Tax law and tax disputes

The Russian Supreme Arbitration Court will make the approach to VAT exemption with regard to airport services more uniform Pepeliaev Group advises that on 7 June 2011 the Presidium of the Russian Supreme Arbitration Court will consider the value added tax exemption with regard to aircraft servicing provided in airports and Russia’s air space (Ruling No. VAS-17072/10 dated 9 March 2011).

30 April 2011 is the deadline for individuals to file income tax returns (tax returns for paying additional tax) with regard to income received in 2010

Pepeliaev Group reminds you that tax rights and obligations depend on tax status, rather than on citizenship.

According to the Russian Ministry of Finance, foreign exchange losses fr om interest are not deductible from taxable profit wh ere such interest has been classified as dividends under thin capitalisation rules Pepeliaev Group advises that according to Russian Ministry of Finance, exchange losses on foreign currency interest are not deductible fr om taxable profit wh ere such interest has been classified as dividends under clause 4 of article 269 of the Russian Tax Code (Letter No. 03-03-06/1/91 dated 11 February 2011).

the Russian Supreme Arbitration Court has confirmed taxpayers' rights to receive annexes to an audit report Pepeliaev Group advises that the Russian Supreme Arbitration Court’s Decision No. VAS-16558/10 dated 24 January 2011 has held that clause 1.15 of the Requirements for Compiling a Tax Audit Report is invalid to the extent that it allows a tax inspectorate not to annex to the copy of a tax audit report given to the taxpayer being audited the documents which confirm breaches of tax legislation revealed during the audit.

Russian Court decision on permanent establishments On December 8, 2010, the Moscow State Commercial Court issued its decision in a case involving an analysis of whether the collection of information can constitute a permanent establishment (PE) under domestic law and the double tax treaty between Russia and USA dated June 17, 1992.

Amendments to the Russian Tax Code to support investment activity and innovation

30 December 2010 saw the publication of Federal Law No. 395-FZ dated 28 December 2010 “On amending the second part of the Tax Code of the Russian Federation and specific laws of the Russian Federation”. These amendments touch on different tax issues, among the most interesting of which are a company being able not to pay profit tax (or individual being able not to pay income tax) on transactions involving securities or participation interests the taxpayer has owned in Russian companies for a protracted time; taxpayers having wider possibilities in terms of determining the service life of non-tangible assets; and eliminating the uncertainty in converting advance payments received in foreign currency when calculating profit tax.

New ground for exemption from profits tax in an amicable increase of net assets Federal Law No. 409-FZ dated 28 December 2010 has brought in a new ground for exemption from profits tax in an amicable increase of net assets. This law mainly deals with the regulation of relations between companies and their shareholders relating to profit distributed but not claimed (i.e. unclaimed dividends). However, some of the amendments brought in by the law go beyond the scope of this issue.

Taxation of a unit investment trust’s property – the rules have changed Pepeliaev Group notes that Federal Law No. 308-FZ dated 27 November 2010 has amended the chapter of the Russian Tax Code dealing with property tax and land tax. In particular, these amendments make property tax and land tax applicable to the property and land plots of unit investment trusts. The law comes into force on 1 January 2011.

Types of work and services liable to VAT at zero rate On 27 November 2010, Federal Law No. 309-FZ “On amending chapter 21 of the second part of the Russian Tax Code” was adopted. It significantly amends and adds to the series of provisions of the Tax Code governing the application of zero rate VAT to work and services connected with the export of goods (articles 153, 164 165 and 167 of the Tax Code). The new law will come into force on 1 January 2011.

On what date should property tax be levied on a constructed real estate asset: Russian Supreme Arbitration Court will provide its response Pepeliaev Group advises that on 16 November 2010 the Presidium of the Russian Supreme Arbitration Court will consider on what date property tax should be levied on a constructed real estate asset.

Amendments to the Double Taxation Treaty with Cyprus 7 October 2010 saw the signing of a Protocol on Amendments to the 1998 Double Taxation Treaty between the Russian Federation and the Republic of Cyprus. The Treaty was significantly amended by the Protocol. Many of the Protocol’s provisions clearly aim to combat aggressive tax planning. At the same time, a number of the amendments make Cyprus a more attractive jurisdiction for Russian companies investing abroad.

“Counter-reform” of the VAT Law: New draft law from the Russian Ministry of Finance Pepeliaev Group advises that the Russian Ministry of Finance has published on its official website a draft law  proposing to introduce, from 2011, a series of amendments into the VAT calculation regime, concerning settlement differences, the recovery of tax when property is lost, discounting and other issues affecting the position of companies.