The management of the company is suspected of using illegal offshore financial schemes for paying dividends and lowering taxes, according to a spokesman from Russia’s Ministry of Internal Affairs.
Its official representative, Irina Volk, claimed the government had lost RUB300 million (US$5m) in taxes owed, as a result.
The ministry official said Russian police had alleged illegal offshore schemes were used to route dividends to a Cypriot shareholder in a holding company owning Cherkizovo, with the aim of lowering the effective tax rate on profits from 15% to 5%. Russia’s federal police have initiated a criminal case into allegedly illegal late tax payments.
The Ministry of Internal Affairs had already accused the management of a Cherkizovo subsidiary of securing illegal VAT refunds exceeding RUB16m (US$276,000), with a criminal case being opened in December (2016).
Cherkizovo has denied all the accusations. In its official statement, the company said the alleged violations amounted to technical disagreements between Russian tax authorities and the company’s management regarding applicable tax rates on dividends.
The company alleged that it had not been informed of some recent changes in Russian tax laws, a problem missed by the company’s auditors. As soon as Cherkizovo learned of the new requirements, the group immediately paid re-assessed taxes and penalties, the company claimed.
The Russian Federal Tax Service did not respond to requests for comments from GlobalMeatNews.
Cherkizovo is one of the largest meat producers in Russia. In 2016, the group was the second-largest poultry producer, with a 10% market share, and the third-largest pork producer, with a share of 5%. The controlling shareholder of Cherkizovo is the family of founder Igor Babaev (now owning around 88% of its shares), having earlier this year purchased about 21% of the shares and global depositary receipts (GDRs) of the company from the Prosperity Capital Management fund.
This July, the Babayev family revealed it had sold almost 3% of its share capital to a Spanish partner, Grupo Corporativo Fuertes, increasing its stake from 5.12% to almost 8.1%.
Last week Babayev’s family sent an offer to other minority shareholders to buy their securities.
According to some sources close to the company, investigations against the company might have been inspired by some major competitors, in order to weaken its market position.