Tax litigation in the Russian Federation: overview
A Q&A guide to civil and criminal tax litigation in the Russian Federation.
This Q&A provides a high level overview of the key practical issues in civil and criminal tax litigation, including: pre-court/pre-tribunal process, trial process, documentary evidence, witness evidence, expert evidence, closing the case in civil and criminal trials, decision, judgment or order, costs, appeals, and recent developments and proposals for reform.
To compare answers across multiple jurisdictions, visit the Tax Litigation: Country Q&A tool.
The Q&A is part of the global guide to tax litigation. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxlitigation-guide.
Overview of tax litigation
Issues subject to tax litigation
In Russia, the most common issues subject to tax litigation are civil law matters. Civil law matters include all issues subject to tax litigation that are not within the scope of criminal law. Civil law matters are tried in accordance with special provisions on state arbitration and administrative procedure. Civil tax disputes commonly considered by the courts include disputes:
To invalidate acts by a tax authority on the basis of failure to comply with legal requirements and infringement of the rights of organisations and individuals.
To overrule execution documents or other documents that make demands under an incontestable procedure.
For the return of funds charged in excess by the tax authorities under an illegal incontestable procedure, or paid in excess by the taxpayer or tax agent.
For compensation of losses suffered by a taxpayer as a result of illegal actions or omissions by the tax authority.
A significant portion of tax-related disputes deals with income tax and VAT.
Most commonly, the issues in controversy include:
Unjustified tax benefits obtained by a taxpayer (for example, lack of business purpose or contradiction between business transactions and filed documents).
Inconsistency of the documents confirming expenses.
Controversial interpretations of the tax legislation by taxpayers and tax authorities.
The most serious tax offences (that is, where unpaid taxes are significant and the offender acts intentionally) are recognised as crimes.
Civil tax litigation
The pieces of legislation applicable to tax disputes include the:
Tax Code of the Russian Federation (TCRF).
Federal laws adopted in compliance with the TCRF.
Taxes and duties legislation enacted by the units of the Russian Federation.
Taxes and duties legislation enacted by the local authorities and adopted by the representative local bodies in compliance with the TCRF.
Tax litigation procedure is governed by the Arbitration Procedural Code of the Russian Federation and the Administrative Procedural Code of the Russian Federation.
Disputes between individual taxpayers and the tax authority are tried in courts of general jurisdiction.
Disputes between individual businessmen and organisations and the tax authority fall within the jurisdiction of the arbitration courts (also known as Arbitrazh courts). These disputes are the most complex and expensive cases of tax litigation in Russia. Accordingly, this chapter will focus on the procedural legislation regulating the cases tried in the arbitration courts.
Criminal tax litigation
The TCRF is also the principal piece of legislation governing criminal tax litigation.
Tax crimes are set out in the Criminal Code of the Russian Federation, and the applicable regulations are contained in the Criminal Procedural Code of the Russian Federation.
Tax evasion and other criminal tax offences
Tax evasion is the most common criminal tax offence. It is characterised by a partial or complete failure to report the financial and economic activities of a taxpayer, including the completion of transactions and the receipt of income or other valuables. One of the key elements is a "large" or "especially large" sum of the tax unpaid as a result.
The Criminal Code of the Russian Federation (CCRF) establishes criminal liability in relation to four categories of tax offences:
Evasion of taxes and/or duties payable by an individual (Article 198, CCRF).
Evasion of taxes and/or duties payable by an organisation (Article 199, CCRF).
Failure to perform the duties of a tax agent (Article 199.1, CCRF).
Concealment of money or property of an organisation or individual businessman, from which taxes and/or duties are to be exacted (Article 199.2, CCRF).
Assessment, re-assessments and administrative determinations in civil law
The Federal Tax Service of Russia (FTS) and the territorial tax authorities (comprising tax departments in the units of the Russian Federation and local tax inspectorates) are responsible for the administration of tax law and the collection of taxes in Russia. This is a unified centralised system of control over the payment of taxes and fees by organisations and individuals.
The FTS is subordinated to the Ministry of Finance of the Russian Federation. The Ministry of Finance of the Russian Federation and its territorial divisions give written explanations on tax issues to the tax authorities, taxpayers and tax agents.
Russia has a self-reporting tax system (except for property taxes on individuals). Taxpayers must file a tax declaration for every tax payable in the tax period, and pay taxes. Individuals do not need to declare income from which tax has already been withheld by tax agents (such as employers).
The tax authorities carry out a chamber tax audit of the tax declarations. They can request more information and documents for this audit. Periodically, the tax authorities can do on-site tax audit (that is, a complex documental audit of all or some taxes payable). The tax authorities cannot check more than three previous calendar years.
After a tax audit, the tax authority can issue a tax audit report that defines the disclosed tax offences and fixes the evidence. Practically all on-site tax audits result in audit reports. Taxpayers and tax agents can submit their objections. Depending on the results of the audits, including reviews of objections, the tax authorities will make decisions that can affect the rights of taxpayers. Most tax disputes relate to these decisions.
Resolving disputes before commencing court proceedings
Under the Tax Code of the Russian Federation (TCRF), the decisions of a tax authority based on the results of a tax audit must first be challenged extra-judicially by filing a complaint with the superior tax authority. From 1 January 2014, the same provision applies to all other decisions and actions of a tax authority (except the Federal Tax Service).
