Representing taxpayers in disputes over alleged failure to exercise the duty of care

Client:a large hotel complex having branches in many constituent entities of the Russian Federation
Opposite party:the Federal Tax Service of Russia (FTS)


The tax inspection of our client conducted by FTS inspectorate revealed the transactions allegedly violating the standard of due care, including dealings with doubtful counterparties (shell companies).

The Case

At preparation stage, we were collecting information on the relevant counterparties (information about websites, location addresses, state contracts, applications for participation in competitive procedures, etc.). As a result, the CG lawyers developed the evidence base supporting legitimacy for commercial activities of the principal’s counterparties.

The claims of tax authorities were successfully contested at pre-action and action stages resulting in 10 times reduction of the additional tax charges. The resolution of tax authority was partially repealed (for up to 90% additional tax, fines and penalties) due to effective application of the key criteria and approaches to the taxpayer behavior assessment established via a number of legal precedents. The only effective part of the tax authority’s resolution concerns dealings with a shell company which has been already recognized as such in the context of another legal case examined a year before this dispute.

Why is it of importance?

The Client has both gained an economic effect based on the results of the tax inspection and an ability to avoid future tax claims with the use of a properly arranged compliance function based on this experience. The approaches selected by courts in this case may provide guidance for other market participants entering into the tender based transactions.


Partner, Head of Tax and Legal Consulting

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