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| Co-authored by Vadym Avdieiev |
At one of international taxation events we heard from a colleague from Avellum
law firm, Mr. Vadim Medvedev, about the very interesting case of Phoenix
Capital LLC* related to the application of the concept of beneficial owner. We
could not help, but examine the case in more details and share our findings
with our dear readers.
So, what makes the case so special?
First of all, the case is memorable for featuring an unusual approach to
a determination of beneficial owner. The case did not revolve around so
familiar to us quotations of Article 103 of the Tax Code of Ukraine providing
that agents cannot count as beneficial owners of an income.
The taxmen and courts went much further. They investigated into the
ultimate beneficial owner of Ukrainian “Phoenix” that had paid the income to a
Cyprus-based company named Okland Holdings Limited. They established that the
ultimate beneficial owner of both of those companies had been the same person –
a mysterious “PERSON_1” under the terminology of the Unified State Register of
Court Rulings.
The evidence confirming the simultaneous ownership over those two
companies was the information provided by Ukrainian bank “Pivdencombank” on the
existence of the indirect control of
“PERSON_1” over Ukrainian “Phoenix” through a chain of non-resident companies.
Moreover, surprisingly though, such “incriminating” evidence was also the
letter of the Head of the Representative Office of Okland Holdings Limited
referring to the same “PERSON_1” as the beneficial owner of this Cypriot
company.
Unfortunately, we have been unsuccessful in finding information on how
exactly the taxmen managed to obtain those “unique” pieces of evidence. Most
likely, they were gathered during a criminal proceeding initiated against the
management of Phoenix Capital LLC. The criminal proceeding is, as always, a
“sealed book”. From a small fraction of information publicly available we have
not managed to find answers to our questions.
If anyone of our readers is more familiar with the case of “Phoenix”, we
would highly appreciate your comments regarding how the taxmen managed to “persuade”
the bank and the representative of the Cyprus company to disclose such valuable
information.
* There is a fair number of court judgments in the case rendered by
courts of different instances. However, in our opinion, the details of the case
are best covered in the Resolution of the District Administrative Court of Kyiv
dated 4 March 2013 (http://www.reyestr.court.gov.ua/Review/29724246)
** The photo is from http://www.qygjxz.com
