Tax Controversy in Russia:
For Foreign-Owned Groups Under FNS Scrutiny

Pravo-300 · 8 years |

Best Lawyers Russia |

Kommersant |

1,000+ matters |

15+ years

Practice
Est. 2009 · Practice No. 04

About This Practice

Tax controversy work for foreign-owned groups in Russia has changed in character since the unjustified tax benefit doctrine was codified in Article 54.1 of the Tax Code in 2017. Field audits now routinely examine not only whether individual transactions were properly recorded, but whether the group structure has sufficient commercial substance to justify its form — a question that is fundamentally different from a standard transfer pricing review and that requires counsel who understands both the Russian audit process and the international corporate structures being examined. At Vetrov & Partners, our tax controversy practice focuses on foreign-owned groups: multinationals with Russian subsidiaries, international holding companies with Russian-source income, and foreign individuals with Russian tax obligations arising from Russian corporate holdings. We advise at the audit stage — before the assessment is issued — and manage proceedings before the FNS and the Russian courts where cases cannot be resolved at the administrative level.

Who We Act For

Our tax controversy instructions come from international groups with Russian operating entities, foreign individuals with Russian-source income or corporate holdings, and overseas law firms requiring Russian tax controversy support for their clients.

Client situations:
You are General Counsel of a European or Asian group with a Russian subsidiary or permanent establishment. The Russian FNS has commenced a field audit. The audit is raising questions about the substance of intra-group service arrangements and the application of a double-tax treaty. You need Russian tax controversy counsel who can advise on the defence strategy from the first day of the audit — not after the assessment is issued.

You are a foreign shareholder of a Russian company. The FNS has challenged the withholding tax treatment of dividends paid to you, alleging that you are not the beneficial owner of the income and that the treaty benefit does not apply. You need advice on the beneficial ownership analysis under Russian law and on the defence arguments available in the appeal proceedings.

You are in-house counsel for a group with a Russian entity that has received an assessment under Article 54.1 following a field audit. The FNS is claiming that the Russian entity's transactions with its Russian contractors were without commercial substance. The assessment is material. You need to understand the realistic prospects of a successful appeal and the procedural steps for challenging the assessment before the courts.

You are a foreign individual with Russian-source income or with a controlled foreign company (CFC) structure. You have received notice from the Russian FNS regarding your CFC reporting obligations or your tax residency status. You need advice on compliance and, if necessary, on the resolution of the tax claim.

You are a foreign group considering de-offshorisation — restructuring your Russian holding arrangements to address beneficial ownership risk and CFC exposure. You need tax controversy counsel who can advise on the risk profile of your current structure and the consequences of different restructuring options.

What We Do

We advise foreign-owned groups at every stage of the Russian tax controversy cycle, from audit preparation through to cassation review before the Supreme Court. Our practice is dispute-first: we approach tax questions from the perspective of what is defensible, not only what is theoretically compliant.

Russian field audits last up to two months, with potential extensions of up to one year for complex cases. The period during the audit — before the audit report (акт) is issued — is the most important phase for building the defence record. We advise on document management, witness preparation, the handling of FNS requests for information, and the preparation of objections to the preliminary audit findings.

Field audit defence

Article 54.1 of the Tax Code (introduced in 2017) sets the standard for challenging the tax benefit from transactions that the FNS considers lacking in commercial substance or real economic purpose. Defence arguments focus on the actual performance of the transactions, the genuine business purpose of the arrangements, and the sufficiency of the available evidence — including contracts, acts of performance, and communications between the parties. We manage Article 54.1 cases from the audit stage through to judicial review.

Article 54.1 unjustified tax benefit cases

Under Article 61.11 of the Federal Insolvency Law, individuals who controlled the debtor and whose actions caused or contributed to the insolvency may be held personally liable for the debtor's debts. This mechanism — known as subsidiarnaya otvetstvennost — is a powerful creditor remedy when the debtor itself is an empty shell with no assets, but the controlling persons have personal assets available. We advise on the prospects of subsidiary liability claims, identify the relevant controlling persons, and manage the proceedings through to enforcement against personal assets where successful.

Subsidiary liability of controlling persons

Russian transfer pricing rules (Section V.1 of the Tax Code) apply to controlled transactions between related parties exceeding established thresholds. FNS transfer pricing audits examine whether the pricing of intra-group transactions reflects arm's-length conditions. We advise on the preparation of transfer pricing documentation, the selection of the most defensible comparables methodology, and the conduct of the appeal process where an assessment has been issued.

Transfer pricing disputes

The FNS has increased its scrutiny of the activities of foreign companies in Russia and the question of whether those activities create a taxable permanent establishment under the applicable double-tax treaty. We advise on the risk assessment of existing structures and on the defence of assessments alleging a permanent establishment where the group's position is that no PE exists.

Permanent establishment challenges

Russian tax law and double-tax treaties require that the recipient of cross-border payments be the beneficial owner of the income in order to claim treaty benefits. The FNS challenges beneficial ownership in the context of dividend, interest, and royalty payments to foreign recipients. We advise on the beneficial ownership analysis and represent foreign recipients in FNS proceedings and in tax appeals.

Beneficial ownership challenges

Foreign individuals and Russian-tax-resident companies are subject to CFC rules that require the reporting of undistributed profits of controlled foreign companies. We advise on CFC compliance, on the application of the available exemptions, and on the tax consequences of restructuring arrangements to reduce CFC exposure.