The extrajudicial settlement procedure is governed by Chapters 19 and 20 of the TCRF.
Complaints must be filed with the superior tax authority within one month of the delivery of the contested decision. Generally, complaints must be considered by the superior tax authority within one month.
Elements of the offence in criminal law
The main elements of the main criminal law offences are as follows:
Tax evasion by an individual (Article 198, Criminal Code of the Russian Federation (CCRF)). This is a failure, committed on a large scale, to submit a tax declaration or other mandatory documents, or disclosing data known to be false in a tax declaration or other documents. This offence requires express malice. Commission on an especially large scale qualifies as aggravated tax evasion.
Tax evasion by an organisation (Article 199, CCRF). This provision applies to officials who are responsible for the relevant managerial function of an organisation (usually the director(s) or chief accountant). The definition of the offence is the same as for tax evasion by individuals (see above). This offence requires express malice. Aggravated tax evasion requires commission by a group of persons acting in concert on an especially large scale.
Failure to perform the duties of a tax agent (Article 199.1, CCRF). A tax agent is an individual(businessman) or the official of an organisation who is responsible for the relevant managerial function of the organisation (usually the director(s) or chief accountant). This offence is characterised by a failure to discharge, in one's personal interests, the legal duties of a tax agent regarding the calculation, deduction or remittance to an appropriate budget (extra-budgetary fund) of taxes and/or fees, when committed on a large scale. This offence requires express malice. Commission on an especially large scale is an aggravating factor.
Concealment of money or property of an organisation or individual businessman, from which taxes and/or duties are to be exacted (Article 199.2, CCRF). This offence can be committed by the proprietor or head of an organisation, or any other person exercising managerial functions in the organisation, or an individual businessman. This offence requires express malice and commission on a large scale.
Criminal intent in tax crimes can only be in the form of express malice. Express malice must be proved even if the actus reus is established.
It is practically impossible to set up a defence that there is no evidence of actus reus if the tax audit report has not been previously challenged in a civil trial.
In criminal proceedings, the defence generally puts forward arguments challenging the existence of direct intent to commit the tax crime.
However, the Russian investigating authorities and courts frequently impose "strict liability", assuming that the evidence of actus reus of a tax crime is a proof of intent.
Extrajudicial co-operation agreements were introduced in Russia in 2009 with the objective of ensuring that the courts carry out an exhaustive investigation of the alleged offence and impose a fair and legal sentence if the accused is found guilty. The judge must ascertain that the accused has complied with all the requirements under the extrajudicial co-operation agreement. If all the requirements have been satisfied, the court must impose a more lenient punishment than the one normally prescribed for the crime. There are no limitations on the use of extrajudicial co-operation agreements for tax-related offences.
A person who has committed for the first time the crimes of tax evasion or failure to discharge the duties of a tax agent must be exempted from criminal liability, if this person (or the organisation or tax agent in respect of which the evasion/failure is imputed to this person) has paid in full the amount of arrears and appropriate penalties, and the fine at the rate fixed in compliance with the Tax Code of the Russian Federation.
The court or an investigator with approbation of the head of an investigative body can only terminate a criminal prosecution in respect of a person suspected or accused of a tax crime (see Question 6) if the damage inflicted on the budget system of the Russian Federation as a result of the offence is fully repaired before setting the date of the trial (Article 28.1, Criminal Procedural Code of the Russian Federation). A case can only be dismissed on this ground with the accused's consent.
Format of the hearing/trial
Generally, court proceedings are public (Article 11, Arbitration Procedural Code of the Russian Federation; Article 241, Criminal Procedural Code of the Russian Federation). Closed court proceedings must be allowed, for example, when examination in open court may lead to the divulgence of a state, commercial or other secret protected by law. For cases tried in closed court proceedings, a ruling must be issued based on a motion of the parties.
Written proceedings are available either:
In minor civil tax cases (that is, if the disputed sum does not exceed RUB100,000).
In other cases at the court's discretion, if the parties do not object.
A civil tax hearing can take place if a party who has been properly summoned to court fails to attend.
Role of the judge/arbitrator/tribunal members
Civil tax litigation
The judges widely participate in tax litigation. In practice, they actively order the disclosure of evidence and question the parties during trial.
Among the various procedures provided for in the Tax Code of the Russian Federation, judicial settlement is the most efficient way of protecting the taxpayers' rights and legal interests. Court decisions also have a major impact on taxation and the administration of tax legislation. Although precedent cases are not formally recognised as a source of law, Russian tax legislation cannot be correctly interpreted without knowledge of the courts' practice.
Criminal tax litigation
The main power of the court in criminal tax proceedings is to recognise a person as guilty and impose a punishment, or to find a person not guilty. Generally, the court actively participates in criminal litigation and has wide powers.
Commencement of proceedings: civil law
Most tax disputes are commenced by a taxpayer filing a request with the court to invalidate an action, omission or decision of the tax authority on the basis that it is a violation of its legal rights. The request can be filed with the court within three months of the date that the person became aware of the breach of its rights and legal interests.
On filing a petition for the invalidation of a non-normative legal act, a taxpayer must pay a state duty of RUB3,000 (Article 333.21, Tax Code of the Russian Federation).
A tax authority can recover additional tax from organisations through an incontestable procedure. Therefore, a taxpayer has the right to apply to court to postpone the payment of the disputed tax.
In practice, it is rather difficult to obtain postponement if collateral is not provided.
