1. Tax Aspects of Acquisitions in Russia How can Due Diligence help? American Chamber of Commerce Tax Conference – Oct. 23, 2009 Maxim Grishin, FCCA Senior Audit Manager Alinga Consulting Group

2. Contents Tax Due Diligence: Risks and Opportunities Onshore taxation: “Asset deal” vs. “Share deal” Post acquisition: Tax deductibility of Goodwill

3. Onshore mergers and acquisitions Offshore deals   Corporate legislature   Disclosure Onshore deals   Gaining popularity   Transparency

4. Tax Due Diligence - risks Tax risks  Cash - Revenues and Costs  Social taxes – SPE  Relationship with a tax guy

5. Tax Due Diligence - opportunities Underutilization of Tax benefits  Traditions  Conservative  Tax cushion

6. Tax risks - mitigation Ways to mitigate  Declare and pay  Initiate a tax audit  Do an asset deal

7. Asset or share Comparison table Asset dealShare deal Transaction price VAT and CITGains taxed Tax risk Inheritance NoneFull Asset deal = buy a property complex, Civil Code

8. Tax Deductibility of Goodwill Assessment and deductibility Asset dealShare deal Assessed on Assets & Liabilities Investments RecordedInvestor DeductibilityYes, 5 yrsNo Goodwill = excess of payment over the Net Assets of the property complex

9. Taxes and deals Asset deal Surplus of Fair Value 200 over Carrying Value 100 100 VAT on sale (200 * 18%) 36 Income Tax on surplus (100*20%) 20 Tax deductions (5 yrs 10% discounted) (15) Total consideration to be paid 141 Share deal Goodwill - surplus of FV over CV 100 Income tax for the Seller 20 Total consideration to be paid 120 Maximum tax provision to choose asset deal 21

10. Conclusion On shore deals - More expensive - Transparent - Less risk

11. Maxim Grishin, FCCA Senior Audit Manager - IFRS Chet Bowling Managing Partner Galina Klimenko Senior Audit Manager - RAS Alinga Consulting Group Audit & Taxation Department www.acg.ru