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Tax disputes: “indirect interdependency”

The sequence of actions in determining the share of indirect participation of one organization in another is ant always the same. Whether the last step is necessary is determined according to the task.

<…> Pursuant to clause 3 of Article 105.2 of the Code, the share of participation of one organization in another is calculated the following way:

1) All sequences of participation of one organization in another are calculated through direct participation of each previous organization in each subsequent organization of each sequence;

2) The shares of direct participation of each previous organization in each subsequent organization of the respective sequence are calculated;

3) The products of the shares of direct participation of one organization in another through the participation of each previous organization in each subsequent organization of all sequences are added up.

The addition of the products of the shares of direct participation is done, when several separate sequences of participation of one organization in another through direct participation of each previous organization in each subsequent organization is discovered.

A word to the expert

Maxim Rovinskiy, Head of Tax and Customs Law Practice of the Law Firm "YUST", Advocate

The rules for determining the shares of participation of one organization in another (or of an individual in an organization) are fixed by Article 105.2 of the Tax Code of the Russian Federation (the TCRF). Pursuant to clause 1 of Article 105.2 of the TCRF, the share of participation of one organization in another is calculated as the sum of shares, in per cent, of direct and indirect participation of one company in another.

The share of direct participation of one organization in another is the share of voting stock of another organization directly owned by one organization, or the share of charter (share) capital (fund) of another organization directly owned by one organization, and if it is impossible to calculate those shares – the share, directly owned by one organization, calculated in proportion to the number of participants of the other organization (clause 2 of Article 105.2 of the TCRF).

Clause 3 of said provision determines the procedure of calculation of the share of indirect participation of one organization in another. Here is the procedure as a step-by-step algorithm:

Step 1. All sequences of participation of one organization in another through direct participation of each previous organization in each consequent organization of the respective sequence are determined. In other words, such sequences need to be discovered and their number ascertained.

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Full version of the publication is available here.


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