Overview of tax events for May 2023

Regulatory developments

A charge is being introduced in the event of transactions with securities acquired from non-residents (excerpt from minutes No. 157/3 dated 24 April 2023 of the meeting of the sub-commission of the Government Commission on Monitoring Foreign Investment in Russia approved by the Russian Ministry of Finance under No. 05-06-10/VN-20705 on 29 April 2023).

The State Duma has passed in the first reading draft law (No. 330129-8 initiated by a group of senators) that expands forms of investment for international holding companies with a view to applying reduced profit tax rates.

A set of amendments to the Russian Tax Code has been put before the State Duma (No. 369931-8 initiated by the Russian Government). It is being planned, specifically:

to expand the application of the mechanism of the pre-trial settlement of tax disputes;

to implement the electronic bank guarantee;

to set up mechanisms aimed at preventing tax base erosion when foreign companies determine the status of a permanent establishment;

to increase the liability of tax agents for the failure to submit a calculation of income paid to foreign companies and of taxes withheld.

For profit tax it is proposed to extend until 2030 the 50% restriction on deducting expenses from previous years.

For personal income tax it is provided that foreign companies will be recognised as tax agents when income is paid to individuals if relevant work was performed/a service was supplied in Russia, including in the field of IT.

As concerns VAT, it is planned that the limit be increased to RUB 300 of tax exempt expenses on purchasing/creating a unit of products transferred for advertising purposes.

Further, the amendments affect special tax regimes, insurance contributions, land tax and transport tax.

The Russian President’s Order to generally suspend double taxation treaties with “hostile” states will tentatively be published in June.

The Russian Ministry for the Development of the Far East is planning to develop international advanced development areas in order to engage partners to establish facilities in Russia albeit in accordance with the regulations of the country supplying the technologies.

Practice

The Russian Federal Tax Service:

• has posted on its website, in the form of open data, information about amounts of income and expenses of companies for 2022 in accordance with accounting (financial) statements;

• has approved the plan for the development and implementation of formats of electronic documents for 2023;

• has claimed that exchanging tax information with foreign countries springs “surprises” on Russia.

Methods to reduce conflicts in tax relationships were discussed at SPILF-2023.

Deputy Head of the Russian Federal Tax Service Konstantin Chekmyshev has presented the Service’s new service, the Register of Persons Subject to Secondary Liability.

It is possible that tax audits will be held with respect to companies working with monobrands in different regions or under a franchise agreement.

Exchanging information between the tax service and law enforcement bodies should not be a substitute for the established procedure for initiating criminal tax cases. The above is stated by the Russian General Prosecutor's Office in response to the address of the Russian business ombudsman Boris Titov.