New Tax Amendments Passed - Law of 29 November 2012

11.12.2012

Legal Update No. 394, 11 December 2012

Goltsblat BLP advises that a number of federal laws have been adopted to amend the Tax Code of the Russian Federation (the RF Tax Code) (Federal Laws Nos. 202-FZ, 203-FZ, 204-FZ, 205-FZ, 206-FZ of 29 November 2012). Most of the Tax Code provisions amended by the newly introduced laws will become applicable from 2013. Below is a summary of the amendments we believe to be the most important:

Corporate profit tax

The taxpayer will only be required to restore the depreciation premium for property, plant or equipment (PPE) disposed of within five years if it is sold to a related party. If, therefore, you intend to sell your PPE to unrelated parties, it makes sense to put a hold on these operations until 1 January 2013.

Depreciation of PPE the rights to which are subject to state registration now begins on the 1st day of the month following that during which they were put into operation, irrespective of the date of state registration.

Immovable property is considered to be sold on the date when such property is transferred under a statement of transfer or any other transfer document, irrespective of when the title to such immovable property is registered.

The limitations on interest expenses that have been applied to borrowings since 1 January 2011 (1.8 of the Central Bank of Russia (CBR) rate for rouble borrowings and 0.8 of the CBR rate for borrowings in foreign currencies) will remain in effect until 31 December 2013.

Corporate property tax

Important amendments made to corporate property tax include tax exemption for movable property recorded as PPE (but only if it is recorded as such from 1 January 2013). If, therefore, you plan to acquire movable property that will be recognised as PPE, it makes sense to put a hold on these operations until 1 January 2013.

Corporate property tax relief has been cancelled for infrastructure facilities. Whereas such facilities as public railway lines, trunk pipelines, power transmission lines and assets that constitute an integral technological part of such facilities (as listed by the Russian Government) used to be fully exempt from corporate property tax, starting from 2013 this relief will only apply to federal public highways. The rest of the above-mentioned facilities will be subject to gradually progressing tax rates to be determined by Russian constituent entities; these will not exceed 0.4% in 2013 and 1.9% in 2018.

Furthermore, a new provision is added to the effect that, if property tax rates are not determined by the laws of Russian constituent entities, the rates stipulated by the RF Tax Code should be applied (similar provisions will also apply for transport and land taxes).

Land tax

At the same time, starting from 2013, land plots provided for defence, security and customs purposes and not freely marketable under the Russian legislation will be subject to land tax at a maximum rate of 0.3%.

Other taxes

The laws also introduce some specific changes to VAT, natural resources extraction tax, excise taxes, personal income tax and state duties.

If you have any question or would like more detailed information, please contact: Evgeny Timofeev, Partner, Head of Tax Practice for Russia/CIS , Goltsblat BLP, by phone +7 495 287 44 44 or by email Evgeny.Timofeev@gblplaw.com; or Anna Zelenskaya, Senior Associate, Tax Practice, Goltsblat BLP by phone +7 495 287 44 44 or by email Anna.Zelenskaya@gblplaw.com.

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