Deutsche Bank: Federal Tax Service withdrew claims by $171m

Deutsche Bank: Federal Tax Service withdrew claims by $171m
Deutsche Bank

After negotiations with the tax authorities "the parties came to an understanding," sources said.⁠

The Federal Tax Service (FNS) refused claims against the Russian subsidiary of Deutsche Bank because of dubious currency transactions. This was reported to RBC by sources familiar with the situation. These are the transactions that the bank conducted in 2013-2014 with Deutsche Bank in London. The top management of the Central Bank and the Ministry of Finance was involved in negotiations with tax authorities. As a result, "the parties came to an understanding," sources said.

To recall, in February 2017, the Interregional Inspectorate for Major Taxpayers (MIFNS) No. 9 suspected that the bank artificially understated the tax base at the expense of "not having reasonable economic sense" operations.

In the opinion of the tax authorities, Deutsche Bank conducted suspicious currency swap transactions. The bank bought the currency on the Russian market, then, closing the currency position, sold it to Deutsche Bank AG in London. The questions arose for the second part of the deals - it was sold at a rate lower than the rate of the Central Bank. Thus, according to it, Deutsche Bank recorded a loss in the form of the realized exchange rate difference, which was used to reduce the base for the profit tax on currency swap transactions. In other words, the tax authorities considered that the base with which the tax was levied could be greater.

After that, Russian branch of the bank began negotiating with the tax authorities. In the worst case, the bank was threatened with compulsory additional taxation of more than 10 billion rubles ($171m).

As RBC noted, foreign banks' subsidiaries are one of the key players on the Russian market in this segment. And the conclusion of currency swap deals with the main foreign structures occur regularly. Market participants, commenting on the possible additional charges of taxes on an unprecedented amount for Russia, pointed to the potentially destructive effect of this precedent for the entire market.

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