LETTER OF THE FEDERAL TAX SERVICE OF THE RUSSIAN FEDERATION

of February 7, 2013 No. ED-4-3/1828 @

Appendix

LETTER OF THE MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION

of November 1, 2012 No. 03-08-13

The department of tax and customs and tariff policy reviewed request concerning determination of share of real estate as a part of assets of the Russian organization for the purposes of the taxation the income tax of the organizations and reports.

At the same time the Code does not contain provisions concerning calculation of share of the real estate which is in the territory of the Russian Federation in assets of the Russian organization.

In our opinion, in case of application of the subitem 5 of Item 1 of article 309 of the Code for determination of share of real estate it is necessary to proceed from the cumulative amount of all assets of the Russian organization which shares (share) were realized by the foreign organization.

This line item corresponds to the international practice enshrined in Comments to Model of the Convention on taxes on the income and the capital of OECD which Item 28.4 to item 4 of Article 13 of the specified Model says:

"Determination of whether represents the real estate which is in the Contracting State, directly or indirectly more than 50% of share value of the company is usually made by comparison of cost of such real estate with the cost of all property belonging to the company without debts and other obligations of the company (irrespective of their mortgage providing with the corresponding property)".

Direct calculation of share of such real estate can be made based on book value of assets of the Russian organization and book value of this real estate. The foreign organization selling shares based on the publications of the conventional private or official sources which are available for it, or based on information obtained by the seller of shares of the Russian organization can also provide to the tax agent such data. Necessary information can be obtained by the share purchaser - the tax agent directly from the issuer whose shares are acquired by him, or from any other reliable sources which are not forbidden by the law.

As the documents confirming the size of share of the real estate which is in the territory of the Russian Federation in assets of the Russian issuer can be:

- the balance sheet (form N 1) as of the last reporting date preceding the transaction on purchase and sale of shares;

- calculation for the property tax on the same reporting date.

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