tax Code of the Russian Federation

Such concept as the consolidated group of taxpayers is being introduced to the Tax Code of the Russian Federation. The consolidated group of taxpayers is regarded as a voluntary association of profits tax payers by virtue of the agreement on forming of the consolidated group for profits tax purposes on the basis the aggregate financial result of business activity of the said taxpayers.
 
A consolidated group of taxpayers can be formed by organizations provided that one organization should directly and/or indirectly participate in the charter (share) capital of other organizations and such participation in any organization should equal at least 90 per cent.
 
Each participant of the consolidated group of taxpayers shall meet the following requirements:

• it should not be in the process of reorganization or liquidation;
• no insolvency (bankruptcy) proceedings should be initiated in respect of the organization;
• the size of net assets of the organization should exceed the size of its charter (share) capital.

   All organizations participating in the consolidated group of taxpayers shall meet the following requirements:

1. the aggregate amount of value added tax, excises, profits tax and severance tax paid within the calendar year proceeding the year when documents required for the registration of the agreement on forming of the consolidated group of taxpayers were filed with the tax authority excluding the amount of taxes paid due to the movement of goods across the customs boarder of the Customs Union is not less than 10 billion rubles;
2. the aggregate amount of proceeds from the sale of goods, products, performance of works and rendering services as well as other profits as per the accounts for the calendar year proceeding the year when documents required for the registration of the agreement on forming of the consolidated group of taxpayers were filed with the tax authority is not less than 100 billion rubles;
3. the aggregate value of assets as per the accounts for the calendar year proceeding the year when documents required for the registration of the agreement on forming of the consolidated group of taxpayers were filed with the tax authority is not less than 300 billion rubles.

We note that only Russian organizations meeting all the foregoing requirements may be consolidated into a consolidated group of taxpayers. Such consolidation shall be voluntary; it shall not lead to forming of a separate legal entity and shall be carried out only for the purposes of calculation and payment of profits tax.
 
Among the participants of the consolidated group of taxpayers there should be selected a responsible taxpayer which is to be responsible for calculation and payment of profits tax in respect of the consolidated group of taxpayers pursuant to the agreement on forming of the consolidated group of taxpayers.
 
Taxable base on profits gained by the participants of the consolidated group of taxpayers shall be determined based on the amount of all the profits and expenses of the participants of the consolidated group of taxpayers. However, profits of the participants subject to withdrawing tax shall not be included into the consolidated taxable base.
 
This law will become effective on 1 January 2012 save for its specific provisions which become effective on other dates.