Russian Federal Tax Service to Administer Insurance Contributions from 2017

02.08.2016

Legal Update No. 572

Goltsblat BLP advises two laws have been passed1 amending the Russian Tax Code and other Federal Laws and transferring the powers to administer insurance contributions to the Federal Tax Service (“FTS”).

From 1 January 2017, the Russian Tax Code will regulate how insurance contributions are assessed and paid to the Russian Pension Fund (“RPF”), Social Security Fund (“SSF”) and Federal Compulsory Medical Insurance Fund (“FCMIF)”, superseding the current law governing the relevant relations2.

Even so, the procedure for assessing and paying such contributions (with respect to their base, payers, rates, etc.) will not change from 2017. As insurance contributions are neither taxes nor levies, they will only come under the general provisions of the Russian Tax Code when stipulated.

Control and administration of insurance contributions will pass to the Russian FTS and its territorial offices.

The general rules for tax audits will be applied for verifying that insurance payments are correct and made in a timely manner. The audit procedure remains unchanged.

An exception to the above will be desk audits of insurance contribution calculations including costs of temporary disability and maternity insurance coverage. Such audits will be conducted by the SSF bodies (using materials transferred by the tax authorities) as prescribed by law3.

The SSF bodies will also continue conducting their own desk and field audits over correct assessment and payment of contributions towards compulsory social insurance against industrial accidents and occupational diseases, and insurance coverage payment costs. The procedure for such audits will remain unchanged but, from January 2017, it will be governed by amended Federal Law No. 125-FZ of 24 July 1998.

We recommend that our clients verify all their settlements with the SSF, RPF and FCMIF to mitigate risks of any potential disputes arising either during the transition period or afterwards.

We also believe that this transfer of social contribution administration functions from extra-budgetary funds to the FTS might translate into speedier adoption of a Draft Law4, currently being considered by the State Duma and introducing criminal liability for failure to pay such contributions.

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1Federal Law No. 243-FZ of 3 July 2016 and accompanying Federal Law No. 250-FZ of 3 July 2016.
2Federal Law No. 212-FZ of 24 July 2009.
3Federal Law No. 125-FZ of 24 July 1998.
4Draft Law No. 927406-6 - passed at the first reading on 19 February 2016.

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