The amount of the fine for failure to perform tax obligations is fixed and does not depend on the moment of the tax payment. However, the amount of the penalty is calculated for each calendar day, beginning on the day following the statutory deadline for the payment of the tax, up to the day of actual payment, regardless of the length of the court proceedings.
Commencement of proceedings: criminal law
Previously, the tax authorities gathered documentary evidence sufficiently indicating that a crime had taken place, and provided it to the law enforcement agency responsible for laying criminal charges.
Recently, the legal framework has changed and the Investigative Committee of the Russian Federation can now initiate criminal proceedings for tax crimes before the end of a tax audit (see Question 37).
The initiation of tax criminal proceedings now requires not only the materials submitted by the tax authorities, but also:
A crime incident report prepared by any person. The applicant is warned about the criminal liability for deliberately false denunciation. A crime incident report cannot be anonymous.
Information on the committed or imminent crime, received from various sources (including the media).
The public prosecutor's order to direct the respective materials to the pre-trial investigation agency, to address the issue of criminal prosecution.
An acknowledgment of guilt.
A conclusion of guilt can be drawn up as a result of the investigation. After the investigator has signed the conclusion of guilt, the criminal case (with the consent of the head of the investigatory agency) must be immediately forwarded to the public prosecutor.
After endorsing the conclusion of guilt, the prosecutor forwards the criminal case to the criminal court, which commences the criminal tax litigation.
For a number of years, most of the tax disputes tried in the arbitration courts were resolved in favour of taxpayers. Recently, this trend has been reversed for several reasons, including the following:
The improvement of evidence collection by the tax authorities. They more often call in taxpayers, their officials, employees, and counterparties for questioning, initiate cross tax audits, engage experts in tax litigation, and so on.
The tax authorities have developed and use their own sources of information. For example, the electronic VAT invoice system and the database of abusive taxpayers have been created.
The tax authorities are now increasing exchanges of tax information at the international level and their co-operation with foreign tax authorities (for the preparation of evidence).
In recent years, the amendments to the procedure for initiating tax criminal proceedings have been the main legislative change for preventing tax crimes (see Question 12). These amendments were designed to ensure that the criminal investigation starts as soon as possible, preventing the destruction of evidence during tax audits and helping the investigative authorities in gathering more cogent evidence for presentation in court.
Burden of proof
The tax authority bears the burden of proving the circumstances that justify the contested decision, action or omission of this authority (Article 200(5), Arbitration Procedural Code of the Russian Federation). However, in practice, the courts frequently transfer the burden of proof to the taxpayer.
The burden of proof lies with the prosecution. The prosecution must prove the actual circumstances of the crime, the person's involvement in the crime, and all other circumstances that are significant for the resolution of the case by the court. The prosecution also bears the burden of disproving any defence alleged by the taxpayer (Articles 14(2) and 73, Criminal Procedural Code of the Russian Federation).
The main stages of typical civil court proceedings for tax disputes are as follows:
Filing of claim (Article 198(4), Arbitration Procedural Code of the Russian Federation (APCRF)). The claim must be filed with the court within three months of the date when the claimant acquired knowledge of the violation of its legal rights.
Preliminary court session (Article 136, APCRF). This is scheduled after the claim is accepted for consideration by the court, with the aim to prepare the case for trial.
Trial (Article 152(1), APCRF). The case must be considered by the first instance court within three months of the date the statement of claim is received by the court. Quite frequently, this term is not respected, as complicated tax cases require several court hearings.
Examination of evidence (Article 162, APCRF). The court must examine the evidence when considering the merits of the case.
Pleadings (Article 164, APCRF). The pleadings start after the court has examined all the evidence.
Judgment (Articles 166 and 167, APCRF). After the pleadings, the judge declares that the consideration of the case on its merits is completed and the court leaves to pass judgment. The judge then announces the decision or (more often) its operative part only. The full text of the decision must then be prepared and announced within five working days.
The main stages of typical criminal court proceedings for tax disputes are as follows:
Appointment of a preliminary hearing or court session (Article 227, Criminal Procedural Code of the Russian Federation (CPCRF)). The appointment must be made no later than 30 days after the day the criminal case comes to court.
Preliminary hearing (Article 229, CPCRF). A petition for conducting a preliminary hearing can be lodged by a party after it has become acquainted with the criminal case materials or after the criminal case with a conclusion of guilt or with a bill of indictment has been sent to the court. The petition must be lodged within three days after the day when the accused received a copy of the conclusion of guilt or the bill of indictment.
Trial (Article 233, CPCRF). The examination of a criminal case in a court session must start within 14 days from the day of the resolution appointing the court session.
Judicial investigation (Article 273, CPCRF). The judicial investigation must commence with a statement of the public prosecutor on the charge brought against the defendant. The court must investigate all the evidence during the court hearing.
Parties' presentations (Article 292, CPCRF). Parties' presentations start after the investigation of all the evidence during the judicial investigation.
Sentence (Articles 295 and 310, CPCRF). After the last plea of the defendant, the court must depart to the retiring room for passing a judgment. After the judgment is signed, the court must return to the courtroom and the presiding judge must pronounce the judgment, or its introductory and operative part. A copy of the judgment must be sent to the convicted or acquitted person within five days from the pronouncement.
