Determination of reporting period upon corporate reorganization. Case study
Author: Vladimir Ryvkin, Head of Tax Department
This article addresses law enforcement practice issues related to the determination of the reporting period for accrual of insurance contributions when an organization is restructured through transformation.
The authority monitoring insurance contribution payments conducted a cameral audit to verify the correctness, completeness and timeliness of mandatory pension insurance contribution payments by OOO, legal successor of ZAO, in particular, the mandatory pension insurance contributions to the Pension Fund of the Russian Federation accrued and paid from April 01, 2014 to June 30, 2014.
The audit found that the calculation of accrued and paid insurance contributions for the audited period were submitted late and proposed to bring to liability and impose a fine on the company under Article 46(1)(2) of Federal Law No. 212-FZ dated July 24, 2009.
The auditors argued that OOO failed to submit the calculation by the set deadline as it did so only on July 31, 2014.
OOO disagreed with this conclusion and appealed to a court to defend its interests.
The courts upheld the appellant’s position and pointed out that since Law No. 212-FZ does not set out specific deadlines for submission of insurance contributions by companies reorganized through affiliation, then the deadlines provided by Article 15(9) of Law No. 212-FZ should apply.
(Moscow State Commercial Court Decision Case No. А40-214964/14 dated 20.02.2015, Ruling of Ninth State Commercial Court of Appeal No. 09АP-13877/2015 26.05.15).
Based on the case materials, the court established that ООО is the legal successor of ZAO, which was reorganized on July 09, 2014 by transformation of ООО in accordance with sole shareholder decision dated April 09, 2014.
Article 40(1) of Federal Law No. 212-FZ On Insurance Contributions to the Pension Fund of the Russian Federation, Social Insurance Fund of the Russian Federation, Federal Fund of Compulsory Medical Insurance dated July 24, 2009 (further “Law No. 212-FZ”) sets out that a wrongful act (action or inaction) committed by an insurance contribution payer liable under Law No. 212-FZ is deemed a violation of Russian laws on insurance contributions.
Pursuant to Article 3(1) of Law No. 212-FZ, the Pension Fund of the Russian Federation and its local offices monitor calculation correctness, as well as completeness and timeliness of payment (transfer) of insurance contributions to state extra-budgetary funds for compulsory pension insurance contributions payable to the Pension Fund of the Russian Federation and compulsory medical insurance contributions payable to compulsory medical insurance funds.
Article 18(1) of Law No. 212-FZ requires payers to pay insurance contributions in full and in a timely manner.
Article 10 of Law No. 212-FZ sets out that the period to account for insurance contributions is the calendar year, and the reporting periods are quarter, six months, nine months and calendar year.
Pursuant to Article 15(9(1)) of Law No. 212-FZ, insurance contribution payers must quarterly submit to the authority monitoring insurance contribution payments at their place of registration, local office of the Pension Fund of the Russian Federation, a calculation of accrued and paid compulsory insurance contributions to the Pension Fund of the Russian Federation and compulsory medical insurance contributions to compulsory medical insurance funds. This information must be submitted no later than the 15th of the second calendar month following the reporting period.
Any action for which a deadline is set may be performed until midnight on the last deadline day. If documents or monetary funds are delivered to a communications organization before midnight on the last deadline day, the deadline will be deemed met (Article 4(8) Federal Law No. 212-FZ).
Article 46(1) of Federal Law No. 212-FZ provides that if a company fails to submit insurance contributions within the period set by this federal law for calculation of accrued and paid insurance contributions to its local authority monitoring insurance contribution payments, a fine of 5% of the amount of insurance contributions payable for the last 3 months of the reporting period, for each full or incomplete month from the set submission date, but no more than 30% of this amount and no fewer than RUB 1,000 will be imposed.
The organization submitted the calculation for the second quarter of 2014 on July 31, 2014 before the set deadline until August 15, 2014. The auditors do not dispute this and this was reflected in the decision appealed against.
Since Law No. 212-FZ does not set out any specific deadlines for submission of insurance contribution calculations by restructured organizations through affiliation, the deadlines set out in Article 15(9) of Law No. 212-FZ should therefore apply.
The authority monitoring insurance contribution payments has therefore no legal grounds to bring the company to liability for violation of laws on insurance contributions, and on that basis the court has reversed this unfounded decision.
We would be pleased to answer any questions related to taxation in Russia you may have, as well as assist in defending the above position in court.