Overview of Tax Events for February 2019

REGULATORY DEVELOPMENTS

The State Duma:

• has adopted a law to ratify a protocol to the Convention between the governments of Russia and Sweden on the avoidance of double taxation with respect to taxes on income;
• has adopted in the first reading draft law No. 620109-7 on making more specific the provisions regarding information being submitted for the purposes of automatic exchange of country reports regarding participants of international groups of companies;
• is examining the draft law on ratifying the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”). Russia intends to apply the MLI with 71 countries.

The Russian Finance Ministry:

• has forwarded to the Russian Government a report on the interim results of the work of an expert working group with respect to non-tax payments. According to the Finance Ministry six compulsory payments should be included in the Tax Code (a payment for a negative environmental impact, contributions of public telecommunications networks, a payment towards compensating damage caused to public roadways by vehicles with a weight exceeding twelve tons, a recycling fee, an environmental fee and a resort fee). Once the law is adopted, a 10-year moratorium will be established with respect to criminal liability for a failure to remit tax payments after they are included in the Tax Code and the limit of unpaid taxes will be increased for the purpose of imposing criminal liability.
• has developed a draft resolution of the Government whereby the Federal Tax Service and Federal Customs Service will begin an experiment of tracking several types of imported goods.
• suggested supporting business angels who invest in new innovative projects at early stages of their development.

New offshore zones, “special administrative districts” (SAD), may appear in Russia, if the experience of SADs already operating in Kaliningrad Region and Primorye Territory proves to be successful.

The Russian Federal Tax Service has removed the following countries and territories from the list of countries and territories that do not exchange information with Russia for tax purposes: Belize, Brazil, Liechtenstein, Monaco, UAE, Seychelles, Uganda, Saint Kitts and Nevis, as well as two British offshore areas – the Isle of Man and Guernsey.

PRACTICE

The trend of lifting the administrative burden from taxpayers is continued. In 2018, the number of field audits was reduced by another 30% down to 14 200 (from 20 200 in 2017). The audit coverage for companies is 0.18%, meaning that two out of every one thousand companies and individual entrepreneurs are audited.

For the first time, tax authorities have managed to prevent the growth of debt.

The Russian Federal Tax Service has summarised:

• the results of pre-judicial settlement of disputes for 2018 and is completing the three-year work of transferring to centralised software for tax administration.
• the results of the VAT Declaration Campaign among foreign internet companies, providing electronic services to individuals (B2C).

The Russian Federal Tax Service has instructed that control and analytical work be reinforced with respect to taxpayers that create an appearance of various independent taxpayers’ operations to cover for the operation of one taxpayer (the splitting of a business).

A special section of the website “Provision of information about foreign clients according to the OECD Standard” now contains an updated format of the electronic report under the OECD Standard version 5.02. In 2019, companies will be able to submit reports on both previously signed and new agreements.

According to Vyacheslav Volodin, Speaker of the lower chamber of parliament, the State Duma, has sent an inquiry to the Federal Tax Service regarding tax payments of Google in Russia. The US web giant Google has stated that it pays all taxes in Russia that are required by law.

The rule regarding a compulsory digital marking for tobacco products sold in Russia has come into force starting from 1 March.

In 2019, the Plenum of the Supreme Court will adopt a Resolution on crimes in the area of taxation.