Overview of Tax Events for March 2019

Regulatory developments

On 15 March, a public consultation started concerning amendments to the Russian Tax Code that were drafted by the Russian Finance Ministry and are aimed at settling disputes under international transactions and many other issues.

The Finance Ministry believes that the draft law to include six payments (environmental, recycling and resort levies, an environmental impact fee, a toll for the passage of heavyweight vehicles by road, and compulsory levies for network operators) in the Tax Code needs to be presented to the Russian Government as soon as possible.

Four business associations have sent a letter to the Russian President expressing their disagreement with the proposal of the Finance Ministry. Entrepreneurs who fear a growing fiscal and administrative burden are insisting on a separate framework law regarding such payments.

Additionally:

The Russian Ministry of Economic Development has proposed to set up a new environmental fund. It is proposed that the fund will be replenished with environmental and recycling levies and the environmental negative impact fee. Such a fund is an alternative for the initiative of the Finance Ministry to bring such payments under the umbrella of the Tax Code.

The cost of connection to the resource of the Russian Federal Tax Service where the financial statements of domestic companies will be accumulated has been determined as RUB 200,000 per user annually. It is planned that the new resource will be launched starting from 1 January 2020.

Practice

By 15 May, the Ministry of Economic Development will prepare an official assessment of the fiscal burden across various industries. While complying with the tax secrecy regime, the Federal Tax Service will, before 15 April, provide the Ministry with the data for calculating specific figures of such burden.

A new section “Controlled foreign companies and controlling entities” will appear on the website of the Federal Tax Service.

56,000 taxpayers had their statuses of a Russian tax resident confirmed in 2018, which is up by 77%, or 24,000, on 2017.

The Federal Tax Service has given an account of obtaining data concerning foreign assets of Russian nationals in 58 countries. Once the data is checked, the Federal Tax Service expects to identify inconsistencies with Russian financial statements at 10% to 15% of the holders of foreign assets and accounts.

Something to consider:

In 2019, the UK's HM Revenue and Customs excluded Russia from the list of participating jurisdictions for the automatic exchange of financial information.
The Federal Tax Service has confirmed the absence of such automatic exchange. Information regarding the assets of Russian nationals in British financial institutions can be obtained only further to a request.

Before autumn 2020, intermediaries in cross-border transactions of European nationals and companies (advisers, accountants, lawyers, and banks) will have to report, for the first time, to European tax authorities transactions with signs of ‘aggressive tax planning’, including retroactively, for transactions consummated since June 2018. This is prescribed by the EU Directive that was adopted last spring.

The Federal Tax Service has set up a register of risks. Information about risks identified, their level and sanctions will be reflected in taxpayers’ personal accounts. The software will also calculate the level of discipline over the last three tax periods. The new interface is being tested now. Information about the risk of failure to submit a tax return and of having an account blocked will be published first.

The OECD Forum for Tax Administration, which was held in Chile, has drafted a communique. In the near future, the Forum will focus on four priorities: delivering on BEPS and improving tax certainty, enhancing international cooperation, supporting the digitalisation of tax administration, and assisting with building tax capacity in developing countries. The Forum has announced its project to develop “a global strategy for the digital transformation of tax administrations by 2030”.