CFC rules and de-offshorisation

Every FNS assessment must be challenged at the administrative level — before the superior tax authority — before a court claim can be filed. The administrative appeal is a formal proceeding with its own procedural requirements and an opportunity to submit additional evidence. We manage the full administrative appeal process and advise on whether to pursue judicial review following an unsuccessful administrative appeal.

Pre-litigation administrative appeal

Tax disputes are resolved before the arbitrazh courts. First-instance proceedings are followed by appellate review, cassation review before the circuit court of appeal, and — in exceptional cases — supervisory review before the Supreme Court of the Russian Federation. We manage full-cycle judicial proceedings and advise on the realistic prospects at each stage.

Judicial review of tax assessments

By the Numbers

Representative Matters

Defended European-owned Russian entity through field audit and administrative appeal. Assessment substantially reduced at administrative stage; no judicial proceedings required.

European manufacturing group · Article 54.1 assessment · pre-litigation resolution

Represented foreign parent company in beneficial ownership proceedings before the FNS. Treaty benefit confirmed on appeal.

Foreign holding company · beneficial ownership challenge · dividend withholding tax

Advised international group on PE risk assessment and managed defence of PE assessment issued following field audit. Assessment overturned on judicial review.

International services group · permanent establishment assessment · Russia

Advised HNWI on CFC obligations and compliance strategy following change in Russian tax residency status.

Foreign individual · CFC reporting · compliance advisory

Managed transfer pricing audit for Asian group with Russian manufacturing subsidiary. Supported preparation of documentation and management of the FNS information requests.

Asian manufacturer · transfer pricing audit · Russia

info@vetrovpartners.com
+7 (983) 510-38-76
Response: under 2 hours (Mon–Fri 09:00–20:00, Sat 10:00–15:00 UTC+7)

The Partner

Kristina Kornouhova, Senior Lawyer

Kristina Kornouhova leads Vetrov & Partners' tax controversy and antitrust practice, advising foreign-owned groups and international holding structures on Russian tax audit defence, Article 54.1 disputes, beneficial ownership challenges, and CFC compliance. She has managed tax controversy instructions from field audit through to cassation review before Russian arbitrazh courts, with a particular focus on disputes arising from intra-group arrangements and cross-border income flows.

Her practice includes transfer pricing audit management, permanent establishment risk analysis for foreign companies operating in Russia, and the full administrative and judicial appeal cycle for FNS assessments directed at foreign-owned entities. She advises regularly on the interaction between Russian tax law and double-tax treaty provisions, particularly in the context of beneficial ownership and the denial of treaty benefits.

We advise foreign groups through their local tax counsel, providing Russian tax controversy strategy in matters where the client's primary advisers are based outside Russia.

Recognised by Pravo-300   ·  Listed in Best Lawyers Russia

The Team

Recognition

We do not hold rankings from Chambers Global or Legal 500 in this practice area.

How We Work

Every engagement begins with a short description of your situation sent to one person, who reads it the same day.

We close with a written memorandum covering the outcome and any ongoing compliance or monitoring requirements identified during the proceedings.

Step 5 · Matter close

Kornouhova manages every material step. We coordinate with the group's overseas tax advisers where required and provide written reports after each significant procedural step.

Step 4 · Execution

We provide a phase-by-phase scope and fee estimate before billable work begins: audit support, administrative appeal, and judicial proceedings are each separately costed.

Step 3 · Written scope

If the initial exchange suggests a viable instruction, we schedule a thirty-minute call with the practice lead partner. For audit matters, this call will focus on the current state of the audit and the most important immediate steps. For appeal matters, we will assess the grounds available and the realistic outcome range.

Step 2 · Complimentary call

Send us three paragraphs: the nature of the FNS enquiry or assessment, the Russian entity or structure involved, and the stage of the process at which you are contacting us. We will respond within two hours with an initial assessment of where the matter stands and what the immediately available steps are.

Step 1 · Initial enquiry

Fees

Hourly billing for ongoing audit support and advisory. Fixed-fee phases available for administrative appeals and defined judicial steps. We invoice in EUR or USD. Fee estimate provided within twenty-four hours of enquiry.

Questions

Last reviewed: May 2026

Related Practices

Corporate Governance for Foreign Shareholders

Asset Protection & Wealth Structuring

Restructuring & Insolvency for Foreign Creditors

Cross-border Disputes & Arbitration

Further Reading

Article 54.1 in Practice: What the FNS Is Actually Looking For

Practice Analysis

The Russian CFC Rules: Compliance Priorities for Foreign Individuals with Russian Holdings

Practice Analysis

Beneficial Ownership in Russian Tax Law: A Guide for Foreign Shareholders

Practice Analysis

Make an Enquiry

ALTERNATIVE CONTACTS
Email: info@vetrovpartners.com
Phone (office): +7 (383) 310-38-76
Mobile / WhatsApp / Telegram: +7 (983) 510-38-76
Telegram channel: t.me/vitvetcom
Hours: Mon–Fri 09:00–20:00 · Sat 10:00–15:00 (UTC+7)
Response: Under 2 hours (business hours)

ADDRESS:
Deputatskaya Street 46, Office 1191, 19th Floor
Novosibirsk, Russia

Vetrov & Partners is a Russian-qualified law firm. For matters governed
by foreign law or requiring local admission in other jurisdictions,
we collaborate with trusted counsel in the relevant jurisdiction.

Vetrov & Partners · Boutique Law Firm · Established 2009 · Russia

The contents of this page are provided for informational purposes and
do not constitute legal advice. No solicitor–client relationship is
formed by reading this page. Vetrov & Partners is registered and
practising in Russia. © 2026 Vetrov & Partners.