Disclosure of documents in civil proceedings
Parties to the proceedings can submit documentary evidence until the first instance court makes a decision on the case. Evidence can only be presented during the trial if it was made available to the opposing party before the trial (Articles 9 and 65, Arbitration Procedural Code of the Russian Federation (APCRF)).
In some circumstances, parties can submit new evidence on appeal to the second instance court. The party seeking to introduce new evidence must prove that it was impossible to acquire and submit the evidence to the first instance court for reasons beyond the party's control (Article 268, APCRF; Article 327.1, Civil Procedural Code of the Russian Federation).
Under the Arbitration Procedural Code of the Russian Federation, documents that can be admitted as written evidence include contracts, acts, references, business mail and other documents in the form of digital or graphical records, or in any other form, which contain data on the circumstances significant for a case and which allow to establish the reliability of a document. All documents are considered equal and none of them can be treated as "privileged" under Russian law.
Documents received by facsimile, electronic or other kind of communication, (including via the Internet) as well as documents signed by an electronic signature or another analogue of a manual signature, are admissible as written evidence in accordance with, and in the cases provided in, the law. If copies of documents are presented to the arbitration court in electronic form, the court can demand that the originals of these documents be submitted.
Written evidence that is wholly or partly in a foreign language must be accompanied by duly certified translations into the Russian language.
A document obtained in a foreign state must be recognised by an arbitration court as written evidence if it is legalised in accordance with the established procedure.
Disclosure in criminal proceedings
The criminal investigator must provide the accused with a copy of the case materials before the judicial proceedings are commenced (Article 217, Criminal Procedural Code of the Russian Federation). This ensures that the accused's right to a fair trial is protected. The accused is given an opportunity to review the prosecution's arguments, enabling him to produce a complete defence during the preliminary investigation and trial.
In criminal litigation, documents are admitted as evidence if the information supplied in them is important for the establishment of the circumstances listed in the Criminal Code of the Russian Federation (CCRF) (for example, for proving the time, place, mode and other circumstances of the crime). All documents are treated equally, and no document is considered "privileged" under Russian law.
Documents can contain information in writing or another form. It is possible to introduce as evidence photographs, audio and video recordings and other carriers of information, provided that they are obtained, demanded and presented in accordance with Article 84 of the CPCRF.
The documents must be included in the criminal case materials and be kept over the entire term of the case storage. On application of their lawful owner, the documents (or copies) seized and included in the criminal case materials can be handed over to him.
The documents that can serve as a means for exposing a crime and for the establishment of the circumstances of the criminal case are recognised as demonstrative evidence. These documents are included in the criminal case materials, and a corresponding resolution will be passed in relation to them.
Witness evidence is recorded by the tax authorities during the tax audit. Witness interview protocols are examined during court trials. Since the tax audit report already contains witness testimony or references to witness interview protocols, the tax authorities rarely subpoena witnesses to give their testimony at a court hearing.
Attorneys can question witnesses, provided that witnesses consent to it. Witness questioning protocols constitute evidence admissible in arbitration courts.
The court can subpoena (for examination in court) witnesses who have already been examined (questioned) by the parties and/or other witnesses. However, in practice, in arbitration proceedings, witnesses are rarely subpoenaed for direct participation in litigation.
Generally, a witness must report orally on data known to him. On the proposal of the court, a witness can record oral testimonies in writing.
Testimonial evidence reported in writing must be attached to the materials of the case (Article 88, Arbitration Procedural Code of the Russian Federation).
A witness who reports data for which he cannot indicate the source cannot be admitted for giving testimonial evidence.
Witness examination during the judicial investigation is conducted orally.
In the event of the non-appearance of a witness, the presentation of his witness testimony given at an earlier date in the course of a preliminary investigation or the judicial proceedings can only be admitted with the consent of the parties (Article 281, Criminal Procedural Code of the Russian Federation (CPCRF)).
A party can examine its own witnesses, who can then be cross-examined by the other party. The judge must put questions to a witness after the witness has been interrogated by the parties (Article 278, CPCRF).
Russian legislation does not set out a procedure for preparing witnesses on behalf of the taxpayer or the tax authorities.
As part of the court proceedings, the court must explain to witnesses their procedural rights and duties. In particular, a witness has the right:
Not to give evidence against himself, his spouse or close relatives up to a degree of kinship determined by federal laws.
To reimbursement of expenses connected with summoning in court, and to pecuniary compensation connected to loss of time.
Additionally, the arbitration court will warn the witness that he can be criminally liable for deliberately giving false evidence or refusing to testify.
There is no special procedure for preparing witnesses on behalf of the defence and the prosecution.
However, as a part of the judicial investigation, the court will explain to witnesses their procedural rights and obligations.
A witness in the criminal court can:
Refuse to testify against himself, his spouse and other close relatives. If the witness consents to give evidence, he must be warned that his testimony can be used as evidence in the criminal case, even if he subsequently repudiates his testimony.
Give evidence in his native tongue or in the language of which he has a good command.
Make use of an interpreter's services free of charge.
Recuse the interpreter taking part in his interrogation.
Enter petitions and file complaints against the actions (or the lack of action) and decisions of the inquirer, investigator, prosecutor or the court.
Come to his examination with a lawyer.
Make a request for the application of security measures.
A witness cannot:
Evade from attendance on summons of the inquirer or investigator, or from appearance (on summons) to the court.
Deliberately give false evidence or refuse to give evidence.
Disclose data from the preliminary investigation, which he has learned in connection with his participation in the criminal proceedings, if he has been warned to this effect in advance.
