Overview of Tax events for April 2018

REGULATORY DEVELOPMENTS

• Russia has approved a Draft Protocol to amend the Convention between the governments of Russia and Sweden on the avoidance of double taxation with respect to taxes on income. The area in which the Convention has effect is extended to cover taxes on property and capital.

• The Russian Government in its official review of draft law No. 419059-7 on digital financial assets pointed out the need to correspondingly amend Russian legislation on taxes and levies with respect to taxation of digital financial assets and transactions performed with these assets.

• The following draft laws have been submitted to the State Duma:

1. No. 449331-7 proposing to restrict a threshold of default interest by the amount of arrears on which the default interest accrues;
2. No. 442400-7 proposing to restrict tax expenses of companies. The key proposal is to recognise as dividends the income received by the owner when leaving the company or when the company is liquidated;
3. No. 441399-7 proposing, among other measures, in response to the US sanctions against Russian business, to prohibit the work of legal, consulting and audit companies.

• The Russian Ministry of Finance has identified defects in the draft law on special administrative districts in Kaliningrad and Vladivostok: the draft was submitted without an explanatory note and economic justification. Owing to absence of these appendices, the risks which can arise if the law is enacted cannot be assessed. Also the Russian Ministry of Finance believes that releasing international companies from providing necessary information to the tax authorities and providing these companies with a land tax exemption does not comply with the tax and budget policy being implemented.

• The Russian Ministry for the Development of the Far East has published for discussion a set of documents on the creation of a regional centre with a special bank, tax and court regime within the framework of the Free Port of Vladivostok.

PRACTICE

• The Russian Ministry of Finance at the extended session has summarised its work for 2017 and outlined its goals for the nearest future: to ‘configure’ the tax system and to enhance the collection of personal income tax and other taxes.

• A competence centre for cross-border transactions has been created on the basis of the Transfer Pricing Department of the Russian Federal Tax Service.

• The Russian Federal Tax Service has started to make settlements more often with good faith debtors; in 2017 the revenues from settlement agreements increased 3.2 times and amounted to RUB 4.2 billion. The revenues from bankrupt companies for the year increased by 35%, reaching RUB 101.1 billion, and from imposing subsidiary liability the revenues increased 12.6 times, exceeding RUB 2 billion.

• From 10 April in Russia a pilot launch of 'tax free' shopping has started in cities hosting matches of the 2018 FIFA World Cup.

• The Bureau of the OECD's Forum on Tax Administration (FTA) held a session in Paris. The delegation of the Russian Federal Tax Service led by Alexey Overchuk, Deputy Head of the Service, participated in the session. During the session, Mr Overchuk acquainted the Bureau members with the intermediate results of projects which the Russian Federal Tax Service is conducting under the auspices of the FTA. One of the projects is dedicated to researching global practices of implementing and using online cash registers; the second project is dedicated to the exchange of knowledge in the area of using digital technologies for tax administration.

• The participants of the session also discussed the implementation of automatic exchange of information about financial accounts and wide use of the sharing economy.