Profit and personal income tax legislation changes.
Legal Update No. 217
Goltsblat BLP advises of the passing of:
Federal Law of 28 December 2010 No. 395-FZ “On Amendment of Part Two of the Tax Code of the Russian Federation and Certain Legislative Acts of the Russian Federation” (Law No. 395-FZ);
Federal Law of 28 December 2010 No. 409-FZ “On Amendment of Certain Legislative Acts of the Russian Federation Covering Regulation of Payment of Dividends (Distribution of Profits)” (Law No. 409-FZ).
Law No. 395-FZ changes the way personal income tax and profit tax are to be calculated and paid with respect to operations by taxpayers with securities and term transaction financial instruments, in particular:
- incomes from the sale of shares, whether or not traded on the organised securities market, and of ownership interests in the authorised capital of Russian high tech (innovative) companies (on certain conditions) that are acquired by individuals or legal entities from 1 January 2011 onwards will no longer be subject to personal income tax or profit tax, provided the shares/ownership interests have been held for a continuous period of over five years;
- when a tax agent determines the tax base for securities operations, on the basis of an application from a taxpayer with respect to legal relations that have arisen since 1 January 2010, documented costs may be specified that were incurred in acquiring and storing securities without the participation of the tax agent, including before the agreement between the taxpayer and the tax agent was concluded.
In addition, a zero profit tax rate is set for the period from 1 January 2011 to 1 January 2020 for organisations involved in educational and (or) medical activities (provided they observe certain conditions).
A maximum ten-year exemption from profit tax is established from the date an organisation acquires the status of a participant in Skolkovo innovation centre projects. This applies to relations arising from 1 December 2010.
The procedure is specified for booking incomes (costs) by the accrual method on receipt of advance payments (deposits) in foreign currency: liabilities and claims must be recalculated into roubles at the Central Bank of Russia exchange rate on the date of their receipt. This provision came into effect on 30 December 2010.
The rules have been changed for determining the service life of certain types of intangible asset (exclusive rights to inventions, utility models, industrial samples, breeding achievements, topologies of integrated circuits, computer software, databases and production secrets (know-how)). From 1 January 2011, the taxpayer is entitled to determine their service-life, of at least two years, for itself. The maximum use period remains unchanged.
As noted in Legal Update No. 209 of 17 January 2011, Law No. 409-FZ, which came into effect on 31 December 2010, introduced amendments into the federal laws on joint-stock companies, limited liability companies and the Tax Code of the Russian Federation regarding the timing and procedure for payment of dividends (distribution of profits).
A shareholder (participant) may apply for payment of declared dividends (distributed profits) within three years of expiry of the deadline set by the Articles of Association or by resolution of the General Meeting of the company on payment of dividends (distribution of profits). After this, distributed (declared) and unclaimed dividends (profits) revert to the company’s undistributed profit. Previously, such sums were recognised as non-sales income of the company and were consequently subject to double taxation.
The list has also been expanded of incomes not counted as part of the profit tax base. These include property, proprietary and non-proprietary rights (as evaluated in monetary terms) transferred by shareholders or participants in a commercial entity or partnership for increasing net assets, including by forming incremental capital and (or) funds. This innovation applies to relations arising since 1 January 2007. These provisions will simplify conversion of a debt into capital and will extend the range of means available for increasing an organisation’s net assets, if necessary, in the most beneficial manner from the tax point of view.
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