Additionally, the tax authority official cannot question a witness about the circumstances that have become known to him in connection with information contained in a special declaration submitted under the Federal Law on the Voluntary Declaration of Property and Bank Accounts (Deposits) by Individuals.
Hearsay evidence in civil and criminal trials
Expert reports in civil trials
Expert opinions are only admissible by way of a written report. Expert reports must include an introduction, declaration and conclusion. Additionally, the report must contain a detailed description of the studies conducted by the expert, the results of the studies and responses to any questions posed by the court. The expert can also report any other significant findings at their own discretion (Article 86(2), Arbitration Procedural Code of the Russian Federation (APCRF)).
The APCRF contains specific rules regarding repeated and additional expert studies. The court can order an additional expert study at the request of any party that disagrees with the original expert's study. The new expert study must be completed by a different expert. If an expert report is unclear or incomplete, the court can order a follow-up report by the same expert.
Expert evidence in civil trials
Experts serving in a court of arbitration must have special knowledge of the issues in dispute. The expert must be appointed by the court and provide an opinion in accordance with the procedural rules set out in Article 55 of the Arbitration Procedural Code of the Russian Federation. When summoned by the court, the expert must appear at trial and give impartial responses to any inquiries that are made. Experts can refuse to give their opinion if a particular matter is outside of their expertise or if they have been provided with insufficient materials.
Expert evidence in criminal trials
The examination and questioning of an expert can only be based on his report.
During the preliminary investigation, the investigator can interrogate the expert for an elucidation of the conclusion he has issued, either on his own initiative or on petition from the victim, suspect, accused or his counsel. The interrogation cannot take place before the expert has given his conclusions.
The expert cannot be interrogated about the information he has obtained in connection with the court examination, if this has no bearing on the object of the court examination in question (Articles 204 and 205, Criminal Procedural Code of the Russian Federation (CPCRF)).
On the parties' petition or on its own initiative, the court can summon for interrogation the expert who has issued the conclusion in the course of the preliminary inquisition, in order to explain or expand on the conclusion he has given.
After the announcement of the expert's conclusion, the parties can put questions to the expert. The first party to put questions must be the party that initiated the expertise (Article 282, CPCRF).
Under the criminal procedure legislation, an expert report must include:
The date, time and place of the court examination.
The grounds for performance of the court examination.
The name of the official person that appointed the court examination.
Information on the expert institution, as well as the surname, name and patronymic of the expert, his education, speciality, work record, academic degree and/or academic status, and position.
Information on the expert's being warned about his responsibility for giving out a deliberately false conclusion.
The questions put to the expert.
The objects of the studies and the materials supplied for the performance of the court examination.
Data on the persons attending the court examination.
The content and results of the studies, with an indication of the methods applied.
The conclusions on the questions put to the expert and their substantiation.
The legislation on arbitration procedure contains provisions governing the procedure for the appointment of experts, which directly affects the introduction of expert reports in civil trial.
For example, the arbitration court must determine the range and scope of matters in respect of which an expert examination must be conducted. Persons participating in the case can submit to the arbitration court matters that are to be clarified during the expert's examination. The court must substantiate the rejection of any such matters.
Persons participating in the case can:
Apply for the summoning of experts, or for the conduct of an expert examination at a specific expert institution.
Apply for the recusation of experts.
Apply for additional questions to the expert to be added into the ruling ordering an expert examination.
Give explanations to the expert.
Access an expert opinion or a report concluding to the impossibility to state an opinion.
Apply for an additional or a repeated expert examination.
While experts are within the category of "other participants in the criminal courts proceeding", they have considerable procedural rights and obligations, including those to:
Get acquainted with the materials of the criminal case, referred to in the object of the court examination.
Request additional materials that are necessary for the issue of a conclusion, or the invitation of other experts for carrying out the court examination.
Take part in the procedural actions with the permission of the inquirer, the investigator and the court, and ask questions concerning the object of the court examination.
Issue a conclusion within the scope of their competence, including the issues relevant to the object of the expert study, even if they were not raised in the ruling ordering the court examination.
Lodge complaints against the actions (or the lack of action) and decisions of the inquirer, investigator, prosecutor and of the court which restrict their rights.
Refuse to submit a conclusion on issues outside the scope of their special knowledge and in the cases where the materials supplied are insufficient for issuing a conclusion. The refusal to submit a conclusion must be declared by an expert in writing, stating the reasons for refusal.
An expert cannot:
Conduct talks with the participants to criminal court proceedings on the issues involved in the court examination without the investigator and the court knowing about this.
Collect his own materials for an expert study.
Conduct without the permission of the inquirer, the investigator or the court studies that may lead to the full or partial destruction of the objects of the study, or to a change of their external appearance or basic properties.
Issue a deliberately false conclusion.
Divulge the data of the preliminary investigation, which have become known to him in connection with his participation in the criminal case as an expert, if he was warned to this effect in advance.
Fail to appear, when summoned by an inquirer, investigator or by the court.
An expert is liable for presenting a deliberately false conclusion in accordance with the Criminal Code of the Russian Federation.
In practice, the most common types of expertise are:
Technical documentation expertise.
Closing the case in civil trials
The judicial pleadings must consist of oral statements made by the persons taking part in the case, and by their representatives. In these statements, they must substantiate their position on the case.
The order of closing arguments is as follows:
Claimant and/or its representative.
