ACCA Paper
Russian Taxation
Pocket Notes
2020
Contents
►
A Guide to the Exam
►
Russian Tax System
►
Corporate Profits Tax
►
Value Added Tax
►
Personal Income Tax
►
Insurance Contributions
►
Corporate Property Tax
►
Tax Planning, Administration and Control.
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«Эрнст энд Янг»
A Guide to the Exam
ALL questions are COMPULSORY:
MAX 3 hours
Section А
1 15 multiple choice questions
2 marks
each
Section В
2 Corporate Profit Tax (CPT)
3 Insurance contributions (IC)
4 Personal Income Tax (PIT)
10 marks
each
5 VAT
6 Personal Income Tax (PIT)
7 Corporate Profits Tax (CPT)
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15 marks
each
Pass mark:
MIN
50 marks of
100
Reading & planning time
To be used for:
► Read the requirement
► Plan the layout of your answer
► Carefully read the scenario
► While reading annotate the question
► Highlight relevant information & key items
► Make preliminary calculations
► Plan your answer
► Pay attention to marks awarded
► Plan the order of your answers
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Examination hints
Practice CBE workspace
at www.accaglobal.com
Time management
► Allocate your time in proportion to the marks:
1 mark ~
2 mark question ~
10 mark question ~
15 mark question ~
►
1,8 min
3,6 min
18 min
27 min
Attempt all the questions
Layout
► Use standard format for tax computations
► Use the layout from the model answers
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Examination hints
Reading the question
► Start reading from the requirement
► Read carefully the scenario
► Do not write information not required by the question
► Do not write out the question
Making assumptions
► Make only brief assumptions
► Use assumptions only if necessary for computation
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Russian
Tax System
Taxes and Taxation
TC
art. 8
A tax is a compulsory and individually non-refundable payment
which is collected from organization and physical persons for
the purpose of financing the activities of the State and/or
municipalities.
Purpose of taxation:
►
Revenue to the budget
►
Redistribution of income
►
Repricing
Types of taxes:
Direct
► Indirect
►
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Progressive
► Regressive
► Proportional
►
Tax Legislation
Tax Code
Part 2
(specific taxes)
Part 1
(basic elements)
Principles
► Rights And Obligations Of
►Taxpayers, Tax Authorities
► Rules For Tax Audit
►
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Corporate Profits Tax
► Value Added Tax
► Personal Income Tax
► Corporate Property Tax
► Insurance Contributions
►
Basic elements of tax
Tax payers
Tax base
Tax period
Who ?
In what amount ?
When ?
Object
What ?
Tax rate
Tax
How much ?
Payment
Reporting
Tax calculation
When and
how much ?
How often ?
Formula
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Types of taxable income
Companies
CPT
VAT
IC
Tax agent
Individuals
PIT
Wages & salaries
Individual Entrepreneurs
PIT on business income
PIT on individual income
IC
VAT
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Taxpayers, Tax agents & Tax authorities
Tax authorities
Control
on-site
tax audit
in-house
tax audit
transfer pricing
tax audit
Clarify tax legislation
Tax monitoring
Tax payment to budget
Tax declaration
Calculation of tax
Tax agents
Taxpayers
►
Pay taxes on their own income
►
Pay taxes on others behalf
Obliged to withhold and
remit to the budget
►
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Special tax regimes
Special tax
regime
Unified
agricultural
tax
Simplified
tax system
Unified tax
on imputed
income
Substituted
taxes
Object of
taxation
Income less
expenses
Corporate
profits tax
(20%),
Personal
income tax,
VAT (except
import VAT),
property tax
(except
cadastral
value)
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Income
Income less
expenses
Based on patent
amount
(statutory level of
income for
certain type of
business)
Statutory level of
income for
certain type of
business
Tax
rate
6%
6%
15%
6%
15%
Tax payments
Current year: by 25th of July
Following year: by 31st March
Current year: by 25th April, 25th
July, 25th October
Following year: by 31st March
Within 25 days from the
beginning of the activities (not
less that 1/3 of tax), the rest
amount – within 25 days after
the end of patent
Current year: by 25th April, 25th
July, 25th October
Following year: 25th January
Corporate
Profits Tax
Corporate Profits Tax
Exam success factors:
Use the layout of model answers
► Finish the computation
► Do not forget to exclude VAT if necessary
► Give clear reference to notes
►
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Corporate Profits Tax - NEW
►Since
01.01.2018 till 31.12.2027 taxpayers are granted investment deduction
in the amount of acquired and/or modernized fixed assets (article 286.1 TC)
►Tax regulations for multinational groups of companies (chapter 14/4-1 TC)
and corresponding sanctions for non-compliance (articles 129.9, 129.10,
129.11 TC) are effective since 2017.
►Since 01.01.2019 increasing depreciation coefficient – up to 2 shall be used
to fixed assets included in state list of innovative facilities (item 1 article 259.3
TC)
►Employer’s expenses on recreation of employees and their families in
Russian Federation (including travel, living and meals if provided, resort
treatment and excursions) shall be deductible limited to 50 000 RR per person
annually and is included into medical insurance expenses limited to 6% of
labour costs (item 24.2 article 255 TC)
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Corporate Profit tax
Taxpayers
Tax base
Tax period
Legal entities
Taxable profit
Calendar year
FLE – not tested
Object of taxation
Taxable income
less
Deductible expenses
Tax rate
CPT
20 %
13 % / 15 %
Payment
Reporting
Tax calculation
Monthly:
+ 28 days/
by 28th of March
Quarterly/ Monthly:
+ 28 days/
by 28th of March
Taxable profit *20%
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Taxable profits
What items to include in taxable profits?
Income
Type
Date of recognition
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-
=
Expenses
Type
Test on
deductibility
Direct/indirect
(date/period of
recognition)
Taxable
profit
Accruals vs cash methods
Cash method
Accruals method
Income & expenses
are recognised
in the reporting period which
they relate to, regardless of
money &/or property
receipt/payments
► Matching
principle (direct
relation & allocation)
► Split of long-term
income/expenses between the
reporting periods according to
the terms of agreement
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Income & expenses
are recognized
when actually paid
► Limited
use: average income
(net of VAT) for previous 4
quarters should not exceed
1mln RR per quarter
► In
case of breach recalculation
starting the beginning of the tax
period
Taxable income & deductible expenses
Operational income:
1.
2.
3.
4.
Sales of goods produced
Property/property rights sales
Sales of purchased goods
Sales of fixed assets
Production & sales expenses:
1.
2.
3.
4.
Non-operational expenses:
Non-operational income:
►
►
►
►
►
►
►
►
►
►
Rental income
Copyright income
Interest income
Fines & penalties for breach of commercial
contracts
Free property receipts (incl free financing)
unless from related party ownership 50 %
Foreign currency exchange gains
Income of past years
Income from participation in other entities
“Claw-back” of previous provisions
Accounts payable write-offs
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Cost of goods produced sold
Cost of property/property rights sold
Cost of purchased goods sold
Cost of fixed assets sold
►
►
►
►
►
►
►
►
►
Leased assets related expense
Copyright income
Interest expense
Fines & penalties for breach of commercial
contracts
Foreign currency exchange losses
Expenses of past years
Bad debt provisions
Accounts receivable write-offs
Bank fees
Exempt income & non-deductible expenses
Exempt income:
►
►
►
►
►
►
Advances received under
accruals method
Contributions received to charter
capital
Property received by
commissioner
(excl. commissioner fee)
Loans received
property received from related
party
(if not transferred to a 3rd party
within a year)
property received for the purposes
of direct financing
Non-deductible expenses:
►
►
►
►
►
►
►
►
►
►
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Advances made under accruals method
Dividends & profits distribution
Penalties & fines paid to budget
Contributions to charter capital
Partially deductible expenses
(exceeding statutory norms)
Property transferred to commissioner
(excl. commissioner fee)
Loans given
Cost of property given free of charge
Property given for the purposes of direct
financing
Certain benefits to employees
Expenses
deductible
partially
deductible
non-deductible
General criteria for deductibility:
- Justifiable
&
- Documentary proved costs
&
- Linked to income-generated activities
if any of these criteria is
not met,
expenses are treated as
non-deductible
art. 252
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Deductible expenses
Deductible expenses
Indirect
Direct
decrease taxable base of the period
partially
Cost of sales
in full
WIP
(allocated to closing
stock of goods)
►Taxpayer
may define the list of direct/indirect expenses himself
in the principles for tax purposes
art. 318, 320
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Direct & indirect costs
Direct costs
Services
Trading company
Production
►
Purchased cost of trading
stock
►
& related transport costs
►
Materials & components
used in production
►
Depreciation of production
fixed assets
►
Direct wages & salaries
►
& Related IC
company
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Indirect costs
►
All the expenses are allowed to
be treated as indirect
►
All the other expenses of the
period
►
Indirect materials (for
packaging, fuel & energy,
instruments, special cloth, low
valued items)
►
Depreciation of non-production
fixed assets
►
Indirect wages & salaries
►
& Related IC
Allocation of transport costs
Cost of ending trading stock:
- FIFO
– Weighted average
– Actual unit cost
Goods
Transport costs
100
15
plus purchases for the period
1 000
200
less closing balance
(200)
Opening balance
Cost of Sales
Average percentage
of transport costs
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?
