VAT, Profit and Income Tax Calculation and Payment Procedure Clarified.

06.12.2011

Legal Update No. 294

Goltsblat BLP advises that Federal Law No. 330-FZ  "On Amending Part Two of the Tax Code of the Russian Federation and Article 15 of the Russian Law "On the Status of Judge in the Russian Federation" and Invalidating Certain Legislative Provisions of the Russian Federation" was adopted on 21 November 2011. Certain provisions of the Law came into effect once it was officially published on 22 November 2011,   while others will take effect from 1 January 2012. Furthermore, a number of its clauses cover relations arising from 1 January 2011 or 1 October 2011.

The Law clarifies the VAT, profit and personal income tax calculation and payment procedure.

VAT Developments

1. Cultural and art services rendered, inter alia, by commercial organisations are VAT exempt.

2. The Law extends the list of zero-VAT-rated works and services performed by oil and petroleum pipeline transportation companies.

Profit Tax Developments

1. Standardisation costs are now classed among other costs in calculating PT charges.

PIT Developments

1.  From 1 January 2012, PIT on compensatory payments covering severance allowances, average monthly earnings during new job search periods and compensation to corporate CEOs, their deputies and chief accountants (to the extent that they total more than 3-fold (or, if dismissed from companies operating in the Far-North or equivalent regions, six-fold) the average monthly salary) will be charged in accordance with the standard procedure. Please note that, as of now, all severance allowances are PIT exempt, irrespective of their amount.

2. Furthermore, the Law specifies the procedure for obtaining standard child care tax deductions and establishes their size range. 

3.   Remainders of property-related tax deductions granted to taxpayers living on pensions and not receiving any taxable income may be carried backward for up to 3 years.  Yet  the Law does not establish any procedure for granting property-related tax deductions to such taxpayers. Nor does it cover any specifics of this. 

4. On the other hand, the Law refines the procedure for determining the tax base for REPO transactions with securities, i.e.:

  • If REPO contracts are terminated ahead of time, the REPO tax base is determined by the transaction parties in the same manner as in the event of improper performance (failure) of the other part of the REPO transaction;
  • In calculating sales revenues (acquisition costs), the market value of securities is determined as of the date of transfer of the title thereto during completion of the first part of the REPO transaction;
  • the market value of securities is determined in accordance with clause 4, article 212 of the Tax Code of the Russian Federation (previously - in accordance with article 280 of the Tax Code of the Russian Federation covering profit tax matters);
  • the rules stipulated in article 241 of the Tax Code apply to taxpayers' REPO transactions performed at their own expense by their commissioners, agents, attorneys and trustees; 
  • In determining the REPO transaction tax base, all costs associated with loan interest charges are, for taxation purposes, deducted within the sums calculated on the basis of the effective refinancing rate of the Central Bank of Russia, multiplied by 1.8 for rouble expenses and by 0.8 for those expressed in other currencies;
  • REPO losses are booked by reducing revenues from transactions with securities irrespective of whether or not they are publicly traded.

Writing down debts of individuals

  • Additionally, the Law establishes the procedure for writing down debts individuals accrue on statutory payments and fines arising as of 1 January 2009, which tax authorities can no longer recover.  Debt write-down resolutions are adopted by tax authorities. Moreover, taxpayers may not be ordered to provide documents confirming availability of proper grounds for debt write-downs. The Law does not apply to upward reassessment of taxes (charges) payable by individual entrepreneurs or private practitioners.

For additional information, please contact:

to Andrey Shpak,
Partner, Tax consulting/tax litigation,
Goltsblat BLP
T: +7 (495) 287 44 44,
E: info@gblplaw.com


 

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