OREANDA-NEWS. December 27, 2012. Starting from January 1, 2013, the number of participants in the consolidated group of taxpayers (“CGT”) of OAO Severstal (“Severstal” or “the Company”) will expand from nine companies to twenty-two. The relevant agreement is registered at the Interdistrict Inspectorate #5 for Major Taxpayers of the Federal Tax Service of Russia.

Initially, Severstal registered the CGT in 2012, in accordance with the provisions of the Russian Tax Code that came into effect early this year. According to those provisions, a voluntary taxpayer association is recognized as a consolidated group of taxpayers based on a contract for the purposes of calculating and paying corporate income tax subject to consolidated results of financial and business activities. That is to say, when determining the income tax for a group of companies, financial results of those companies are added together and the tax is paid on behalf of a single company, the responsible participant. Such taxation procedure enables the CGT to calculate and pay uniform corporate income tax for the group of companies and file consolidated tax returns with the tax authorities.

With the establishment of the CGT, tax liabilities allocated to the budgets of regions where the group pursues its business are distributed in proportion to the depreciable assets the group owns in any given region and the number of its employees (or cost of labor) in that region.

Alexey Kulichenko, Severstal’s CFO, said: "Introducing the concept of CGT will result in more equitable and predictable allocation of tax liabilities among the Russian regions, as they will be calculated based on the number of employees and cost of fixed assets at the site. At the same time, the total amount of tax liabilities will depend on the company’s consolidated results. It will create conditions for more accurate regional budget forecasts due to reduced fluctuations of tax liability amounts because of the financial results of a specific entity.”

For reference:

Before January 2013, Severstal’s CGT included the following legal entities: OAO “Severstal”, OAO “Olcon”, ZAO “Izhora Pipe Mill”, OOO “Severstal-Promservice”, OOO “SSM-Tyazhmash", OAO “Severstal Metiz”, OOO “Severstal Vtorchermet”, OOO "Holding Mining Company” and OOO “North-West Castable”. Starting from January 1, 2013, the CGT will also include the following entities: OAO “Karelsky Okatysh”, OOO "CTA", OOO “Korpanga”, OOO “Vorkutaugol”, ZAO “Severstal Resources”, OOO “UlugkhemUgol”, OAO “Severstal Infocom”, OOO “Severstal — Unified Service Center”, ZAO “Neva Metal”, OOO “Yunifes”, ZAO “Severstal Long Product Mill Balakovo”, ZAO TH “Severstal Invest”, and ZAO “Severstal Steel Solutions”. Therefore, the total number of Severstal's CGT participants will amount to 22 companies.