Overview of tax events for April 2014

REGULATORY DEVELOPMENTS

Russian President Vladimir Putin has signed Federal Law No. 81-FZ dated 20 April 2014 "On amending the Second Part of the Tax Code of the Russian Federation", which is aimed at simplifying tax accounting and harmonising the rules for calculating the profit tax base and the rules for establishing financial results in accounting.

www.gazeta.ru, 21 April 2014

On 25 April the State Duma approved Federal Law "On amending Federal Law "Concerning the National Payment System" and certain items of legislation of the Russian Federation". This includes an amendment which allows banks to close foreigners' accounts if foreign legislation requires that information on such accounts be submitted to the USA.

www.1prime.ru, 25 April 2014

On 15 April the State Duma approved in the first reading the draft law submitted by the deputies "On amending article 25.8 of the First Part of the Tax Code" to extend tax benefits for investment projects in the Far Eastern Federal District to projects in the Republic of Khakassia and the Krasnoyarsk Territory.

It is proposed that profit tax and personal income tax preferences be extended to territories of the Republic of Khakassia and the Krasnoyarsk Territory which were approved in September 2013 by the Law on stimulating implementation of regional investment projects in the territories of the Far Eastern Federal District and certain constituent entities of Russia.

www.kommersant.ru, 17 April 2014

Russia's fifth gambling zone may appear in Crimea. The corresponding draft law has been submitted to the State Duma by President Vladimir Putin. However, Russian Ministry of Finance doubts that such project would be economically feasible.

Vedomosti, 24 April 2014 and 21 April 2014

A draft law "On amending certain items of Russian legislation" has been put before the State Duma. The draft in question is concerned with information being transferred to tax authorities of a foreign state. The amendments apply not only to banks but to other financial institutions as well including brokers, depositories, insurance companies, investment funds, unit investment trusts, private (i.e. non-state) pension funds, management companies, etc. The draft law permits all these organisations to collect and send to the IRS (the US tax service) information regarding their clients who are US taxpayers as well as to refuse to open accounts for (or close existing accounts of) those US taxpayers who refuse to provide the required information.

www.kommersant.ru, 24 April 2014

 In the autumn the State Duma will resume considering legislation aimed at reducing retailers' costs. "We have promised retail chains that we will accommodate their requests, for example with regard to deducting the costs which retail chains incur owing to thefts", commented Igor Shuvalov, First Deputy Prime Minister.  "We will see what the current practice is for working with producers of food products. Whether or not anything is changing for the better, then we will allow certain improvements for them, which will essentially mean a minus for regional budgets", he also clarified.

www.kommersant.ru, 27 April 2014

 The Russian Government has instructed the Ministry of Finance to refine the draft of the "Main directions of Russia's tax policy for 2015 and the tax period of 2016-2018".

The main concepts are that fiscal burden should not be increased until 2018; that the body of tax benefits should be revised; that the immovable property tax should be assessed based on the cadastral value; that income tax should be imposed on individuals who sell a residential property which is not their sole residential property; that a tax manoeuvre should be used in the oil and gas sector in the form of personal income tax being increased and the export duty being reduced; while de-offshorisation remains on the agenda.

www.vedomosti.ru, 23 April 2014

 

Additionally:

(itar-tass.com, 8 April 2014)

The Russian Government will not increase the tax burden. During the discussion of the draft Main directions of Russia's tax policy for the coming years the Ministry of Finance and certain other experts made proposals that tax rates be increased, including for profit tax and dividend tax, but all these proposals were rejected.

Analysis:

(www.rg.ru, 29 April 2014)

In the opinion of experts, the business community has been given a message, which is that the State is ready to reduce the tax burden and improve the tax administration to create favourable business conditions. In return, taxpayers will have to be open and understand the need to pay fair taxes.

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 The Ministry of Finance has submitted to the Russian Government a draft Directive concerning a Data Exchange Agreement to be signed with the US.

www.vedomosti.ru, 21 April 2014

 

In the meanwhile:

(Vedomosti, 4 April 2014)

The US Internal Revenue Service has published the list of countries with which it has not yet signed a Tax Information Exchange Agreement (FATCA) but the negotiations are close to completion. The list includes 15 countries, but Russia is not among them.

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The Ministry of Finance is also preparing a draft law that will harmonise Russian legislation with the American FATCA. It assumes that banks will be able to provide information regarding their clients not only to the US Internal Revenue Service but in fact to any company which is authorised to collect taxes. This means foreign banks which have the right to withhold taxes and which are involved in processing the payment.

www.kommersant.ru, 18 April 2014

Officially:

(www.kommersant.ru, 14 April 2014)

Russian Minister of Finance Anton Siluanov talks about the reasons for the large-scale offensive of the State against offshore companies and the expected results from it.

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The Ministry of Finance is proposing that the procedure be simplified for making decisions regarding grace periods and extensions for paying federal taxes and charges when the time periods do not exceed three years, by delegating the powers of the Government concerning these matters to the Federal Tax Service. This regulatory act is expected to enter into force on 1 January 2015.

www.vedomosti.ru, 7 April 2014

According to the concept of a draft law which the Ministry of Economic Development and Trade is currently working on, residents of the special economic zone in Crimea will pay only the 10% profit tax; benefits regarding social insurance contributions are also possible. According to the plan of the Minister of Economic Development Alexey Ulukaev, this, combined with the simplified administrative procedures, should make Crimea an alternative to offshore jurisdictions.

www.vedomosti.ru, 21 April 2014

Opinion:

(Vedomosti, 25 April 2014)

Crimea should receive tax benefits, but it is not necessary to create a special economic zone there, believes Sergei Shatalov, Deputy Minister of Finance.

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 The Federal Migration Service has prepared amendments to article 27 of the Law "On the procedure for leaving and entering the Russian Federation". In particular, it prohibits from entering the country those foreigners who have breached the procedure for paying customs duties and taxes.

izvestia.ru, 1 April 2014

Businessmen are proposing that federal agencies such as the Federal Tax Service should also bear an obligation to disclose information regarding companies with private equity. This proposal is aimed at helping foreign companies to protect their rights in Russian courts.

www.rbcdaily.ru, 3 April 2014

PRACTICE

In its letter dated 9 April 2014 the Ministry of Finance specified which schemes should be barred that involve companies from transit jurisdictions, such as Cyprus, Netherlands and Luxembourg. The issue is using intermediaries to divert dividends, loan interest and rights to intellectual property to offshore jurisdictions.

The Ministry of Finance insists that there should be a clear delineation between the beneficial owner which may "expect income" and "define its economic destiny" and an artificially created intermediary which is registered in a transit jurisdiction (a "conduit company").

www.kommersant.ru, 22 April 2014

The Presidium of the Supreme Commercial Court has declared illegitimate the formal approach of state authorities which requires foreign companies to provide details which they do not have. This cost the owner of duty-free shops AeroTradeService lost the alcohol license and a shop in an airport because it did not provide the INN (Russian Taxpayer ID) of its German contracting party.

The list of details which foreign companies may not have is topped by the seal of a legal entity which the Federal Tax Service requires when a tax is refunded. At the same time, Russia may soon abandon using seals as "anachronistic".

www.kommersant.ru, 16 April 2014