The FTS has launched a new service for paying subsidies to small and medium-sized entreprises

Pepeliaev Group advises of the new service for paying subsidies to small and medium-sized enterprises

On 1 May 2020 the Federal Tax Service(the "FTS") put into operation a new electronic service that is intended for paying subsidies (“Subsidies”) aimed at the partial compensation of costs resulting from the spread of the coronavirus infection, as well as preserving the level of employment and employees’ salaries in April and May 2020. The subsidies are being paid in pursuance of the instructions issued by the Russian President further to a meeting with the members of the Government that took place on 15 April 2020[1].

The rules for providing the Subsidies have been approved by the Russian Government's Resolution No. 576 dated 24 April 2020.

Terms and conditions for obtaining Subsidies

Both companies and individual entrepreneurs (“IEs”) may apply for subsidies. To qualify for a subsidy, an applicant must comply with the following conditions:

• as at 1 March 2020 the applicant (a company or an IE) was included in the register of small and medium-sized enterprises;
• the applicant (a company or an IE) operates in an industry most affected by the coronavirus infection;
• the company is not undergoing liquidation, no bankruptcy procedure has been initiated against it, and no decision has been issued to exclude it from the Unified State Register of Legal Entities (with respect to an IE this last condition is not applied for the purposes of obtaining a subsidy);
• the debt of the company or IE with respect to taxes and social security contributions as at 1 March 2020 did not exceed RUB 3,000;
• the company or IE has filed reports to the Pension Fund of the Russian Federation for March 2020;
• the number of employees of the company or the IE is equal to at least 90% of the number of employees in March 2020.

The Subsidy for one legal entity amounts to one minimum monthly wage (RUB 12,130 )[2] per each employee. The Subsidy for the IE will be calculated based on the number of employees plus one[3].

Please note that the Subsidy amount is not regarded as income of the company for tax purposes.

How the new service works

The new electronic service of the FTS for paying out the Subsidies has been available since 1 May 2020 on the FTS’s official website that you may access using this link. The service contains detailed information on how Subsidies are received including regarding categories of subsidy recipients, the amounts of the Subsidy, the formulas for calculating it, and the timeframes for filing an application for the Subsidy. Moreover, there is a step-by-step instruction on the Service that allows the applicant to check whether it complies with all the prerequisites to qualify for the Subsidy. Among other things, the applicant may check:

• Whether it is included in the register of small and medium-sized enterprises (this may be checked using this link available within the Service);
• whether the applicant’s area of activity is among those most affected by coronavirus (this may be checked by using this link available within the Service).

When using the service the applicant may check the compliance of the terms and conditions for receiving the subsidy by pressing the special button ’You may check compliance with these terms here’ and entering the Taxpayer ID Number (in Russian, referred to as 'INN'). Next, the applicant will be given a response as to whether it qualifies for the Subsidy.

The users of the service may find the formula for calculating the Subsidy for both companies and IEs. For instance, according to the service, the Subsidy amount for a company is calculated as follows: (number of employees in March 2020) * RUB 12,130.

Please note that data about the number of employees for the purposes of receiving the Subsidy is determined based on the data from reports drawn up according to the SZV-M form that that have been filed with the Russian Pension Fund.

The service also enables the applicant to compile and send an electronic application for the Subsidy.

How to file an application for the subsidy

The application for receiving the Subsidy may be filed in 2 ways:

• through the taxpayer’s personal account on the website of the Federal Tax Service[4];
• through the service where the applicant presses the button ’Compile an application for the subsidy’ and receives access to the form of the application.

Please note that, when preparing the application with the use of the service (in other words, without registering in a taxpayer’s personal account) the applicant will have to print out and sign the application, and then send it to the Federal Tax Service by post. When the application is compiled through the personal account (i.e. using the first of the ways suggested above), it will be sent to the Russian Federal Tax Service electronically.

When applying for the subsidy through the FTS’s service, companies and IEs will have to specify the following information:

• the TIN and name of the company or IE;
• the month for which the Subsidy will be paid;
• the exact bank details of the company or IE (account name, bank name, correspondent account of the bank, the bank's Banking ID Code, the bank's TIN and its Code of Reason for Registration, as well as the account number);
• the way in which the application was signed (personally or under a power of attorney[5]);

The Service allows the applicant to follow the progress of the review of the application using this link.

Please note that the application for the Subsidy for April 2020 should be sent from 1 May to 1 June 2020, and the application for May 2020 should be sent within the period from 1 June to 1 July 2020.

If the applicant uses the second way of submitting the application (i.e. files the application by completing the form using the service), the printed application will have to be signed and sent to the tax authority at the place of its location or at the place of residence of the individual entrepreneur. If the application is sent by a representative we suggest that it be accompanied by a copy of the power of attorney.

Dispute resolution procedure

The application for the Subsidy will be examined within 3 business days from the date on which the Federal Tax Service receives the application. Once a decision to pay out the Subsidy has been adopted, the Federal Tax Service will calculate the amount of the Subsidy and the Federal Treasury will pay the Subsidy according to the bank details specified in the application.

The period when the Subsidy will be paid depends on the date on which the application was filed. If the application was filed in the first half of the month then the payment will be performed after the 18th of the following month.

The Federal Tax Service will inform the applicant of the fact that the subsidy is payable through the applicant’s personal account on the website of the Federal Tax Service or by post.

What to think about and what to do

Small and medium-sized enterprises operating in the industries most affected by the coronavirus are recommended to use the FTS’s new digital service to receive the Subsidy.

Help from your adviser

Pepeliaev Group's lawyers have extensive experience of advising on any issues in the area of taxation or the application of tax legislation, including the issues of receiving subsidies. We are ready to provide legal support with respect to any questions arising when applicants reach out to the Federal Tax Service, including issues connected with receiving subsidies that are granted in view of the spread of the coronavirus infection, and any other matters of law.