Overview of Tax Events for July 2018

REGULATORY DEVELOPMENTS

The State Duma’s spring session resulted in a number of significant tax laws being adopted, some of which the Russian President has already signed, in particular:

• a Federal Law that allows tax authorities to request from auditors information regarding clients. The timeframe is 10 days from the time when a request was received. For a refusal to provide the data or for a late reply, a fine of RUB 10,000 is provided for.

The following laws have been submitted to the President for signature:

• on increasing the VAT rate up to 20% from 2019 and on changing the tariffs for insurance contributions. https://www.kommersant.ru/doc/3700334 28.07.2018
• a law aimed at improving tax administration procedures; changing the procedure for setting profit tax rates with respect to the portion of the tax that is payable to regional budgets; and cancelling certain tax incentives with regard to the corporate property tax.

The same law provides that transfer pricing control over transactions within the country should be gradually abolished and in this connection the institute of consolidated groups of taxpayers should be eliminated from 2023. The procedure is also simplified for confirming that the VAT rate of 0% is justified,

• with amendments in part 1 and chapter 25 of the Tax Code with regard to the specific features of the taxation of international holding companies.

The following have been ratified:

• the Protocol to the Convention between the Russian Federation and the Kingdom of Belgium ‘On avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital’;
• Convention between the Government of Japan and the Government of the Russian Federation for the Elimination of Double Taxation.

On 9 July the State Duma discussed, as part of its parliamentary hearings, the draft of the Main Trends in the Budget, Tax and Customs and Tariffs Policies for 2019 and for the planning period of 2020 and 2021. The recommendations of the participants in the parliamentary hearings following the discussion have been placed on the website of the State Duma’s Committee for the Budget and Taxes.

PRACTICE

The Russian Federal Tax Service prepared letter No. SA-4-7/11482 ‘On filing recommendations regarding VAT deductions being applied taking account of case law’ dated 14 June 2018.

Letter No. ED-4-15/13247 of the Federal Tax Service ‘On preventing infringements of tax legislation’ dated 10 July 2018lists the cases in which tax returns may be considered inaccurate and be invalidated.

From 1 August the Federal Tax Service will start publishing data on companies which are no longer subject to the tax secrecy regime. The data to be published is:

• data on a company’s average staff headcount for the calendar year preceding the year when such data was published;
• data on the special regimes taxpayers apply;
• data concerning the taxpayer participating in a consolidated group of taxpayers as at 31 December of the year preceding the year when the data was published.

This is the first stage of the launch of the ‘Transparent Business’ service.

On 20 July the Federal Tax Service started accepting information from banks about foreign clients and their assets. The Federal Tax Service will share this information with tax administrations of other countries and will receive in exchange from such tax administrations information about Russian citizens’ foreign assets.