=
x%
( ?? )
???
Transport costs
(opening balance + purchases for the period )
Goods
(opening balance + purchases for the period )
Allocation for production operations
Method may be chosen by a taxpayer
but should be justifiable
Sample methods:
Type of activities
Processing of raw
materials
Works & services
Other types of
production activities
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Method of allocation of direct expense
% in natural units:
raw materials in ending stock to total raw
materials
% of uncompleted works (services) in the total
works (services) of the period
based on standard costs
Partially deductible expenses
Business travel
Interest
Advertising
Business entertainment
Insurance
Business training
Compensation of interest paid by employees on mortgage loans
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Advertising expenses (indirect)
Fully deductible
►
Mass media advertising
(incl. video & cinema shows)
►
Out-of-door advertising
►
Participation in
exhibitions/fairs
►
►
Partially deductible
Maintenance of demonstration
halls,
Printing of advertising
catalogues & brochures
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►
All the other advertising
expenses
Limit:
Deductible up to
1 % of sales revenue
(net of VAT)
art. 264
Business training expenses (indirect)
Fully deductible
Non deductible
if ALL is met:
►At
licensed russian or foreign educational
institution
►To
permanent employees
other
►The
training program improves the
professional skills of employee & result a
better efficiency at working place
►
►
ALSO Higher & middle-special education
Education of future employees
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art. 264
Business travel expenses (indirect)
Deductible for CPT (when supported by documents):
► NO statutory norms but LE’s norms required
► Travel costs (incl. taxi to & from airport)
► Airport fees & commission charges
► Luggage fare
► Accommodation expenses (hotel, but not meals, laundry, sports,
recreation)
► Business communication expenses (business calls)
► Cost on visas & passports preparation
Travel outside Russia:
► No statutory norms but LE’s norms required
► Principle of arrival country
► Exchange rate as at the date when travel report is approved
art. 264
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Business entertainment expenses (indirect)
1.
Expenses connected with the reception & servicing the
representatives of other organisations, who conduct business
negotiations with the taxpayer
2.
Expenses incurred with the relation of the board of directors
1.
Cost of official reception
(breakfast, lunch, dinner)
2.
Transport costs (local)
3.
Cost of buffet (meals) during
negotiations
4.
Cost of external translators
Deductible up to 4 % of deductible
labour costs
(incl. bonuses, compensations, voluntary
insurance, not IC)
Must be documented !!!
art. 264
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Insurance expense
medical
personal
> 1 year
against death,
harm to heath
pension
Any breach of conditions
Include previously
deducted expenses into
non-operational income
> 5 years,
license, personal
Deductible if
license, age
Insurance premium covering
more than one reporting period
- deductible proportionally to
calendar days
Deductible within the list
set by the law – enlarged
Employees
life
Deductible within the
tariffs set by the law
Property &
3rd party liabilities
> 5 years
Mandatory
Voluntary
non-state pension
Insurance
deductible within the limit of
(12 % of LC) (6 % of LC) (15 TRR)
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Labour costs
Deductible expenses
►
►
►
►
►
All kinds of payments both in cash and
in kind, production incentives,
compensations for working conditions and
environment, operating bonuses and onetime incentives, other payments under
legislation of RF and labour
agreements, e.g.:
Wages and salaries for worked hours,
paid vacations (including provisions made),
payments for unused vacations, study
leaves, other paid absence according to
legislation of RF
Mandatory and voluntary insurance of
employees (subject to certain limitations)
Payments to individuals (not individual
entrepreneurs) under civil-law contracts for
works /services performed
Compensation of interest paid by
employees on mortgage loans (within limit)
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Non-deductible expenses
►
►
►
►
►
►
Gifts in cash or in kind & related
expenses payable to employees
Financial aid
Price Difference when selling goods to
employees below market prices
Free or low-priced meals to employees
(unless provided in the labour contracts)
Compensation of commuting expenses
to the work place & back (unless
provided in the labour contracts)
Travel, recreation, medical treatment,
sports, entertainment provided to
employees
art.255 /art. 270
Other benefits for employees
1. Compensation of interest paid by employees on mortgage loans
Partially deductible
Statutory limit for compensation of interest paid on mortgage loans:
3 % of labour cost
►
Effective for unlimited period
►
If deductible for CPT ➔ non-taxable for PIT
2. Payment for recreation of employees and their families
including travel, living and meals if provided, resort treatment and
excursions in Russian Federation
deductible within 50 000 RR per person
limited to 6 % of labour costs (along with medical expenses)
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Labour costs as the limit for CPT
Labour costs
Business
entertainment
expense
Voluntary life
insurance
Voluntary
medical
insurance
Compensation of
interest paid on
mortgage loans
Limit
4%
12 %
6%
3%
Wages
YES
YES
YES
YES
Bonus
YES
YES
YES
YES
Benefits in
kind
(deductible for
CPT)
YES
YES
YES
YES
Voluntary
insurance
YES
NO
NO
YES
IC
NO
NO
NO
NO
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Interest income & expense
(non-operational)
BASIC RULE: Interest income & expense – NO LIMITS
LOAN / 365 days * DAYS of the period* ACTUAL RATE
►Taxable
/ deductible at ACTUAL RATE
► for the period of actual use of borrowed funds
(based on number of days – do not take the first day but take the last)
► at the end of each month
Exemption # 1: Controlled loans
Interest income:
Interest expense:
at actual rate,
at actual rate,
if > lower limit
if < upper limit
Interest for threshold limit:
at the end of the month or at agreement date if no
change of interest rate in loan agreement
Threshold interest rates
Currency
Lower limit
Upper limit
Rouble
75 % * key rate CB
125 % * key rate CB
EUR
EURIBOR + 4%
EURIBOR + 7%
USD
USD LIBOR +4%
USD LIBOR +7%
Exemption # 2: Thin capitalisation rules
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art. 269
Thin capitalisation rules
Controlled
loan:
1. Lender (FLE) owns > 25 % of RLE
2. Lender (RLE) is affiliated to FLE
owning > 25 % of RLE
3. Such FLE (its affiliate) guarantees
the loan to RLE
gives
FLE
Loan + %%
3 times exceeds
net assets
&
(excl. tax liabilities)
of RLE (borrower)
Loan + %%
loan
guarantees
directly or indirectly owns
more than 25 %
>3
RLE
Net assets
(excl. tax liabilities) ?
Yes
Thin capitalisation rules:
► Capitalization ratio
► Deductible interest
► “Deemed” dividends and the CPT at 15 %
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No
interest is deductible
under general rules
Thin capitalisation rules
interest on controlled loan
deductible
Capitalization ratio =
Deductible interest =
deemed dividends
Controlled loan + unpaid interest
(Net assets (excl. tax liabilities) * % ownership*3)
Interest at limited rate
Capitalization ratio
“Deemed dividends” = Actual interest – Deductible interest
CPT on “deemed dividends” = “deemed dividends” * 15 %
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Depreciation
Depreciable fixed assets:
► Used for > 12 months
► Initial cost > 100 000 RR
But not:
NBV end = NBV beginning *(1-k%)n
Depreciable cost:
Initial cost (net of VAT)
less 10 % (30 %) write
off
But not:
Land and natural resources
► Inventory
► Incomplete capital construction
► Securities
►
Also excluded:
Interest expense
► Forex differences
► registration fees
► state duties & taxes
► Revaluation
►
Given for gratuitous use
► Conservated for > 3 months
► Reconstructed (modernized) for > 12 months
►
Modernization
additional cost
Useful life:
is determined according to
10 depreciation groups
Depreciation STARTS:
next month after fixed
asset was put into use
Methods of depreciation:
straight - line
non-linear
1/n * 100 %
to original cost
K % to NBV
to group
increase of useful life
Special coefficients:
change
change
depreciable value
depreciation rate
10 % (30 %) write off
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«Эрнст энд Янг»
Leasing – up to 3 (not to 1-3rd groups)
► Fixed assets used in innovative facilities
– up to 2
►
Investment deduction
(2018 – 2027)
➢
➢
➢
➢
➢
Right of taxpayer → accounting policy for 3 years
Fixed assets of 3rd – 7th depreciation groups
If enacted in the Region
Can be carried forward to the following years
To be recovered if fixed asset is sold
Instead of
▪ Write off
▪ Depreciation
Investment deduction
when put in use
decrease
Regional CPT
Federal CPT
90% of initial cost
10 % of initial cost
limited to 17%-5% =
12% of CPT tax base
before deduction
without any limit
art.286.1
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Leased assets - depreciation
Lease
operational
financial
on the balance of lessor
on the balance of lessee
Lessor
income
expense
Lessor
leasing payments
depreciation
x3
~
income
leasing payments
expense
proportionally to income
(leasing payments)
Lessee
Lessee
►
expense
leasing payments
=
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expense
Depreciation
x3
Rest amount of leasing
payment
►
Leased assets – capital improvements
lessee makes capital improvements
lessor
approves
&
reimburses expenses
approves
&
BUT doesn’t reimburse expenses
lessee shall depreciate
capital improvements
lessor shall depreciate
capital improvements
Depreciation under statutory
norms during the lease period (the
rest amount is non-deductible)
►
10 % (30 %) write off is applicable
to capital improvements
►
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10 % (30 %) write off is
applicable to capital improvements
►
Research & development costs
Deductible expenses:
upon completion of R&D works or their stages
not for R&D for customers
1. Depreciation of fixed and intangible assets for the period (full calendar months)
when such assets were used solely for R&D activities;
2. Labour costs for employees for the period (proportion allocation is possible)
when they participated in R&D activities;
3. Material expenses directly related to R&D activities;
4. Other expenses directly related to R&D activities limited to 75 % of labour costs
related to R&D activities;
5. Purchased R&D works as per agreement with supplier;
6. Payments to Science and Innovation Fund limited to 1,5 % of sales.
►
►
►
►
If in State list, deductible expenses = actual * 1,5.