Third parties making independent claims concerning the object of the dispute.
Defendant and/or its representative.
A third party who does not advance independent claims concerning the object of the dispute must take the floor after the party on whose side he is taking part in the case. The participants in the judicial pleadings cannot refer to:
Circumstances that have not been investigated by the court.
Evidence that has not been examined during the court session.
Evidence that has been recognised by the court as inadmissible.
After all the participants in the judicial pleadings have made their statements, each of them must have the right to reply. The defendant and/or its representative can make the final replies.
In practice, the most effective method is to submit a written argument, with a brief oral argument issued in the court hearing.
Closing the case in criminal trials
When the court completes the examination of the evidence submitted by the parties, the chairperson of the court will ask the parties if they wish to add anything to the judicial investigation. If a party makes such a request, the court will discuss the request and make a decision. Once all the requests are resolved and the required court actions are completed, the chairperson declares the judicial investigation concluded and proceeds to the pleadings stage.
The prosecution and the defence present their oral arguments during the pleadings stage. If the accused is not represented, he/she will participate directly in the pleadings. During the pleadings the participants cannot introduce evidence that was not considered during the court session or that has been deemed inadmissible by the court. Every party has a second opportunity to present oral arguments following their opening arguments. The accused has the right to make the final oral submissions.
Decision, judgment or order
Civil law cases
A case must be considered by a first instance court within three months from the day the court receives an application (Article 152, Arbitration Procedural Code of the Russian Federation (APCRF)). For cases that are highly complex or involve a large number of parties, a judge can extend this deadline to a maximum of six months.
A judgment of the court comprises (Article 170, APCRF):
An introduction. The introduction must include the:
name of the court;
surname of the person responsible for the court report;
date and location of the decision;
subject matter of the dispute;
names of the parties to the dispute; and
surnames and positions of court participants.
A narrative. The narrative contains a concise description of the parties' claims, objections, explanations, requests and appeals.
A declaration. The declaration must include:
a statement of the facts as ascertained by the court of arbitration;
the evidence on which the court's decision is based;
the reasons for the acceptance or dismissal of evidence or arguments;
the applicable laws; and
the reasons underlying the application of those laws.
A decision on the merits of the case. The operative part of the decision must be announced at the hearing in all cases. The whole text of the decision must be prepared within five working days from the day it is announced.
Criminal law cases
The court can enter a conviction or an acquittal (Article 302, Criminal Procedural Code of the Russian Federation (CPCRF)). A conviction can only be entered if the evidence proves that the accused committed the crime. The punishment imposed on the accused must be indicated in the sentence (Article 303(1) to (4), CPCRF). An accused can be exempt from serving a punishment imposed on him if, at the time of sentencing, an amnesty act was issued exempting the accused person from punishment. Additionally, if the length of time an accused person was held under arrest during the criminal case exceeds the length of the punishment imposed by the court, the accused is exempt from serving additional time in prison. If the accused person is a minor, he can be sentenced to attend a special closed education institution in lieu of imprisonment. Further, an accused person can be exempt from imprisonment if the court rules that he is no longer a danger to the public.
Under the CPCRF, a criminal court sentence has three parts:
The introductory part supplies general information about the court rendering the sentence, the defendant's personality and the charge.
The descriptive-motivation part of a sentence of acquittal must include the:
Substance of the charge brought.
Circumstances of the criminal case, as established by the court.
Grounds for the acquittal of the defendant and related evidence.
Reasons for which the court rejects the evidence presented by the prosecution.
Reasons of the decision with respect to the civil claim.
The resolutive part of a sentence of acquittal must contain:
The surname, name and patronymic of the defendant.
A decision recognising the defendant as not guilty and the grounds for his acquittal.
A decision cancelling any measure of restriction imposed by the court.
A decision cancelling any measures aimed at the confiscation of property and compensation of damages.
An explanation of the procedure for the compensation of damages suffered as a result of the criminal prosecution.
The descriptive-motivated part of a sentence of conviction must contain:
A description of the criminal act, recognised as proved by the court, with an indication of the place, time and method of commission, the form of guilt, and the motives, purposes and consequences of the crime.
The evidence on which the conclusions of the court are based, and the reasons for rejecting the other evidence.
An indication of the circumstances either mitigating or aggravating the punishment, and if the charge is found to be unsubstantiated in any one part, or if an incorrect qualification of the crime is established, the grounds and the reasons for changing the charge.
The reasons for the decisions on all the questions concerning the imposition of/exemption from a criminal punishment, as well as the application of other measures.
The evidence underlying the court's conclusion that the property subject to confiscation has been received as a result of committing a crime, is deemed income from such property or has been used or intended for being used as an instrument of crime or for financing terrorism, an organised group, illegal armed formation or a criminal community (organisation).
The substantiation of the decisions made on other issues.
The resolutive part of a sentence of conviction must indicate the:
Surname, name and patronymic of the defendant.
Decision recognising the defendant as guilty of the crime.
Item, part and Article of the Criminal Code of the Russian Federation envisaging liability for the crime.
Type and size of punishment imposed on the defendant for every crime of which he is recognised guilty.
Final measure of the punishment.
Type of correctional institution in which a person sentenced to a deprivation of liberty must serve his term of imprisonment, and the regime of this correctional institution.
Length of the probationary period in the case of a summary probation and the liabilities imposed on the convict.
