Tax Litigation in Russia – Current Court Practice LITIGATION SERVICES 10 March 2011

1 © 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Tax Litigation – Routine Matter in Russia Supreme Arbitration Court statistics (1 half of 2010) total tax cases decided, including cases filed by the tax authorities 809 cases involving foreign legal entities (including non-tax disputes)

2 © 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. When Do Taxpayers Need to Litigate Tax assessments made by the government Field tax audits covering three previous fiscal years Desktop tax audits covering the latest tax returns Refusal of the authorities to refund excessive advance tax payments after filing of final tax return Refusal of the authorities to refund excessive tax payments after refiling of tax returns with decreased tax payables Refusal of the authorities to refund VAT when the input VAT exceeds the output VAT in a fiscal period

3 © 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Tax Assessments – Who Are Affected Russian legal entities Foreign legal entities acting in Russia through permanent establishment Non-commercial representative offices Company’s management Group headquarters

4 © 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Specific Issues for Representative Offices Who signed contracts with the clients of the Russian clients? Whether the revenue is recognized in Russia Whether such revenue is subject to tax in Russia Which primary documents support the attribution of revenue Who signed contracts with vendors/subcontractors for the purpose of Russian operations? Whether the costs are deductible in Russia for income tax purposes Whether the services provided by the foreign subcontractors are subject to Russian VAT Does the representative office use any intellectual property developed abroad? What are tax implications free-of-charge use of IP-rights Whether the IP-license fees are subject to withholding tax in Russian Does the representative office operate for the benefit of other foreign companies?

5 © 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Tax Assessments Frequently Raised issues Attribution of taxable income to permanent establishment – assessments up to 1 billion RUB Questionable use of intermediary companies in business operations – assessments up to 15 billion RUB Thin capitalization & withholding tax Negligence in selecting Russian vendors/suppliers Documentary support of VAT and income tax deductions Transfer pricing

6 © 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Your KPMG Key Contacts in Russia Mikhail Orlov Partner Tax Department of KPMG in Russia +7 (495) Anton Zykov Manager Tax Department of KPMG in Russia +7 (495)

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© 2011 ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”).