Extension of the deadline for filing accounting reports
On 7 April 2020, the Russian Ministry of Finance and the Russian Federal Tax Service issued a joint letter concerning the extension of the deadline for filing accounting reports provided for by Resolution No. 419 of the Russian Government dated 2 April 2020.
As you can see from this letter, the three-month extension that has been granted does not cover everyone and it relates only to taxpayers who are obliged to file accounting reports with the tax authorities under article 23(1)(5.1) of the Russian Tax Code. However the list of taxpayers specified in this provision is very narrow (budgetary organisations, credit institutions, religious organisations, and organisations handling official state secrets) and the bulk of commercial organisations are not covered by it.
The obligation of the remaining taxpayers with respect to filing a counterpart of their accounting reports with the tax authorities in order to form a state informational resource (from 2020 this function has been transferred from the Russian Federal State Statistics Service to the Russian Federal Tax Service) is not regulated by the Russian Tax Code, since it is enshrined by the provisions of the Federal Law “On accounting”. Accordingly, from the formal standpoint at present the Russian Government is not empowered to amend the deadline for the performance of this obligation. Taking this into account the Russian Ministry of Finance and the Russian Federal Tax Service have reached the agreed position that for the majority of the companies the deadline for filing accounting reports (financial statements) is extended only to 6 May.
In other words, the deadline for business entities to perform the same obligation to file accounting reports with the tax authorities in the same circumstances restricted by the measures taken in connection with the pandemic is significantly different solely owing to the fact that this obligation is governed by different regulations.
It is also interesting with regard to filing accounting reports, that the Russian Ministry of Finance and the Russian Federal Tax Service have no doubts that the specified obligation does not arise until the end of the period of non-working days announced by the Decree of the Russian President, irrespective of whether the organisation in question is covered by the regulations on non-working days or whether it is obliged to continue its activity to maintain support for the life of the public and the state.
It is still unclear why, then, with regard to determining maximum deadlines for filing tax reports and, probably, performing the obligation to pay taxes, the Russian Ministry of Finance and the Russian Federal Tax Service have taken a diametrically opposed approach (letter No. 03-02-07/2/25589 of the Russian Ministry of Finance dated 31 March 2020 and letter No. SD-4-3/5547@ of the Russian Federal Tax Service dated 1 April 2020).
We hope that common sense, logic and a systemic interpretation of the provisions of tax legislation will allow these discrepancies to be eliminated shortly.
Organisations that are not covered by the support measures with regard to deadlines for filing annual accounting reports should be guided by the joint explanations of the Russian Ministry of Finance and the Russian Federal Tax Service, and should assess the risk of the liability being imposed if the reports are not filed by the established deadlines.
The legislation provides for no special rules concerning liability for the failure to file or for the late filing of accounting reports in accordance with article 18 of the Federal Law “On accounting”. Previously liability was imposed on organisations under article 19.7 of the Russian Code of Administrative Offences. However fines under it are insignificant (for legal entities the fines are from RUB 3,000 to RUB 5,000). The Russian Ministry of Finance understands this, and therefore is proposing to amend the Russian Code of Administrative Offences by adding the new elements of an offence (article 15.11.1) with a large volume of sanctions. The amendments were planned to be introduced from 2021, but the draft has not yet been approved. For this reason we suppose that the liability for a violation of deadlines for filing reports in 2020 will either be insignificant or will not ensue at all.
If there is a risk of the imposition of sanctions, an organisation may refer to the absence of fault in committing an offence as a result of force-majeure circumstances or to the need to mitigate liability, or may be limited to a warning. But there will be effective arguments that fault is absent only in cases when the restrictive measures in fact have paralysed the company’s activity.