MOSCOW, October 19 - RAPSI. The Ninth Commercial Court of Appeals has upheld a lower court judgment invalidating the order issued to Моеt Hennessy Whitehall Rus to pay $1 million in supplementary taxes and penalties, the court told the Russian Legal Information Agency (RAPSI/rapsinews.com).

The court has also turned down the Moscow tax inspectorate's appeal.

Моеt Hennessy Whitehall Rus is the Russian subsidiary of Моеt Hennessy International.

The tax authority challenged the Moscow Commercial Court's August 3 judgment upholding the company's complaint.

The penalties were charged to the company following a 2009-2010 audit.

Moet Rus appealed the tax service's decision in court. The dispute arose over the scheduling of the company's product promotional actions and over dividend tax assessments. The tax service claimed that the company's promotional expenses for listings (ads on menus and wine cards), merchandizing, and displays were advertising expenses.

However the court ruled in favor of the company that they were not advertising expenses. It deemed them as "other production and sales expenses which result in a sales volume increase." Thus, these expenses were included in the tax base assessment.

The court also sided with the company on the dividend tax liability issue. Moet Rus paid dividends to Cyprus' MHWH Ltd. and, as a tax agent, withheld taxes amounting to five percent. This rate is stipulated by the bilateral agreement between Russia and Cyprus on double taxation.

The tax service ruled that the 15 percent equity minimum should apply since they believed that Moet Rus had not proved that MHWH Ltd. was based in Cyprus.
The court ruled that the Income Certificate for 2008 was sufficient grounds to confirm the company's foreign organization status.