To be supported with technical report submitted to tax authorities
If intangible asset, deductible expenses = depreciation during useful life or
2 years.
Sale at loss of intangible R&D asset shall be non-deductible.
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«Эрнст энд Янг»
Non-operational income & expenses
Foreign exchange gains and losses
Loan* (Exchange rate date of receipt of loan– Exchange rate end of quarter )
Assets received and given for free:
►
Taxable income vs non-deductible expense
Fines and penalties:
Taxable income & deductible expense for customers & suppliers
► Non-taxable income & non-deductible expense for budget
►
Profits and losses for the previous years:
Understated tax liability (profit revealed) – must amend previous
years tax calculations
► Overstated tax liability (loss revealed) – may include in tax
calculations of the current period
►
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«Эрнст энд Янг»
Property disposals
Type of
property
Result on disposal
Sales (net of VAT)
Stock
Sales (net of VAT)
Fixed &
intangible
assets
-NBV (tax)
(X)
X / (X)
X
(X)
- sales related expenses (X)
Gain / Loss
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«Эрнст энд Янг»
X
less balance value (tax)
Gain / Loss
Loss treatment
X / (X)
reduces taxable income in
the period of disposal
reduces taxable income for
the rest period of useful life
in equal amounts
Factoring
Delivery
Supplier
(creditor)
Customer
(debtor)
Payment
Debt assignment
Cash
Factoring company
(factor)
discount on factoring is treated
Delivery
(shipment)
date
as interest
Deductible within the limit:
- upper limit for interest
- using transfer pricing rules
deductible limit for rouble debts:
Sum received from factor * CB RR * 1,25
* N of days to due term / 365 days
Все права защищены.
«Эрнст энд Янг»
Time of
settlement of
receivable
under
agreement
as bad debt
Loss is fully
deductible at
factoring date
Bad debt expense
Bad debts
written off
expiration of statutory
term of debt collection (3
years)
► Official liquidation of the
company (bankruptcy)
Bad debt
provision
right of the taxpayer
► After
Deductible non-operational
expense
►
If bad debt is written off for which bad
debt provision has been created, no
expense is recognised in the period of
writing it off.
limits depending on the age of debt:
► Less than 45 days
0%
► 45 days – 90 days
50 %
► More than 90 days
100 %
► Deductible within the limit:
10 % of Sales revenue (net of VAT) of
the current or pervious tax period
►
Overestimated provision is added to
non-operational income
►
Debt shall be decreased by payables owed to
the customer
►
Все права защищены.
«Эрнст энд Янг»
Only customer’s debts
Losses carried forward
➢Losses can reduce taxable profits only by 50 % of tax
profit of the period (starting from 01.01.2017)
➢Losses of previous tax periods can be utilized without any
period limitation
➢FIFO METHOD IS USED
➢TAXPAYER SHALL NOT REDUCE TAX BASE ON
LOSSES RECEIVED WHEN TAXPAYER’S INCOME WAS
SUBJECT TO 0 %
Все права защищены.
«Эрнст энд Янг»
CPT & subdivisions
Federal budget + Regional budget
20% = 3% + 17%
Subdivision:
►
Territory separated office
►
Workplace established for more than 1 month
►
Doesn’t matter if not in charter documents
Regional part of CPT (17 %) shall be allocated to each subdivision and
paid to regional budget
Allocation of CPT to subdivision:
% of FA
NBV (tax) FA
% of labour costs
or
% of average staff
+
2
Все права защищены.
«Эрнст энд Янг»
=
% of allocation of
regional CPT to
each subdivision
Dividend income
Tax = Share of dividends * Tax rate * (Distributable – Received )
dividends
dividends
13 %
Russian
legal entity
15 %
Foreign
legal entity
0%
RLE owning
>50 % of the share capital
► for > 365 days
► if from FLE it must be
incorporated outside offshore zones
►
►
Should be withhold by tax agent (paying out entity) & remitted to
budget within 1 day after dividends are paid out
►
If dividends are received from foreign legal entity tax is paid at 13 %
rate along with submission of CPT declaration
Все права защищены.
«Эрнст энд Янг»
Dividends. Exam approach
CPT on dividends to FLE
CPT = Distributed dividends * Share of ownership * 15%
CPT on dividends to RLE
(1)
Total distributed dividends
(DO NOT INCLUDE dividends payable to FLE)
(2)
Less net dividends received
(DO NOT INCLUDE dividends received taxable at 0%)
(1)-(2) Dividends taxable at 13 %
CPT= 13% * Share of dividends at 13% (*)
Total dividends withheld at source
RR
ХХ
ХХ
(ХХ)
ХХ
ХХ
ХХ
Все права защищены.
«Эрнст энд Янг»
Transfer pricing
►
Effective since 01.01.2012:
Article 25 TC
►
Controlled transactions
Article 105 TC
►
Not controlled transactions
►
Transfer Pricing Documentation
►
Transfer pricing methods
►
Transfer pricing tax audit
►
Advance pricing agreements
►
Consolidated group of taxpayers
Все права защищены.
«Эрнст энд Янг»
Related parties
Related parties for CPT shall be:
LE or Individuals directly or indirectly own > 25 % of other entities
► LE which executive and supervisory bodies are appointed by 1 person/entity or
by group of related parties
►
Companies are allowed to declare themselves as related parties for CPT
► Companies - parties of a transaction - may be treated as related partied for
CPT upon court decision
►
Parties shall not be treated as related for CPT only due to :
leading market position or monopoly
- ownership in companies which are also owned by Russian Federation, regions
of Russian Federation, municipalities
►
Все права защищены.
«Эрнст энд Янг»
Transfer pricing
Controlled transactions
1. Deals between related parties
2. Cross-border operations for commodities (if annual deals > 60 mln RR)
3. Cross-border operations with offshore LE (if annual deals > 60 mln RR)
Not controlled transactions
1. Deals between companies of consolidated group of taxpayers
2. Deals between RLE:
► Registered in one region (not in special economic zone)
► No sub-divisions in other regions or abroad (i.e. CPT is not paid to the
budget of other regions)
► No tax losses
► No MET or % CPT or special tax regimes
Все права защищены.
«Эрнст энд Янг»
Transfer pricing documentation
LIST of controlled transactions:
► No later than May 20 of the following year
► Information on kind of transactions, parties, amounts
DOCUMENTATION on controlled transactions:
► Submitted upon request of tax authorities:
- which shall be issued no later than 1 June of the year following the calendar year
- within 30 days after receiving the request
► Shall include:
- structure and terms of the transaction, the parties involved and their
functions, and the pricing methodology;
description of the transfer pricing methods, sources of information used, and
rationale for the choice of transfer pricing method;
other factors that might influence the price (for example, marketing strategy);
► Shall include Adjustments to the tax base.
Penalties on non-submission /late submission/ incorrect information = 5 000 RR
Все права защищены.
«Эрнст энд Янг»
Transfer pricing methods
1 Comparable
uncontrolled price
(CUP) method
Compare price used in controlled transaction with prices for
similar peer goods sold under comparable terms between
independent parties
2 Resale minus
method
Compare price of resale of goods adjusted for market gross margin
with purchase price in controlled transaction: calculate actual gross
margin in controlled transaction and compare it with range of gross
margins for comparable transactions.
3 Cost plus method
Compare price of controlled transaction with market price
calculated as costs of controlled transaction increased by normal
margin
4 Comparable profits
method
Compare operating margin (return on sales, return on assets,
return on costs, return on general and administrative costs) of
controlled transaction with range of operating margin for
comparable transactions
5 Profit split method
Profit from sales is split between parties of controlled transaction
proportionally to each party’s contribution to sales profit
Все права защищены.
