Litigation - Russia

The Supreme Arbitrazh Court has confirmed the illegality of imposing tax liability on banks that fail to respond to the tax authorities' requests for bank account information and full account statements, unless such demands relate to bank customers that are subject to tax control measures.(1)

According to Article 86(2) of the Tax Code, banks must submit information about the accounts of corporate entities (or individual entrepreneurs) to the tax authorities on demand. However, an amendment to the article came into force on January 1 2007 which substantially restricted the tax authorities' power to request such information.

On June 23 2009 the court ruled on a case regarding a bank's tax liability for an offence under Article 135(1) of the code. The bank in question had failed to submit information about a customer's accounts and statements showing transactions on the accounts in accordance with Article 86(2).

The court found in favour of the bank. It noted that Article 86(2) contains an exhaustive list of circumstances in which the tax authorities may demand that a bank submit a statement of an account holder's transactions. The bank's obligation to respond to such a request depends on whether the account holder is subject to tax control measures.

The court indicated that:

"a tax office may request that a bank submit information about accounts opened at the bank and account balances, as well as bank statements showing transactions on the accounts of companies or individual entrepreneurs... provided that tax control measures have been taken against [them]. The tax office may demand the submission of the information specified in this clause only after issuing a decision to collect tax, suspend transactions or cancel the suspension of transactions on bank accounts with respect to the company or entrepreneur. This provision does not extend to any other instances in which the bank account statements of companies or entrepreneurs may be requested from a bank."

This ruling confirms the court's November 2008 decisions regarding the imposition of liability on banks in connection with Article 135(1).(2)