The Russian subsidiary of AB InBev defended itself from the claims of the tax officers amounting to 300 million roubles

«Vedomosti», 18.11.2013
Maria Kunle

Sun Inbev, the subsidiary of AB InBev, one of the largest breweries in the world, was able to defend itself from the claims of the tax officers amounting to 300 million roubles. According to the text of the ruling by the Court of Arbitration of Moscow published last week, Sun InBev OJSC contested in the first instance court the claims by the Inter-District Inspectorate No. 3 on largest taxpayers.

The tax officers’ claims concerned the royalties paid by Sun Inbev to АВ InBev S. A. in 2009 and 2010 for the use of the know-how in the fabrication of various brands of beer - Stella Artois, Hoegaarden, Staropramen, Lowenbrau etc.: 720 million roubles in 2009 and 826 million in 2010. The tax officers calculated the sum of the unpaid income tax and VAT together with penalties and fines at 306,5 million roubles.

Besides, the tax officers believed the royalty amounts to be non-market and additionally charged tax and penalty under Article 40 of the Tax Code, that is – according to the market prices. The expert contracted by the tax authorities calculated that the fair royalty rate would be 0,79% (while Sun Inbev has applied 0,8-2,8% since 2006, depending on the amount of the manufactured products). However, Judge Anna Bedratskaya failed to see the expert’s document as convincing: in her Ruling, she pointed out the incorrect methods and “highly dubious” sources – humor websites, paper databanks, an instruction on moonshine-making. Sun Inbev submitted its own experts’ conclusion proving the market nature of the applied royalty rate of 1 to 3 %.

The court Ruling cites the conclusion by the independent valuer: “The market value of the use of the know-how in the process of manufacturing of brewery products, as of 01.01.2009, as of (rounded) 2,3% of the Licensee’s profits, which would correspond to 850 million and 855 million in 2009 and 2010 respectively”. Besides, the Ruling also says that the very “application of Article 40 of the TCRF to the royalty rate under a license agreement is not allowed”.

Andrey Erin, Corporate Relations Director of Sun Inbev, says: “Intellectual property payments are common practice for international as well as Russian companies in Russia”, mentioning, however, that the company used to have no such disputes. Egor Batanov of Nektorov, Saveliev and Partners says: “Where payments for the objects of exclusive rights go out of the country, the tax authorities by default see the signs of scheming, which is a tendency of the fight, which is gaining intensity, against capital withdrawal from Russia”. The tax officials’ claims concerning royalties frequently get the courts’ attention (see the table at www.vedomosti.ru for more details). For example, the Board of the Higher Court of Arbitration considered in 2010 the dispute between G.T.I. on Marketing and Sales CJSC (a subdivision of Japan Tobacco International) with the same Inter-District Inspectorate. Advocate Maxim Rovinskiy, Head of the Tax and Customs Practice of the Law Firm "YUST", recounts that the Board took the side of the company, which was additionally charged for 700 million roubles by the tax authority. The FTS representative refused comments saying that the case proceedings were not completed yet.