Overview of Tax Events for September 2018

REGULATORY DEVELOPMENTS

The Russian Ministry of Economic Development has prepared draft amendments to the Russian Civil Code which are to determine what property is treated as movable for tax purposes. Until the bill has been adopted, the Russian Federal Tax Service should not reclassify as immovable such property that its owner has classed as movable.

The Chairman of the Russian Government has organised an expert group for non-tax payments. It will be presided over by Anton Siluanov, the First Deputy Chairman and Minister of Finances. Major business associations will take part in its work.

The Russian Federal Tax Service has published a draft order extending the list of jurisdictions which are ready to automatically transmit to the Tax Service data about accounts and income subject to taxation in Russia. The overall number of such states has reached 85.

PRACTICE

Dmitry Satin, Deputy Head of the Russian Federal Tax Service, has revealed that a new VAT rate will be applied starting from 2019. This rate will be applied to goods shipped starting from 1 January 2019 and does not depend on the terms and conditions of the contracts and the dates of such contracts.

Starting from 1 January 2019, foreign sellers of electronic services must assess VAT on transactions with entities and individual entrepreneurs. If the electronic services were provided in 2018 but payment for them was received in 2019, a foreign entity must independently assess VAT in accordance with the new rules but at the previous rate. On the other hand, if the foreign entity received payment in 2018 but provided the services in 2019, no VAT should be assessed. In this case, the obligation to assess VAT and pay it to the budget rests with the tax agent, which is the buyer.

The creation of a single database of the tax service and customs service removes from the agenda the issue, which had been previously discussed, of integrating the two services, as follows from the declaration of First Vice-Prime Minister Anton Siluanov made at the joint panel of the Federal Tax Service and the Federal Customs Service.

For information:

At the meeting of the CIS Economic Council, a draft Protocol was approved concerning electronic information exchange between CIS member states for tax administration purposes. This exchange will be possible starting from 2019.

In its Ruling No. 309-KG18-6366 in the case of Galopolimer Kirovo-Chepetsk LLC, the Russian Supreme Court acknowledged that funds transferred by a Russian entity to a foreign company free of charge are subject to withholding tax in Russia. Such amount is recognised as income of the relevant foreign entity received from a source in Russia.