Headquarters of Russia's Federal Tax Service, Moscow division
Photo: Dmitry Kostyukov
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Personal Products of Care and Cash
The tax claims of 670 million rubles were presented to Russia’s arm of P & G, OOO Procter & Gamble. Most of the claims relate to using trademarks and royalty payment to U.S. Procter & Gamble Co. The tax authorities came up with the resolution once the Supreme Arbitration Court upheld similar charges to Transmark beer distributor. Russia’s Procter & Gamble challenges the claims in the Moscow Federal Tax Service.
Moscow Tax Inspection No. 48 passed the resolution on calling to tax account OOO Procter & Gamble. The officials had spotted tax arrears of 482.6 million rubles for VAT and profit tax payments due for 2003 and 2004. They added the fine of 25.5 million rubles and penalty of 163.5 million rubles, claiming 670 million rubles overall as a result.
The resolution dates December 14, 2007. Procter & Gamble Foreign Tiers Director Viktor Kromarenko confirmed the receipt of the document yesterday, saying they are appealing it in the Moscow Federal Tax Service. Kromarenko declined to elaborate on the essence of the claims, but a source close to the company specified that it is suspected of minimizing tax deductions by overestimating the costs.
Under the resolution, the basic claims relate to the royalty for trademark use. U.S. Procter & Gamble Co. granted to Russia’s company the trademark license for royalty of 2.5 percent to 7 percent of the sales. So, OOO Procter & Gamble has made no personal care products, dealing with sales exclusively. According to tax authorities, not distributors but manufacturers need a trademark license, while Procter & Gamble had no grounds to refer royalty to the costs and narrow its tax base by that action.
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All the Article in Russian as of Mar. 28, 2008
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