Inclusion of dividends into customs value of the goods: Current practice in Russia

This problem concerns first and foremost Russian subsidiaries of foreign companies operating under the limited-risk-distributor model. Subsidiaries of Chanel, Bershka, and Pull&Bear in Russia have already faced claims from customs authorities and failed to challenge them in court. In previous years the courts were reluctant to accept arguments of the authorities, and denied the inclusion of dividends. However, at the end of 2022 the position of the courts (including the Supreme Court of Russia) changed in favour of the customs authorities.

According to the Supreme Court, dividends may be included into the customs value if, in their essence, they ensure that the foreign supplier receives part of the income due to it from the further sale of imported goods. Moreover, the Supreme Court stated that in cases where goods are imported based on supplies within the same group of companies, and the further sale of such goods is the main income source of the Russian buyer, a decision on the payment of dividends becomes solely a matter at the discretion of the foreign supplier or other participants of the group of companies. This creates a significant risk of manipulation of the customs value of the goods.

The above risks of claims from the customs authorities may be high in the cases when, inter alia:

The overall income of the Russian company contained a high share of income from the sale of imported goods bought from a related supplier (80% or more);Goods were supplied by the foreign shareholder;There were dividends distribution (payments) in 2021–2023, where it was evident that the dividend amount correlated with income from the further sale of imported goods, or the dividends were distributed non-proportionally in favour of the foreign shareholder as the supplier; andThere were low commercial risks and functions assumed by the Russian buyer.

Companies operating in Russia should evaluate whether the above risks may apply to them, and whether their supply chains should be restructured. They should also prepare defence files and reconsider the periods for which the dividends are paid so there is more than a three years gap between dividend distribution and the relevant import/sale of goods.

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Valeria Khmelevskaya is a Partner, Lawyer and Tax Consultant admitted to practice in Russia. She has over 20 years of experience of consulting in matters of Russian and international tax law. She is also the Deputy Head of the Management Board and the Chair of the Committee for Taxes and Financial Reporting of the German-Russian Chamber of Commerce (AHK) and recommended attorney of the Austrian Foreign Trade Centre Moscow (Advantage Austria).