"Difficult" decisions: increasing income tax rates

First. There is an increase up to 15% of the "unfair" tax rates on income in the form of interest and dividends going from Russia abroad to offshore jurisdictions named by the President of the Russian Federation. This rate is established by the Tax Code of the Russian Federation, but reduced rates provided for by international agreements on the avoidance of double taxation may be applied to the income of persons who are actually entitled to such income. Changes to these rates require adjustments to international agreements signed by the Government of the Russian Federation and foreign Governments. If such changes are not possible due to the reluctance of foreign partners, the Russian Federation is considering withdrawing from these agreements. And they will begin to apply these measures from the most "popular" offshore jurisdictions, through which significant of Russian origin resources.

Second. It is proposed to set the personal income tax rate at 13% on interest income if the total amount of Bank deposits or investments in debt securities of a citizen exceeds 1 million rubles. At present, in general, the amount of excess of interest income over the amount calculated based on the refinancing rate increased by 5 points for ruble deposits (9 % per annum for deposits in foreign currency) (Paragraph 1, Article 214.2 of The Tax Code of the Russian Federation). Realization of this measure, as well as any changes in the tax procedure, is possible by accepted the relevant the Federal Law.

It should be noted that changes in tax legislation are currently possible only from the beginning of the regular (next) tax period and changes that worsen the situation of taxpayers do not have opposite effect (Paragraph 1,2 , Article 5 of The Tax Code of the Russian Federation). Unless, of course, the Legislator do not changes the basis of the Tax Legislation of the Russian Federation.

Additional budget revenues received as a result of the realization of these "difficult" decisions are planned to be allocated specifically to finance measures to support families with children, the unemployed or people who are on sick leave. Most likely, the last 2 categories will include people who have suffered in one or another form from the epidemic of the Coronavirus infection.

How will be provide deferred payments of taxes and premium rates changed?

We recall that, in accordance with the current edition of The Tax Code of the Russian Federation, the Legislation of the Russian Federation about taxes and fees consists of the Tax Code of the Russian Federation and approved in accordance with the Federal Laws on taxes, charges, premiums rates (Paragraph 1, Article 1 of The Tax Code of the Russian Federation). And amendments to The Legislation of the Russian Federation on taxes and fees, as well as termination, cancellation or invalidation of provisions of acts of The Legislation of the Russian Federation on taxes and fees are carried out by separate the Federal Laws. Such changes cannot be included in the texts of the Federal Laws that change (terminate, cancel, or invalidate) other the Legislative Acts of the Russian Federation or contain an independent subject of legal regulation (Paragraph 7, Article 1 of The Tax Code of the Russian Federation).

Therefore, the Federal Law must be approved in order to realize the measures announced by the President of the Russian Federation to support businesses in terms of deferred payments of taxes, changing the deadlines for submitting tax reports, and reducing premium rates.

The provisions of paragraph 4.10 of the Plan of priority measures (actions) to ensure sustainable economic development in the context of the deterioration of the situation due to the spread of the new coronavirus infection (17.03.2020) (further - the Plan) provide for granting the Government of the Russian Federation the right to regulate certain issues on tax relations. Specifically, the Plan specifies the development of the Bill in the Federal law that will allow the Government of the Russian Federation to determine the procedure for obtaining deferred payments (installments) for taxes (premium rates), including in terms of the procedure, grounds, timing of tax reporting (calculations), as well as the right to extend these terms. For this Federal law, the following deadlines are specified: introduction of the Bill law to the State Duma - 30.03.2020, and approval of the Federal law - 30.04.2020.

Sourcehttp://government.ru/news/39235/

You need to be patient and wait for the appropriate changes in the Tax Legislation of the Russian Federation. The beginning of such changes may be extended to an earlier date than the date of approval of the specified Federal Law.

Which organizations can expect these tax preferences?

According to the address of the President of the Russian Federation, support should be provided to small and medium-sized businesses and microenterprises.

 [1] At the same time, the President of the Russian Federation underlined that support measures in the form of deferred tax payments (except VAT) and premium rates (for microenterprises) are offered for enterprises in those industries that are most affected by the current difficult situation. At the same time, the Government of the Russian Federation is instructed to constantly monitor the situation and, if it is necessary, expand and correct the list of industries that need support.

Therefore, it is the Government of the Russian Federation will determine the lists of particularly affected industries for deferred taxes.

At present, after the meeting of the Presidium of the Coordination Council under the Government of the Russian Federation on countering the spread of the coronavirus infection in the Russian Federation on 25.03.2020, including the order of Ministry of Economic Development of the Russian Federation, Ministry of Industry and Trade of the Russian Federation and Ministry of Finance of the Russian Federation to work out measures to provide Government support for sphere of public catering and services, as well as owners of commercial real estate.

Sourcehttp://government.ru/orders/selection/401/39276/

Reducing the amount of premium rates from 30% to 15% (if the minimum wage is exceeded) is a measure directed to income support of citizens employed in small and medium-sized enterprises. Literally from the address of the President of the Russian Federation, it does not follow that this measure will be applied only to particularly affected organizations.

Moreover, this measure is named not as an anti-crisis measure, but as a long-term incentive for employers to increase their employees' pays.

The Federal Tax Service of the Russian Federation on 27.03.2020 gave answers to questions about measures taken on behalf of the Government of the Russian Federation to support taxpayers and about the address of the President of the Russian Federation on 25.03.2020.

Sourcehttps://www.nalog.ru/rn54/news/activities_fts/9699948/

Basically, these explanations relate to the early support measures taken in the form of postponement until may 01, 2020 of compulsory collection of taxes in the tourism and air transport sectors, in the physical education and sport, art, culture and cinematography areas. In addition, the Federal Tax Service of the Russian Federation explained that in accordance with the order of the Federal Tax Service of the Russian Federation from 25.03.2020 until may 1, 2020, measures of compulsory collection of taxes delays will not be applied to companies and businessmans whose information is included in the unified register of small and medium-sized businesses. This postponement of recovery measures does not require additional application to the tax authorities. But at the moment work is in progress to change the legislation for the realization of the possibility of obtaining a deferred payments of taxex for 6 months. The Federal Tax Service of the Russian Federation also clarified that the issue of non-deduction of penalties during the moratorium on compulsory collection of taxes will be resolved when the legislation will be change.

[1] The Criteria of small, medium and microenterprises (MSP):

  • by number and income for the previous year: medium-sized enterprises - no more than 250 people and no more than 2 billion rubles; small enterprises - no more than 100 people and no more than 800 million rubles; microenterprises - no more than 15 people and no more than 120 million rubles.;

  • by the structure of the authorized capital - percentage of organizations that are not small and medium-sized enterprises must not exceed 49%, the Government's, regions, or NPOs share must not exceed 25%.

Information about MSP must be entered in the unified register of small and medium-sized businesses.

Normative documents: The Federal Law of 24.07.2007 №209-FL "The development of small and medium-sized enterprises in the Russian Federation", Decree of the Government of the Russian Federation of 04.04.2016 № 265 "The maximum values of income received from business activities for each category of small and medium-sized enterprises".

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