A Russian subsidiary of the car manufacturer group HYUNDAI had been claiming losses on a reoccurring basis.
Following an audit the tax authority concluded, that the losses incurred by the Russian distributor were mainly due to non-arm’s length transfer pricing within the group of companies and issued an assessment for FY 2009 – 2010 in the amount of 857 741 779 rubles.
The assessment was partially upheld by the Arbitration Court and then appealed to the Supreme Court.
Decision of the Russian Supreme Court
The Supreme Court dismissed the appeal lodged by HYUNDAI.
“In checking the calculation of the market price of the goods, the court, having assessed whether the data given in the calculation of the market price for the acquisition of the vehicles corresponded to the data contained in the primary documents, came to the conclusion that the calculation presented by the inspectorate was justified. The court considered that the tax authority had made the calculation on the basis of the particular characteristics and sale of each particular car (according to the VIN).
Under such circumstances, the court concluded that the taxpayer overstated the amount of costs to reduce income from sales for 2009 in the amount of 136 475 133 rubles, for 2010 – in the amount of 500 997 837 rubles.
The cassation appeal contains no arguments related to the episode involving application of thin capitalization rules to interest on bank loans.
In studying the arguments contained in the complaint, it was established that they were reduced to a review of the factual circumstances of the case established by the courts and could not be the subject of the Judicial Board of the Supreme Court of the Russian Federation, which in virtue of paragraph 1 of Part 7 of Art. 291.6 of the Arbitration Procedural Code of the Russian Federation with authority to review the circumstances established by the courts of lower instances.
The courts have not committed any violations of the rules of substantive law or of the requirements of procedural law, which entail unconditional cancellation of the judicial acts.”
Rus vs Hyu 2016 A40-50654-2013_20160120