«Эрнст энд Янг»
Transfer pricing – APA & CGT
Advance pricing agreements (APA):
► Applicable for “Major taxpayers”
► Worth 1,5 mln RUB of state duty
► 6/9 months for review by tax authorities
► Approved advance pricing agreement is valid for 3 years and may be
prolonged for an additional 2 years at the taxpayer’s request
► Will not be changed even if relevant provisions of tax legislation are
amended
Consolidated group of taxpayers (CGT):
► Applicable for RLE owing not less than 90 % of the others
► One authorized entity of consolidated group of taxpayers shall calculate
and pay cumulative taxes based on cumulative financial result
► Application with an agreement on entering consolidated group of taxpayers
must be submitted and to be confirmed by tax authorities
► Special procedures for reporting, tax audits and penalties and fines
Все права защищены.
«Эрнст энд Янг»
Multinational Group of Companies
MGC– is a group of entities (incorporated and not) which are related to each other
by ownership or by control if all the criteria are met:
1.Consolidated financial reporting is filed according to legislation of RF or stock
exchange
2. At least one of the companies is either
- a tax resident of Russian Federation / not a tax resident of Russian Federation
A member of the multinational group of companies shall submit the following
documentation:
- notice of a membership in a multinational group of companies
- country information on a multinational group of companies
- global documentation
- national documentation
- country report of a multinational group of companies on states which
recognize members of a multinational group as its tax residents
Chapter 14 TC
Все права защищены.
«Эрнст энд Янг»
Multinational Group of Companies
Notice of a
membership in the
MGC
•
•
•
reveals info on members of MGC: titles, incorporation states, registration numbers etc
submitted to the Tax authorities as electronic documents
within 8 months after the end of a reporting period for the parent company of MGC
Country
information
•
•
•
•
income and expenses, profit and loss received in Russian Federation and/or abroad
key indicators on operations of a member of a multinational group of companies
taxes paid in Russian Federation and abroad
for consolidated income over 50 billion RR
Global
documentation
(for the periods
starting since 2017)
•
•
•
is submitted upon request from tax authorities within 12-26 months after reporting
to be replied within 3 months after the request of tax authorities
shall constitute information on capital and control structure of a multinational group and
markets of business operations, intangible assets of a members, business and financial
information of a member of MGC
National
documentation
(for the periods
starting since 2018)
•
•
•
is submitted by request of tax authorities
terms and requirements are similar to tax documentation on controlled deals
describes operations (including pricing basis) of controlled transactions if one of the
counterparts is a foreign member of MGC
refers to submitted global documentation
Country report
(for the periods
starting since 2017)
•
Все права защищены.
«Эрнст энд Янг»
•
•
is submitted upon the request of tax authorities in a formalized way as electronic document
within 12 months after the end of reporting period
consists information for the reporting period on income/expense on transactions, profit/loss
before taxation, amounts of taxes paid, amount of capital and accumulated profits, number
of staff, amounts of tangible assets and identification of each member of MGC based on
consolidated financial reporting according IFRS
Breach of tax rules
for Multinational Group of Companies
Tax offence
Tax penalty
Breach of reporting terms of notice of a member of
MCG or submission of false information *
50 000 RR
Breach of reporting terms of country report or
submission of false information *
100 000 RR
Non submission of national documentation
100 000 RR
Non submission of global documentation *
100 000 RR
* Violations of MGC reporting requirements shall not be penalized in
2017-2019
Все права защищены.
«Эрнст энд Янг»
Reporting & payment
Quarterly
Reporting
Monthly
Reporting
Quarterly
Reporting & Payment
Monthly advance
payments based on
estimated profits
Monthly advance
payments based on actual
profits
Limited to small companies
(> 15 mln RR per quarter)
Reports 4 times a year
Reports 12 times a year
Reports 4 times a year
Reporting periods: 1st
Reporting periods: 1 month,
quarter, half a year, 9 months 2 months, 3 months …. 11
months
Reporting periods: 1st
quarter, half a year, 9 months
Pays 16 times a year
Pays 12 times a year
Pays 4 times a year
Reporting dates:
28th of April, 28th of July,
28th of October
Reporting and payment
dates: advance payments:
28th of each month following
the reporting period
annual payment: 28th of
March
Reporting and payment
dates:
28th of April, 28th of July,
28th of October
annual payment: 28th of
March
Payment dates:
28th of each month
annual payment: 28th of
March
Cumulative calculation of tax for the reporting period
annual payment: 28th of
March
Tax formula
Amount Calculation
+ Sales income (excl. VAT)
- Sales expenses (excl. VAT)
= Operational profit
+ Non-operational income (excl. VAT)
- Non-operational expenses (excl. VAT)
= Tax base (before loss carried forward)
- Loss carried forward
= Tax base (after loss carried forward)
x Tax rate
= Tax
Все права защищены.
«Эрнст энд Янг»
Value Added Tax
Value Added Tax
Exam Success Factors:
► Attempt
the question devoted to VAT (Q4 Section B)
► Use all the data provided in the questions
► Follow the model answers layout.
Все права защищены.
«Эрнст энд Янг»
Value Added Tax NEW
1st of January 2019 standard VAT is increased to 20% (article 164 TC);
►Declarative procedure of VAT recovery can be applied by taxpayers with the
amounts of taxes paid for the previous 3 years exceeding 2 billion RR (article
176.1 TC);
►Declarative procedure of VAT recovery requires bank guarantee for at least 10
months since tax declaration submission day (subitem 1 item 4 article 176.1
TC);
►Taxpayer is allowed not to use 0% tax rate on export of goods and related
services to all of its operations (not to specific deals) by submission of
application before tax period start for not less than 1 year (article 164 TC);
►In-house audit on VAT shall be limited to 2 months with the possible extension
up to 3 months in case of signs of taxpayers violations (item 2 article 88 TC);
►Since 1st of January 2018 VAT tax rate for re-export shall be 0% (subitem 1
item 1 article 164 TC).
►Since
Все права защищены.
«Эрнст энд Янг»
Value Added Tax
Taxpayers
Legal entities
Individual
entrepreneurs
Tax base
1. Revenue
2. Customs cost
3. Cost of construction
Object of taxation
1. Sales
2. Import
3. Self-supplied
construction
Tax period
Quarter
Tax rate
VAT
20% / 10% / 0%
Tax calculation
Payment
Monthly:
+25 days (1/3)
Все права защищены.
«Эрнст энд Янг»
Reporting
Quarterly:
+25 days
Output VAT
less
Input VAT
Company B
Buys ore 120
(incl. VAT 20)
Wages & IC 100
Sells steel 360
(incl. VAT 60)
Buys steel 360
(incl. VAT 60)
Wages & IC 100
Sells heater 840
(incl. VAT 140)
60
20
steel
Company A
60-20
=40
140-60
=80
Federal Budget
Все права защищены.
«Эрнст энд Янг»
140
60
heater
Principle of VAT taxation
Individual
VAT tax rates
0%
Exports
10 %
Lower
20%
Basic
►
►
Goods exported outside
Russia
Works (services) related
to the production & sales
of exported goods (e.g.
transportation, loading)
art. 164
Все права защищены.
«Эрнст энд Янг»
Limited list of products
(mostly food & children items)
-
Special VAT rates 20/120 or 10/110 for:
►
Advances (both received & paid)
►
Sales related income
►
VAT withheld by tax agents
►
Goods with capitalised VAT
VAT invoice and VAT registers
VAT invoice
►
►
►
►
►
►
Issued by seller within 5 days
after shipment of goods (works,
services) or prepayment receipt
Essential for VAT recovery
Required for:
- VATable operations
Not required for:
- retail sales
- VAT exempt operations
Signed by director and chief
accountant
Can be nominated in foreign
currency
Customer:
Seller:
Input VAT
Output VAT
Purchase Book
Sales Book
-
+
VAT return
Sales agents, forwarding
agents, developers:
Register VAT invoices in
Journals of VAT invoices
received and issued
(except own operations)
Все права защищены.
«Эрнст энд Янг»
Content of VAT invoice
1
2
3
number and
date of issue
name, address and
identification numbers
of the taxpayer and the
purchaser
name and address
of the consignor
and of the
consignee
4
5
6
7
Number of the
payment and
settlement
document
Description
of the goods
supplied
Quantity of goods
supplied
Price (tariff) per
unit of
measurement
8
9
10
11
Value of goods for
the entire quantity
of goods supplied
excluding tax
Amount of
excise duty
for excisable
goods
Tax rate
Amount of tax
charged to the
purchaser of the
goods
12
13
14
Value of the entire
quantity of goods
supplied including
the amount of tax
Country of
origin of the
goods
Number of the customs
declaration
Content of
VAT invoice
Все права защищены.
«Эрнст энд Янг»
Input VAT
recovery is
possible
Amended VAT invoice
►
Issued by seller to purchaser in case of changes of purchase price
of goods (works, services) sold due to changes in price or
quantity 5 days
►
After seller has informed purchaser on price change and received
confirmation from the purchaser that the price change is accepted
(addition l agreement or other written acceptance shall be signed).
►
Shall include information on:
► Number and date of initial VAT invoice;
► Initial amount of goods, initial price for goods and initial
purchase price;
► Amended amount of goods, amended price for goods and
amended purchase price;
► Difference between initial VAT invoice and Amended VAT
invoice.
