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25 December 2017 Constitutional Court Validates Recovery from Individuals of Taxes Unpaid by Companies

Legal update No 625

Goltsblat BLP advises of developments in the way taxes unpaid by companies are recovered from individuals following publication of Russian Constitutional Court Resolution No. 39-П passed on 8 December 2017 (the Resolution) on appeals by G.G. Akhmadeeva, S.I. Lysyak and A.N. Sergeev.

We have reported on several court cases (see No. 595 of 14 April 2017 at http://www.gblplaw.com/news/legal/85407/ and No. 527 of 8 September 2015 at http://www.gblplaw.com/news/legal/81406/), in which the Supreme and Constitutional Courts of Russia have confirmed that an organisation’s tax arrears may be recovered from individuals found guilty of tax crimes, the arrears qualifying as damage caused to the state.

In the Resolution, the Constitutional Court has reaffirmed that company tax arrears and late payment interest (but not fines) may be recovered from individuals found guilty of a tax crime and persons whose criminal prosecution was halted on non-exculpatory grounds (e.g., under amnesty or because the statute of limitations had expired). The Court points out that a guilty verdict or termination of such a criminal case should not be treated as unconditional confirmation of the individual being guilty of inflicting property damage.

The Court also points out that, in order to preclude arrears being recovered twice, funds may only be recovered from an individual to cover the damage inflicted once all other legal grounds for recovery have been exhausted or found to be absent (i.e., after an entry on the company’s termination has been made in the Companies Register or a court has established that the company is actually inactive and/or recovery is impossible). Should it be determined that the company is a sham (i.e., not an independent business entity), recovery from individuals is also possible before other methods of recovery have been exhausted.

The Court makes a point that, in quantifying damage, account may be taken of the financial status of the individual (particularly, whether enrichment took place), the degree of guilt, nature of the criminal penalty, whether they had control over the company’s affairs and other material circumstances. Since there are no clear criteria for assessing these circumstances, the amount ultimately recovered will depend on the judgement made by particular law administrators.

This Constitutional Court Resolution is of the utmost importance for protecting individuals who might face claims in connection with company tax arrears.

Goltsblat BLP’s Tax Crime Defence Group has amassed a wealth of experience handling both tax disputes and white-collar crime cases and is well-positioned to provide its clients with comprehensive legal support in relation to criminal and other liability of managers and beneficiaries.



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