Decision on the additional types of punishment.
Decision on offsetting the time spent in preliminary custody, if the defendant was detained before the sentence was passed, or if the accused was subject to measures of restraint in the form of custody or home arrest, or if he was subject to a medical treatment or placed in a mental hospital.
Decision on any restrictive measures imposed on the defendant before the sentence comes into force.
Decision on the procedure for the convict to travel to the place of service of the punishment, if he is assigned to serve his sentence at a settlement colony.
Restrictions imposed in respect of a convict sentenced to a restriction of liberty.
As a general rule, the criminal court must pronounce all parts of the sentence. However, if the criminal case is tried in closed proceedings or the case concerns offences in the area of economic activities (including tax disputes), the court can decide to pronounce the introductory and resolutive parts of the sentence only.
The copies of the sentence must be handed in within five days from its pronouncement to the convict or acquitted person, to counsel for the defence and to the public prosecutor.
The litigation costs are comprised of all the expenses attributable to the consideration of the case by the court, including the costs of legal representation (Article 106, Arbitration Procedural Code of the Russian Federation (APCRF)). The unsuccessful party is responsible for paying the successful party's costs within reasonable limits (Article 110(2), APCRF). "Reasonable limits" is not a statutorily defined term. However, the court will evaluate the circumstances of the case and exercise discretion to define a reasonable limit for compensation by the losing party. In cases involving state authorities, courts frequently reduce the amount payable for legal expenses without sufficient grounds for such reduction.
The costs can be claimed and recovered at each stage of the appeal.
If the court finds the actions of tax authorities to be illegal, the tax authorities must pay interest at the refinancing rate of the Central Bank of the Russian Federation on actually claimed or unreturned from the budget sums (in addition to the reimbursement of court costs).
The state bears a large portion of the costs associated with a criminal trial. In practice, this involves paying for the maintenance of the state authorities responsible for conducting the proceedings. A relatively small portion of the costs of a criminal trial paid from public funds is subsequently exacted from the convicted person.
A person who is found non-guilty has a right to rehabilitation. The right to rehabilitation includes the right to:
Compensation for property damage.
The elimination of consequences of the inflicted moral harm.
The reinstatement of labour, pension, housing and other rights.
The damage caused to the citizen as a result of the criminal prosecution must be compensated in full by the state, regardless of the guilt of the inquiry body, inquirer, investigator, public prosecutor or the court.
The compensation of property damage includes compensation for:
Wages, pension, allowance and other funds of which the defendant was deprived as a result of the criminal prosecution.
Confiscated property or property turned into state revenue on the ground of the sentence or court decision.
Fines and procedural expenses paid by the defendant in execution of the court sentence.
Sums paid to obtain legal assistance.
Right to appeal in civil law
A judgment of a first instance court can be appealed to a second instance court (Article 181(1), Arbitration Procedural Code of the Russian Federation (APCRF)). Unless otherwise provided under the APCRF, a judgment of a first instance court can also be appealed to a cassation instance court. This can be done if the second instance court has already considered the decision or has refused to reinstate the period for filing an appeal (Article 181(2), APCRF).
The main grounds of appeal against first instance decisions are as follows:
Incomplete clarification of circumstances of importance to the case.
Failure to prove circumstances of importance to the case, which the court believed to be established.
Non-correspondence of the conclusions presented in the decision to the circumstances of the case.
Violation or incorrect application of the rules of substantive or procedural laws.
Grounds of appeal at the cassation stage (that is, for amendment or repeal of a decision or resolution of an arbitration court of first or second instance) include:
Lack of correspondence between the conclusions of the court, contained in the decision or resolution, and the evidence in the case or the actual circumstances of the case established by the arbitration court.
Violation or incorrect application of the rules of substantive or procedural laws.
Court decisions can be reviewed by the Supreme Court of the Russian Federation under the second cassation and supervision procedures. This can be done at the request of a party to the proceeding or for other reasons indicated in the APCRF (Article 308(1), APCRF).
Grounds of appeal at the second cassation stage (before the Judicial Chamber of the Supreme Court of the Russian Federation) include the fundamental breach of substantive law and/or procedural law, which affected the decision and without removal of which it is impossible to restore and protect the violated rights, liberties and interests in the sphere of entrepreneurial and other economic activities, as well as public interests.
All court decisions passed by all instances in the case can be reviewed under the supervision procedure. This request can be filed within three months of the date of entry into force of the latest contested court decision.
A court act must be revised or cancelled by the Supreme Court of the Russian Federation if it breaches the (Article 308.8, Arbitration Procedural Code of the Russian Federation):
Uniformity of interpretation and application of the law by courts.
Rights and freedoms of men and citizens guaranteed by the Constitution of the Russian Federation and stated by generally recognised principles and norms of international law and treaties to which the Russian Federation is a party.
Rights and legitimate interests of an undetermined number of persons or other public interests.
When examining a case under the appeal procedure, the arbitration court must make a new investigation of all the facts, on the basis of the documents already contained in the case and of those supplied additionally.
At the cassation stage, the arbitration court can only check the legality of the decisions and resolutions passed by the arbitration courts of first and appeal instance, by verifying the correctness of the application of the rules of substantive and procedural laws.
Procedure to appeal in civil law
There are four stages of appeal against the decisions of the Arbitrazh courts: appeal, cassation, second cassation and supervision.