►
If negative difference – minus.
Все права защищены.
«Эрнст энд Янг»
Amended VAT invoice
Increase of
purchase
price
Seller
Customer
Add to Output VAT
Add to Input VAT
At the date of written
document confirming
price change
Add to Input VAT
Decrease of
purchase
price
Все права защищены.
«Эрнст энд Янг»
At the date of amended
VAT invoice
Add to Output VAT
(claw back of previously
recovered Input VAT)
At the date of amended VAT invoice
Output VAT
Recognized at the earliest of dates:
Dispatch date
Payment date (prepayment date)
Sales related amounts:
►
Interest (discounts) on bonds & promissory notes, received for
sales of goods (services, works), exceeding current CB RR
►
Interest on commercial credits, exceeding current CB RR
– Related amounts are VAT exempt if the main sale is VAT exempt
Sum differences
► Not adjusting VAT tax base (Output VAT) and Input VAT
► Shall be recognized as taxable income and deductible expenses.
Volume discounts to customers
► shall not influence VAT liability unless stated in the agreement
Все права защищены.
«Эрнст энд Янг»
VAT exempt operations
►
►
►
►
►
►
►
Currency circulation (Russian & foreign)
Insurance
Interest
Assets transfer during reorganization
Sale of assets of bankrupt entities
Charter capital contributions
Some other
Special rules for VAT exempt operations
►
Separate accounting for VATable and VAT exempt operations
►
Input VAT allocation rules
►
Licensed activities are exempt only if license obtained
►
Agents do not enjoy exemption for their commission on VAT exempt
goods.
Все права защищены.
«Эрнст энд Янг»
Recovery of Input VAT
Condition of
recovery
goods (works, services) should be used for
activities subject to VAT
General criteria for
recovery
1. goods (works, services) received &
booked
2. supporting documents (VAT invoice &
trade documents)
NB!
Все права защищены.
«Эрнст энд Янг»
Input VAT shall be recovered in full amount
for partially deductible expenses
except for business travel expenses
& business entertainment expenses
VAT on advance payments
Tax Period
Output VAT
Prepay
-ment
Input VAT
CUSTOMER
makes prepayment
Payment
Shipment
Period
Period
Prepayment
/ 120 * 20
(Prepayment
/ 120 * 20)
(Prepayment
/ 120 * 20)
Output VAT
Shipment
Input VAT
SELLER
receives prepayment
Payment
Shipment
Period
Period
Prepayment
/ 120 * 20
Sale
/120 * 20
(Purchase
/ 120 * 20)
On receiving prepayment supplier shall be obliged to issue VAT invoice and customer
shall have right to recognise VAT amount as input VAT
► No Output VAT on advance payments received from foreign customers on export sales
since 2006.
►
Все права защищены.
«Эрнст энд Янг»
Allocation of Input VAT
Separate accounting
Output VAT
Input VAT
VATable
operations
VAT exempt
operations
-
* 20 %
if relate only to VATable
if relate only to VAT
operations
exempt operations
recovered
included to costs or
capitalized
if relate to both VATable & VAT exempt operations
Can be ignored
if cost of VAT exempt
sales is < 5 % of total
costs
Then such input VAT
is fully recovered
Все права защищены.
«Эрнст энд Янг»
Input VAT allocation
proportionally to sales (net of VAT)
Export operations
Output VAT
0%
Separate accounting
at the last day of tax period when confirmation
package is submitted to tax authorities
exchange rate as at the last date of quarter
otherwise
recovered if confirmed within 180 days starting
Input VAT
from export date
• Only for resource exports
Export confirmation package:
1. Contract with FLE
2. Shipment documents with customs stamp
3. Customs declaration with customs stamp
4. Commission agreement
• No output VAT on advances for export sales
Export is treated as unconfirmed
• Taxpayer is allowed not to use 0% tax rate on export of goods and related
services to all of its operations (not to specific deals) by submission of
application before tax period start for not less than 1 year
• Since 1st of January 2018 VAT tax rate for re-export shall be 0%
Все права защищены.
«Эрнст энд Янг»
Unconfirmed export
Export is treated as unconfirmed if confirmation packaged is not
provided to tax authorities within 180 days starting from export date
Output VAT
20 %
Input VAT
recovered
at export date
amended VAT return for export date tax period
late payment interest: 1/300 & 1/150 CB RR (current)
Later confirmation of export operation:
1. Submit confirmation package
2. Calculate Output VAT at 0 % (exchange rate at the last date of the
quarter when confirmation package is submitted to tax authorities)
3. Deduct Input VAT
4. Deduct VAT paid on unconfirmed export
► No right to recover late payment interest
Все права защищены.
«Эрнст энд Янг»
“Claw-back” of recovered VAT
Shift to VAT exempt operations
► Contribution to the charter capital
►
“Claw-back” of recovered VAT
include in Output VAT
estate property
materials &
fixed assets
stock
NBV * 20 %
tax value * 20 %
recovered VAT / 10 years
*
VAT exempt year sales
Total year sales
in the current tax period
Deductible expense for CPT
Все права защищены.
«Эрнст энд Янг»
last tax period in
the year
Property disposals
Fixed asset
has been used for
VATable operations
Fixed asset
has been used for
VAT exempt operations
Input VAT
has been
recovered from the budget
Input VAT
has been
capitalized
Output VAT on sale:
Selling price *20/120
Все права защищены.
«Эрнст энд Янг»
Output VAT on sale:
(
Selling
price –
Accounting
net book
value
)
*20/120
VAT on goods returned to supplier
Goods returned due to
1. Poor quality or inconsistency with agreement
Supplier
Customer
Input VAT
Output VAT
based on the original VAT invoice of the supplier
if adjustment is made to sales within one year since
customer’s refusal to accept goods
2. Other reasons
Ex-supplier
Input VAT
►Supplier:
Все права защищены.
«Эрнст энд Янг»
= New sale
VAT
invoice
General rules
Ex-customer
Output VAT
recovery of output VAT on prepayment
(input VAT is recognised) if agreement is cancelled
Factoring
Delivery
Customer
(debtor)
Payment
Output VAT
Supplier
(creditor)
Debt assignment
Cash
No output VAT
No input VAT,
unless for financial services
Все права защищены.
«Эрнст энд Янг»
Factoring company
(factor)
Profit on further debt sale is
VATable at the rate 20/120
Commission agreement
VAT on agent’s commission only
No VAT:
- in relation with goods transfer between agent & principle
- in relation to expenses reimbursed to agent by principle
VAT invoicing procedure (sale)
Principle
Agent
Customer
in the Journal,
but not in Purchases Book
VAT invoice on
sale
VAT invoice on
purchase
VAT invoice on
sale
in Sales Book
Все права защищены.
«Эрнст энд Янг»
in the Journal,
but not in Sales Book
in the Journal,
but not in Purchases Book
in Purchases Book
VAT invoicing procedure (purchase)
Principle
Agent
Supplier
in Purchases Book
VAT invoice on
purchase
VAT invoice on
sale
in the Journal,
but not in Purchases Book
in Sales Book
VAT invoice on purchase
VAT invoicing procedure (commission)
Principle
VAT invoice
on commission
in Purchases Book
Все права защищены.
«Эрнст энд Янг»
Agent
VAT invoice
on commission
in Sales Book
Self-supplied construction
Current tax period
Output
VAT
If used in VATable
operations
on the last day:
20 % * cost incurred
for capital construction
in the financial accounting
Input
VAT
general rules
recovery of
output VAT assessed
on self-supplied construction
in the same tax period
Recovery of Output VAT assessed on self-supplied construction can be done in
the same period if the general recovery criteria for Input VAT is met.
Все права защищены.
«Эрнст энд Янг»
Construction costs for self-supplied
construction for CPT, VAT & PT
Type of
expense
Depreciable value of
FA for CPT
Tax base for
VAT
Initial value for
PT
Materials
used
YES
YES
YES
Wages of
construction
workers
YES
YES
YES
IC on wages
YES
YES
YES
Cost of subconstructors
YES
NO
YES
Interest on
loan
NO
YES
YES
Все права защищены.
«Эрнст энд Янг»
Reporting and Payment
►
One VAT tax return
►
Quarterly reporting & payment
►
Only electronic form of VAT tax return since 2014
►
Deadline for reporting & payment – 25th of the
month following the end of the quarter
►
VAT liability is payable 1/3 of VAT liability per
quarter – 3 months after the end of the quarter
Все права защищены.
«Эрнст энд Янг»
How to get the refund?
Input VAT > Output VAT
In-house tax audit:
►
In case of VAT
refund upon the submission of VAT tax return
►
In relation to VAT recovery on export operations
Amount not
confirmed
for refund
End of
Quarter
Amount
confirmed
for refund
Late payment
interest from
the budget
Submission of End of in-house
Decision on
VAT
VAT tax return
tax audit
in-house tax audit refund
In-house tax
audit
1/365 CB RR
per day of
25 days
2(3) months
7 days
5 days
delay
Все права защищены.
