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Major changes in Russian tax legislation


In the framework of the main directions of the tax policy for 2017 and for the scheduled period of 2018 and 2019 the Federal Law No. 401-FZ “On amending part one and part two of the Tax Code of the Russian Federation and other legislative acts of the Russian Federation” (hereinafter – The Law No. 401-FZ dated 30.11.2016) has been adopted in November 2016. The Law No. 401-FZ dated 30.11.2016 came into force on November 30th, 2016, except for its particular provisions, for which specific terms of coming into force have been set.

Below you can find a brief overview of major amendments which may affect the widest range of taxpayers regardless their industry affiliation.

1. Restriction of eligibility of the property tax exemption with respect to movable property

The eligibility of the federal property tax exemption in respect of movable property is restricted by the Law No. 401-FZ dated 30.11.2016. Starting from January 1st, 2018 the property tax exemption remains available only if it is established at the regional level. That said, in 2017 the taxpayers would still have a possibility not to pay the tax in regard to movable property accounted for as fixed assets starting from January 1st, 2013.

In current circumstances the taxpayers who have planned capital expenditure into high-cost fixed assets (e.g. production assets) for the period after January 1st, 2018, may consider rescheduling such plans for the beginning of 2017 in order to secure to the federal property tax exemption in regard to such assets at least in 2017.

2. Limitation of the ability to reduce the profits tax base for the current tax period by the amount of losses incurred in previous tax periods

The Law No. 401-FZ dated 30.11.2016 limits the ability to reduce the profits tax base for the period starting from January 1st, 2017 to December 31st, 2020 by the amount of losses incurred in previous tax periods is. That said, the losses incurred in previous tax periods may reduce the profits tax base for the above period only within 50 % of the profits tax base determined for the current tax period. The limitation does not apply to certain categories of taxpayers eligible for application of preferential profits tax regime.

The legislator has tried to mitigate, to a certain extent, the negative effect of the above limitation by cancelling from January 1st, 2017 the 10-year limitation period for carrying losses forward. Such 10-year limitation period is cancelled with regard to losses incurred starting from 2007.

3. Extension of the list of transactions not controlled for transfer pricing purposes

From January 1st, 2017, the following financial transactions shall be excluded from the list of controlled transactions for transfer pricing purposes:

  • transactions on provision of collaterals (guarantees) with all parties of such transactions being Russian companies, except for banks;
  • transactions on provision of interest-free loans between related parties incorporated in Russia.

The above amendments are aimed at reduction of the administrative burden on businesses in part related to preparation of transfer pricing reporting documents. That said, in practice the collaterals (guarantees) are most commonly used by Russian companies in order to attract bank financing for related parties and the respective transactions are entered into by such related parties with banks. In this regard, the amendments in question may be interpreted in such a way that transactions on provision of collaterals (guarantees) entered into by Russian companies with banks were and remain under the control of the Russian Federal Tax Service.  

4. Possibility to pay taxes (levies) and social security contributions by third parties  

The Law № 401-FZ of 30.11.2016 has put an end to many years of debate on the possibility to pay taxes (levies) for the taxpayer by third parties. Earlier, the Constitutional Court of the Russian Federation expressed the view that the tax can be paid only from the taxpayer’s account (please refer to the Ruling of the Constitutional Court of the Federation dated 22.01.2004 No. 41-O). Now the possibility to pay taxes for the taxpayer by third parties is established at the legislative level. Such a possibility improves the conditions for paying taxes (levies) in the way that the debt of the taxpayer lacking the monetary funds on its bank accounts may be repaid by other persons. Moreover, the payment of tax by a third party on time will allow the taxpayer to avoid penalties and late payment interest and in some cases even more serious consequences that may have an impact on the possibility of the taxpayer to continue carrying out its business activities.

It is important to note that third parties, which paid the taxes (levies) for the taxpayer, shall not be entitled to claim them for refund from the tax authorities. It is the taxpayer who should be entitled for such a refund.

The possibility to pay social security contributions for their legal payers by third parties is provided by the Law No. 401-FZ dated 30.11.2016 from 1 January 2017, i.e. when the power to collect such contributions is transferred to the tax authorities.

5. Extension of the list of third parties from whom the company’s tax arrears may be recovered

The Law No. 401-FZ dated 30.11.2016 extends the list of thirds parties from whom the company’s 3-months due tax arrears, which arose as a result of the tax audit (including desktop tax audit), may be recovered through legal proceedings. The individuals recognized by court as “being otherwise related” to the company having the above tax arrears are now added onto such list.

Therefore, the Law No. 401-FZ dated 30.11.2016 de facto opens up new opportunities for the tax authorities to collect tax arrears from individuals related to the taxpayer.

6. Increase of late payment interest rate for taxes (levies)

The Law No. 401-FZ dated 30.11.2016 increases the late payment interest rate for taxes (levies) twice from 1/300 to 1/150 of the refinancing rate of the Central Bank of the Russian Federation for each calendar day starting from the 31st calendar day of the delay. At the same time, for the period starting from the 1st day until the 30th day of the delay the late payment interest rate remains unchanged (i.e. 1/300 of the refinancing rate of the Central Bank of the Russian Federation).  

The increased late payment interest rate will apply to tax arrears which arose from 1 October 2017.



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