To have a decision reviewed by a higher instance court, a party must comply with the time limits and jurisdictional rules for filing complaints. The time period for filing an appeal is one month from the day the decision was passed by the court (before it comes into force). The time limit for filing a cassation and second cassation claim is two months from the day the contested judgment came into force.
The state duty for filing an appeal, a cassation, second cassation or supervisory claim against decisions or rulings of an arbitration court is RUB1,500.
Right to appeal in criminal law
A criminal law sentence can be appealed on the following grounds (Article 389.15, Criminal Procedural Code of the Russian Federation):
Discrepancy between the court conclusions, presented in the sentence, and the factual circumstances of the criminal case established by the court of appeal.
Violation of criminal procedural law.
Incorrect application of criminal law.
Injustice of the punishment imposed.
The grounds for amendment or repeal of a court's sentence, decisions and rulings under the criminal cassation procedure include the significant violation of criminal law and criminal procedure law, which had an influence on the outcome of the case.
The grounds for amendment or repeal of a court's sentence, decisions and rulings under the procedure of supervision are the same as in the criminal cassation procedure.
Procedure to appeal in criminal law
A written request must be filed to appeal the decision of a criminal court. The request must include:
The applicant's personal information.
The name of the court and an indication of the specific act being appealed.
The applicant's submissions or arguments.
A list of materials relied upon by the applicant.
The applicant's signature.
The appeal must be filed with the second instance court within ten days of the judgment. Alternatively, the appeal can be filed with the court of cassation or the court responsible for reviewing court acts under the supervision procedure within one year of the judgment coming into force. Supervisory proceedings are within the exclusive competence of the Board of the Supreme Court of the Russian Federation.
Recent civil law developments and proposals for reform
Important amendments came into effect on 6 August 2014. Following a merger of the highest courts, all the powers of the Supreme Arbitrazh Court of the Russian Federation have passed to the Supreme Court of the Russian Federation.
Instead of the Supreme Arbitrazh Court of the Russian Federation, a new panel of judges (the Judicial Board on Economical Disputes) was established within the Supreme Court of the Russian Federation.
The Judicial Board on Economic Disputes became the court competent to hear second cassation petitions. The period to file a cassation petition is two months from the date of entry into force of the last decision of the arbitration court in the case.
The structure and powers of arbitration courts of lower instances have been retained.
Additionally, the following two categories of cases have recently been excluded from the jurisdiction of arbitration courts:
Challenges to normative acts.
Challenges to the cadastral value of property.
Recent criminal law developments and proposals for reform
On 22 October 2014, in accordance with amendments to the Criminal Procedure Code of the Russian Federation, the Investigative Committee of the Russian Federation (ICRF) has become entitled to initiate criminal proceedings for tax crimes before the end of a tax audit. The decision to initiate criminal proceedings can be made by the investigators of the IC RF on the basis of data obtained during the tax audit before it is completed.
However, there are also amendments favourable to taxpayers. In 2015, an amnesty on capital was declared. This is a release from tax, criminal and/or administrative liability for offences connected with the following:
Acquisition (or the formation of sources of acquisition.
Use or disposal of property.
Controlled foreign companies.
Opening and/or crediting of funds to foreign bank accounts (deposits).
To benefit from this amnesty, a taxpayer must submit a special declaration to the tax authorities voluntarily.
In addition, the Government of the Russian Federation recently approved and sent to the State Duma amendments to the Criminal Code of the Russian Federation (CCRF) relating to non-payment of compulsory insurance contributions. Amendments to the CCRF will add two Articles (199.3 and 199.4) which will introduce responsibility for evasion of payment of insurance contributions to the state non-budget funds by the obliged person (individual or organisation).
Federal Tax Service of the Russian Federation (FTS)
Description. This is the official website of the FTS of the Russian Federation, which provides up-to-date information.
Maxim Rovinskiy, Partner, Head of Tax and Customs Law Practice
YUST Law Firm
Professional qualifications. Russian Federation, Attorney
Areas of practice. Tax law; customs law; banking and financial law (securities); litigation and arbitration; industries: banking and finance, chemicals, energy, oil and gas, innovation and IT, fast-moving consumer goods and food, metallurgy and mining, pharmaceuticals and healthcare, real estate, retail, telecommunications, aviation and defence industry, culture and sport.
Languages. Russian, English
- International Comparative Legal Guide to: Corporate Tax (Russia) (www.yust.ru/upload/iblock/fdb/fdb1cce3b3c2791cb751b54524a55345.pdf).
- Transfer Pricing and Tax Avoidance (Jurisdictional comparisons, Russia) (www.yust.ru/press-center/news/transfernoe_tsenoobrazovanie_i_nalogovaya_optimizatsiya/?sphrase_id=785).
Nikita Tolkachev, Associate
YUST Law Firm
Professional qualifications. Russian Federation, Attorney
Areas of practice. Tax law; litigation and arbitration; industries: banking and finance, chemicals, energy, oil and gas, innovation and IT, pharmaceuticals and healthcare, real estate, retail, telecommunications.
Languages. Russian, English, German
- September 2014, Tax disputes Journal, "New stories on thin capitalisation".
- April 2015, Tax disputes Journal, "Thin capitalisation 'mellowed'".
- May 2015, Tax disputes Journal, "Business on tax holidays".
- November 2015, Rossiyskaya Gazeta comments on de-offshorisation issues (www.rg.ru/2015/11/03/fns.html).