«Эрнст энд Янг»
Declarative procedure of VAT refund
Valid for taxpayers:
►
With taxes paid during previous 3 years > 2 billion roubles
►
In case bank guarantee for 10 months is provided
Written request to refund within 5 days after VAT return
submitted
Decision on refund is to be issued by tax authorities within 5
days after the request received
In-house tax audit under general rules
In case of any refunded amount is not confirmed during
in-house tax audit, taxpayer shall return it to the budget
and pay interest for cash usage at CB RR * 2
Все права защищены.
«Эрнст энд Янг»
VAT Exam Question Answer Format
Output VAT
Calculation
VAT on goods (works, services) sold
VAT on prepayment received
VAT on sales related income
VAT on capital construction
VAT on property used for non-VATable transactions
VAT on prepayment made recovered
Total output VAT
Input VAT
VAT on materials bought
VAT on services bought in
VAT on business entertainment expenses
VAT on capital construction
VAT on prepayment received recovered
VAT on prepayment made
Total input VAT
VAT payable (recoverable)
Все права защищены.
«Эрнст энд Янг»
Amount
XXX
(XXX)
XXX
Personal
Income Tax
Personal Income Tax
Exam Success Factors:
Start each part of PIT question (Q5 Section B) on
a new page
► Do not mix the information between the parts
► Calculate tax base for each tax rate separately
► Use all the data provided in the question
► Follow the model answers layout.
►
Все права защищены.
«Эрнст энд Янг»
Personal Income Tax
NEW
PIT rules for income from sale of property (purchased after 1st January 2017)
have been changed:
►Sale of property shall be exempt if property has been owned for 5 years
and more
►Sale of property shall be exempt if property has been owned for 3 years
and more and has been inherited, received as a present from relative or
privatized
►If selling price is less than 70% of cadastral value as at 1st January of the
year of sale tax base shall be calculated as 70% of cadastral value of
immovable property
►Regions are allowed to decrease minimal period of ownership and per cent
of cadastral value threshold for PIT
Since 01.01.2018 interest income on Russian quoted corporate bonds in RR
exceeding key CB rate increased by 5% (item 1 article 214.2 TC)
Все права защищены.
«Эрнст энд Янг»
Personal Income Tax
Taxpayers
Tax base
Tax period
Individuals
Individual
entrepreneurs
Taxable income per each
rate (in cash & in kind)
Calendar year
Object of taxation
Taxable income
Tax rate
PIT
13% / 35 %
13% / 30%
Payment
Reporting
Tax calculation
up to 15th July
Tax agent:
payment date
up to 30th April
Tax agent:
+ 1 month (quarterly)
by 1st of April
Taxable income less deductions* 13%
Taxable income *35%
Taxable dividend income *13%
Все права защищены.
«Эрнст энд Янг»
Income recognition date
Basic: Payment date
deposit interest
civil-law agreement
copyright income
Benefits in-kind:
receipt date
BUT
1. Wages & Salaries:
last date of the month
Bonus: when accrued
2. Imputed interest income
for low rate loans:
last date of the month
art.223
Все права защищены.
«Эрнст энд Янг»
Tax rate
35 %
Increased
13 %
Basic
►
►
►
►
Salary, wages
Bonus
Gift from the LE (>4000 RR)
Business income
►
Taxable portion of prizes & awards from
advertising games (incl. VAT; > 4 000 RR)
►
Interest on bank deposits /quoted
corporate bonds exceeding CB RR +5 %
(roubles) or 9 % (foreign currency)
►
Imputed interest (income) on low rate
loans
!!! Casino winning
►
12 %
Dividend income
(separate tax base)
30 %
►
All types of income received by tax
non-residents
Tax base is determined separately for income taxed at
different rates
Все права защищены.
«Эрнст энд Янг»
Taxable & exempt income
Taxable
Exempt
►Dividends
►Payments
and interest received
►Insurance payments received in case of
insured incident
►Income on copy-rights and related rights
►Rent income, including transport lease
►Income from the sale of property, including
immovable property, shares, securities,
claims
►Employment remuneration and
remuneration for work performed or services
rendered
►Pensions, benefits, scholarships and similar
payments received under foreign legislation
!!!
sick-leave
payment
established by Law
►Reimbursement of costs related to
employment and duties performance
►Interest income < CB RR + 5 % (9 %)
►Financial aid to employees in case of the birth
of a child < 50 000 RR per child
►Inherited property, gifts from close relatives,
gift from individuals if no state registration is
required for such gifts
►Increase of shares due to revaluation of
assets, rights issue and reorganization
►Mother’s capital received under the rules of the
government national program
Partially exempt (> 4 000 RR per group):
1.
2.
3.
4.
5.
Gifts from LE (13 %)
Support payments (13 %)
Reimbursement of medical expenses prescribed (13 %)
Gifts & prizes in competitions & tournaments held under decisions of authorities (13 %)
Gifts & awards in competitions, games & other events held for advertising purposes (35 %)
Все права защищены.
«Эрнст энд Янг»
Benefits in-kind
Taxable 13 %
Payments to enable employees to
perform their duties or to provide
►
better working conditions
► If required by law
travel expenses up to statutory norms
membership of a fitness club
medical insurance for employees and relatives
trip to Singapour
business expenses – reimbursements
provision of personal driver
free meals
provision of mobile phone set
company’s payment for private calls
business expenses - cash advances
discounts
provision of car for business purposes
training in time management
provision of accommodation
employer’s payment for medical treatment
of a relative
car allowance within the government limits
grace credit card period (1 month)
►
At fair market value (incl. VAT)
The arms length principle
should be taken into account
Non-taxable
Все права защищены.
«Эрнст энд Янг»
►
Allowances & deductions
Standard
dependant
charity
Social
Property
child education
agent
only cash up to 25 %
tax return
50 000 RR per child for both parents
tax return
agent
medical, pension, life
insurance, educational
expenses
education: own, brother, sister
medical , life insurance (>5years), pension expenses:
own & close relatives up to 120 000 RR
sale of property
movable – 1 000 000 RR, immovable – 250 000 RR
owned > minimum period of ownership (5/3) – exempt
tax return
purchase of residential
property
2 000 000 RR for several objects
+ interest on 1 mortgage loan up to 3 000 000 RR
tax return
agent
actual expenses
IE civil-law contracts, author agreements
fixed
IE, author agreements, 20 %- 40%
tax return
agent
period of ownership
listed securities, open PIFs owned > 3 years
3 000 000 RR * Ks
tax return
agent
investment to ind inv
account
up to 400 000 RR per year, > 3 years
tax return
income on ind inv
account
Financial result , > 3 years
agent
Professional
Investment
1 400/ 3 000 RR up to 350 000 RR
Все права защищены.
«Эрнст энд Янг»
Standard child deduction
1 400 RR per 1st & 2nd child
3 000 RR per 3rd & next child
up to 350 000 RR
My tax plan:
Submit written
request on
deduction to
employer
to both parents for each child under 18 y.o.
(under 24 y.o. for qualifying students)
►
Granted at written request to employer at only one place of
employment
►
To individual entrepreneurs based on the average monthly income
►
No standard allowance under civil agreement at source (possible
on submission the annual tax declaration)
►
Increased amounts of standard & children allowances
Все права защищены.
«Эрнст энд Янг»
art. 218
Social deductions
Charity
in cash
25 %
►
►
►
Own education,
brother’s / sister’s education
medical, life insurance (>5years),
pension – own & close relatives
120 000 RR
Educational
50 000 RR
per child
Unused social deductions are not carried forward
Applicable only to income taxed at 13 %
Granted upon submission of the annual tax declaration
►
Taxpayer is allowed to claim social deduction related to pension (additional
payments for accumulative part of pension, contributions to non-state pension
fund, pension insurance) & life insurance at employer before the end of the
tax period provided that expenses are documentary proved and if employer
withheld such payments from the salary and remitted to State Pension Fund
art.219
Все права защищены.
«Эрнст энд Янг»
Educational deduction
On own education &
on brother’s/sister’s
education
(up to 120 000 RR)
incl. evening courses
►
►
My tax plan:
???
Pay for sister’s
design classes
Pay for own English
courses
Pay for son’s
computer classes
Все права защищены.
«Эрнст энд Янг»
►
►
On children’s education
(up to 50 000 RR per one
child)
&
►
►
►
ALSO for evening courses
One deduction for both parents
Children under 24 years old
Only in licensed educational institutions
Granted in the amount of expenses
Must be supported by confirming documents (incl. license)
Granted upon submission of the annual tax declaration
YES
???
NO
CLAIM DEDUCTION
Check license !!!
Keep documents !!!
Budget:
120 000 RR
+ 50 000 RR
Pay for niece’s MBA
Pay for wife’s
cooking classes
Pay for mother’s
knitting classes
Better to give
cash for their
own payment,
so that they
can claim
deduction
Medical deduction
►
►
►
►
►
On own medical treatment & insurance
On medical treatment of spouse, parents, children under 18 y.o.
Only medical treatment approved by the government
Total amount is limited up to 120 000 RR (except for certain types of expensive medical
treatment)
Only in licensed medical institutions of Russian Federation
►
►
►
My tax plan:
???
Pay for mother’s
medical treatment
Buy medical
insurance for wife
Take son to the
doctor
Все права защищены.
«Эрнст энд Янг»
►
Granted in the amount of expenses
No deduction if paid by employer
Must be supported by confirming documents (incl. license)
Granted upon submission of the annual tax declaration
YES
CLAIM DEDUCTION
Check license !
Keep documents!!!
Budget:120 000 RR
???
Pay for sister’s medicine or
buy insurance for her
Medical centre in Germany
or in Russia
Pay for plastic surgery
NO
To claim deduction :
sister should pay
herself, medical centre
should be in Russia,
medical treatment
should be due to
medical reasons
PIT on property sale
EXEMPT for PIT
If owned for MORE than MINIMUM PERIOD OF OWNERSHIP:
3 years – immovable property: inherited, received as present from family
member, privatised; other property
5 years – other immovable property (except mentioned above)
Tax base = selling price
but not less than70% of cadastral value
If selling price is less than 70 % of cadastral value as at 1st of January of
the year of sale, use 70 % of cadastral value as taxable income for PIT
Regional authorities are allowed to decrease:
► Minimum period of ownership
► Per cent of cadastral value
Все права защищены.
«Эрнст энд Янг»
Property deduction on property sale
owned for less than minimum period of ownership:
property deduction
Movable
(car)
Immovable
(old house)
250 000 RR
1 000 000 RR
for all sales per tax period (year)
►
►
►
►
May be substituted with actual expenses
Allocation of property deduction between the owners
Not applicable for individual entrepreneurs
Tax agents: no obligation to withhold, BUT obligation to submit data to tax
authorities
My tax plan:
+++
Plan sale after 3
years of purchase
Все права защищены.
«Эрнст энд Янг»
++
Keep documents on
purchase (agreement,
payment orders)
++
Compare which is beneficial:
actual expenses or
fixed deduction
++
Plan sale of
property for
different years
Housing incentive deduction
►
►
►
►
►
►
►
►
►
►
►
►
13 % taxable income can be reduced by the amount invested in qualifying
property (houses, apartments, rooms, cottages, parts in property, plots of land)
To receive housing incentive: own actual expenses + ownership + own income
Maximum - 2 000 000 RR per several objects of property
Maximum of interest on mortgage loan - 3 000 000 RR (only for 1 object of
qualifying property)
Is granted once in a lifetime
Granted at written request supported by appropriate documents confirming
property acquisition (title of ownership) & related expenses
Additional expenses on decorations is applicable if need for it separately stated in
the main agreement (incl. design documents)
Can be used for refinanced mortgage loans
Parents can use housing incentive on property bought for children under 18 years
old
Taxpayer can claim housing incentive from several tax agents
No incentive if between related parties or paid by employer
Unused incentive amount is carried forward until fully utilised
Все права защищены.
«Эрнст энд Янг»
Options for utilising the housing incentive:
1. General: at written request along with annual tax
declaration
2. Special: before the end of tax period when appropriate
documents are obtained:
► Written application to the tax authority for confirming
right to the housing incentive at source
► Within 1 month receive confirmation from the tax
authorities in the special format
► Transfer this confirmation to the employer
► Employer provides housing incentive for PIT
Все права защищены.
«Эрнст энд Янг»
Professional deductions
Civil-law
agreements
►
►
Copy-right
agreements
Expenses
Expenses incurred for generating
income (documentary proven on
CPT pattern)
or
SIC accrued on business income
of Individual entrepreneur
Individual
entrepreneurs
Fixed professional
deduction
► 20
% of the gross business
revenue (only for registered
entrepreneurs)
►
Fixed professional deduction is not valid for civil-law agreement
►
Fixed professional deduction for copy-right agreement is 20 – 40 %%
Granted on written request to tax agent or along with the annual tax
declaration
►
►
Only for 13 % income
Все права защищены.
«Эрнст энд Янг»
Investment deduction
Ownership term
deduction
Positive result on sale/redemption of listed securities owned > 3 years:
3 000 000 RR * Ks
Individual Investment Account (400 000 RR per year, > 3 years):
Deduction amount
Period for deduction
Other taxable
income
How to receive
deduction
If individual
investment account
is closed before 3
years
If individual
investment account
is closed after 3
years
Все права защищены.
«Эрнст энд Янг»
Investment deduction on investment
Investment deduction on income
Investments made to individual
investment account (not more than
400 000 RR)
annual
Positive result on operations through
individual investment account
Is required for deductions
Through annual PIT tax return
Claw back of investment deductions
received + fines + PIT = 13 % of
positive result on operations through
individual investment account
PIT = 13% of positive result on operations
through individual investment account
When individual investment account is
closed (after 3 years)
Is not required for deductions
Through tax agent upon submission
confirmation from tax authorities
PIT = 13% of positive result on
operations through individual
investment account
Deduction in the amount of positive
result on operations through individual
investment account
Insurance income
Insurance PREMIUMS – taxable by PIT,
if employer pays for employee
Insurance PAYMENTS – taxable by PIT
Exempt – not taxable for PIT
►
Obligatory insurance (according to
legislation)
►
Obligatory insurance (according to
legislation)
►
Insurance against harm to life &
health
►
►
Medical insurance (except for
payments for recreation & resort
facilities)
Insurance payments as a result of
death or compensation of harm to
health or reimbursement of medical
expenses
►
Insurance payments under voluntary
pension
insurance
(insurance
premium paid by employee), if
conditions for insurance payments are
similar to state pension conditions
►
Contributions made by employer on
behalf of employee to non-state
pension funds or under voluntary
pension insurance agreements and
additional payments to cumulative part
of state pension (limited to 12 000 RR)
Все права защищены.
«Эрнст энд Янг»
Insurance income
Life insurance:
13 %
* (
Total insurance
payment received
-
Total contributions made
increased by CB RR
(at average rate)
)
Insurance income on property destruction:
13 %
Insurance
compensation
(
*
received
-
Market value
of destroyed
property
-
Insurance
contributions )
Insurance income on property damage:
13 %
Insurance
compensation
(
*
received
-
Actual repair
expenses
-
Insurance
)
contributions
art.213
Все права защищены.
«Эрнст энд Янг»
Insurance income
Type of
insurance
Classification of
expense for CPT
Voluntary
accumulative
labour pension
Non-state
pension
insurance
Deductible within
12 % of labour
costs
Life insurance
Deductible within
6 % of labour
costs (if >1 year)
Personal
Deductible within
insurance
the limit of
against harm to
15 000 RR per
health and death insured person
Medical
insurance
Все права защищены.
«Эрнст энд Янг»
Classification of income for PIT
Classification of
income for IC
on contributions
on payments
30 % / 27,1 %
>12 000 RR per
year per person
13 %
>12 000 RR per
year per person
Non-taxable
Non-taxable
13 %
30 % / 27,1 %
Taxable
13 %
> CB RR
Non-taxable
(if >1 year)
Non-taxable
(excl. health
resorts)
Non-taxable
Non-taxable
Interest on bank deposits and Russian
quoted corporate bonds in roubles
Deposit
(actual sum)
/ 365
days
* Days
*
of the period
Rate
35 %
CB RR + 5%
Actual
Taxable
►Interest exceeding:
9%
rate
rate
CB RR +5 % for rouble deposits
9%
for currency deposits
►Bank – tax agent: withhold tax when paying interest out & remit it to the
budget not later than the next day
►No rounding-up for days
►Decrease of CB RR – special rules:
no taxable income if under limit at agreement date
► within 3 years after decrease
► no option of decrease in deposit rate in agreement
►
Interest income on Russian quoted corporate bonds is taxable in the
amount exceeding CB RR + 5%
►
Все права защищены.
«Эрнст энд Янг»
Imputed interest income on low rate loans
Loan
(actual sum)
/
365 *
days
Days
*
of the period
2/3 CB RR
9%
1.
2.
2.
3.
4.
5.
6.
Rate
Actual
rate
35 %
Imputed
rate
At the last date of each month during the loan period
Calculate interest on loan using 2/3 CB RR for rouble loans
9 % for currency loans
Imputed interest – Actual interest =Imputed interest income (if > 0)
Include in the annual tax declaration
Obligation for tax agents to calculate & withhold tax on imputed interest
No rounding-up the days
No imputed interest income for mortgage loans qualified for housing
incentive
art.212
Все права защищены.
«Эрнст энд Янг»
Securities & PIFs
Unquoted
Quoted
Income
(loss)
=
per each group:
Sales proceeds
Losses on quoted securities
shall be carried forward for next
10 years against taxable
income on quoted securities
only
► Allocation of expenses
PIFs
For quoted
securities:
if loss test against
weighted average
market price
-
Expenses
Purchase price
► Depositary fee
► Broker’s commission
► Exchange fee
► Registrar’s fee
► Interest at CB RR*1,1 paid on
loan taken to finance purchase
of listed securities
►
Loss on each group shall not reduce taxable
income from the other group
Exempt for PIT sale of securities
► Tax base is calculated at:
owned for more than 5 years:
► End of tax period
- unquoted shares of RLE
► Payment to the taxpayer
- quoted shares of innovative RLE
►
Все права защищены.
«Эрнст энд Янг»
Prizes, gifts & awards
NO PIT:
► Between close relatives (spouses, parents, children, grandparents,
grandchildren, brothers, sisters)
►
►
Individual  Individual (unless statutory registration needed)
Sport awards: if Olympic, official championship
EXEMPT in the amount < 4 000 RR per each group in a tax period:
1. Gifts from LE (13 %)
2. Support payments (13 %)
3. Reimbursement of medical expenses prescribed (13 %)
4. Gifts & prizes in competitions & tournaments held under
decisions of authorities (13 %)
5. Gifts & awards in competitions, games & other events held for
advertising purposes (35 %).
Все права защищены.
«Эрнст энд Янг»
Business travel expenses
NOT subject to PIT (when supported by documents):
► Per diem allowance within statutory norms
►
(for each day of business trip including travel days):
Russia
700 RR
► Abroad
2 500 RR
Travel costs (incl. Taxi to & from airport)
Airport fees & commission charges
Luggage fare
Accommodation expenses (hotel)
Business communication expenses
►
►
►
►
►
►
Income shall be recognised at the last day of the month in which
expense report is approved
Все права защищены.
«Эрнст энд Янг»
Dividend income
Tax = Share of dividends * Tax rate * (Distributable – Received )
dividends
dividends
13 %
Separate tax base
(1)
(2)
(1)(2)
PIT on dividends payable to Individual (tax resident):
Total distributable dividends
ХХ RR
DO NOT INCLUDE dividends payable to FLE
Less net dividends received from FLE (tax agent)
(ХХ RR)
DO NOT INCLUDE dividends received taxable at 0%
Dividends taxable at 13 %
ХХ RR
PIT= 13% * Share of dividends taxable at 13% (*)
►
ХХ RR
Should be withhold by tax agent (paying out entity) & remitted to budget within 1 day
Все права защищены.
«Эрнст энд Янг»
Taxpayer’s obligations
Obligation on
►
►
►
►
►
►
Income from non tax agents
(ex. Rent of the apartment to individuals)
Income from sales of personal property
Income from sources outside Russia
Income in-kind (if tax was not withheld)
Income from gambling & lottery prizes
Declaration
by 30th of April the following year
Payment
by 15th of July the following year
Tax payments
before
submission of
tax declaration
1. Upon payment order issued by tax inspectorate to
the taxpayer
2. In 2 equal installments:
► Within 30 days after receipt of payment order
► Within 30 days after the 1st installment
art. 228
Все права защищены.
«Эрнст энд Янг»
Tax agents’ obligations
art. 226
► On a monthly basis cumulatively for 13 % rate income
► Separately for each amount taxed at different rates
2. To withhold at the moment of payment from the amount
payable (not out of tax agent’s own funds)
Obligation 1. To calculate tax:
Payment
in-kind
1. Withhold from other cash payments (up to 50 %)
2. Do not withhold
BUT
3. Report within 1 month
Payment
to the
budget
At the location of taxpayer:
1. The day of the actual receipt of cash in bank
2. The day of a wire cash transfer
3. Not later than the following day in other cases of cash receipt
4. The day following the date of actual tax withholding
Reporting within 1 month after the end of
1st quarter, 1st half of year, nine months
annual report - until 1st of April the following year
Все права защищены.
«Эрнст энд Янг»
Tax agent’s liability
Tax offence
Liability
Based on
Delay in tax agent’s Fine – 1 000 RR for each month (part item 1.2 article
reporting on calculated or full) overdue
126 TC
and withheld PIT
Blockage of operations at bank item 3.2 article
accounts in case of report delay for
76 TC
10 days
Mistakes in tax agent’s Fine - 500 RR for false information article 126.1
reporting on calculated submitted for each document
TC
and withheld PIT
Все права защищены.
«Эрнст энд Янг»
Business income
►
►
►
►
Business income of registered individual
entrepreneurs
Business income of private notaries & other private
practice in accordance with the law
May be decreased by allowable professional tax
deduction
Loss cannot be carried forward.
Все права защищены.
«Эрнст энд Янг»
PIT reporting for individual entrepreneurs
Tax declaration must be submitted (by 30 th of April of the following year) by:
1. Individual Entrepreneurs, conducting business activities
2. Individuals, engaged in private practice (private notaries)
3. Individuals receiving income from non tax agents or income free of tax
withholding
4. Individuals receiving income from abroad
►
Preliminary declaration on estimates business income:
Issued by individual entrepreneurs & private practitioners
Within 1 month & 5 days after first income

Payment orders issued by tax inspectorate
►
Amended preliminary declaration if considerable (>50 %) change in
estimated income
►
On termination business individual entrepreneur is to submit final tax
declaration (within 5 days)
►
►
Все права защищены.
«Эрнст энд Янг»
Payment obligations for individual
entrepreneurs art. 227
►
►
►
►
Must make advance payments
Based on estimated income
Per a preliminary tax declaration
According to payment orders issued by tax inspectorate
Amounts
50 %
25 %
25 %
final
Все права защищены.
«Эрнст энд Янг»
&
by
Deadlines
15th July of the current year
15th October of the current year
15th January of the next year
15th July of the following year
PIT proforma
Income taxed at 13 %
Employment income
Income from business activities
Income from sale of property
Other income taxed at 13 %
Total income taxed at 13 %
Deductions & allowances
Standard personal deduction
Standard dependant deduction
Business expenses
Social deduction
Professional deductions
Property deduction
Housing incentive
Other deductions/allowances
Total deductions & allowances
Taxable income subject to 13 %
Tax at 13 %
Dividend income
Tax on dividends at 13%
Income taxed at 35 %
Tax at 35 %
Total tax liability
Less: tax withheld (including tax on dividends)
Additional tax payment (refund) required
Все права защищены.
«Эрнст энд Янг»
Amount
Amount
Insurance
Contributions
Insurance Contributions NEW
►Threshold
limit for tax rates for Insurance Contributions shall be:
- 1 150 000 RR for Contributions to Pension Fund
- 865 000 RR for Contributions to Social Security Fund
- none for Contributions to Medical Insurance Fund
(article 426 TC, Act of Government RF # 1426 dd 28.11.2018)
►Payers
of IC making payments to individuals shall use:
- 22 % IC rate for contributions to Pension Fund under 1 150 000 RR
- 10 % IC rate for contributions to Pension Fund over 1 150 000 RR
- 2.9 % IC rate for contributions to Social Security Fund under 865 000 RR
- 5.1 % IC rate for contributions to Medical Insurance Fund
(article 426 TC)
Все права защищены.
«Эрнст энд Янг»
Insurance Contributions
Taxpayers
Tax base
Tax period
Legal entities
Individual
entrepreneurs
Taxable payments to
individuals
Calendar years
Object of taxation
Payments to
individuals
Tax rate
IC
Pension fund: 22% / 10%
Social security fund: 2.9%
(not for civil-law & copyright)
Medical Insurance: 5.1%
Payment
Reporting
Tax calculation
Monthly:
+15 days
Quarterly:
+30 days
Pension fund: 1 150 000 * 22% +
(>1 150 000)*10%
Social security fund: (<865 000)*2.9%
Medical insurance: without limit *5.1%
Все права защищены.
«Эрнст энд Янг»
Taxable & exempt income
Tax exempt:
Taxable:
payments and
remunerations to
employees in cash and in
kind.
ALSO:
Non-deductible for CPT
►Assistance
payments required by law
►
Compensation paid under legislation
►
Mandatory insurance contributions
Voluntary personal medical insurance of
employees (> 1 year or against the death or
health damage)
►
►
Value of uniforms and outfits
►
Financial aid (less 4 000 RR)
►
Business trip expenses (within limits)
►
Education compensation
►
Compensation of mortgage loans
►
Tax base - cumulatively for the tax period for each employee separately.
►
Tax base – separately for each employer (LE)
Все права защищены.
«Эрнст энд Янг»
Reporting & payment procedures
Declaration
30th of month following the quarter
Additional calculations/files to:
Pension Fund: by 15th of the following month
(annual – up to 1st March)
Federal Social Fund: by 25th of month following the quarter
Payments
Monthly advance & final annual payment:
by 15th of the following month
Separate subdivisions (balance and a separate bank account) :
► Payment & reporting at the location of subdivision
Все права защищены.
«Эрнст энд Янг»
Civil-law & Copy-right agreement
Civil-law agreement
Taxpayers - legal entities and individual entrepreneurs in relation
to payments under civil-law agreements:
RR
Remuneration under copy-right agreement
XX
less
Actual expenses
(XX)
Tax base (threshold limit 1 150 000 RR)
XX
Tax at (22%+5.1%) % / (10%+5.1%)
XX
Copy-right agreement
Taxpayers - legal entities and individual entrepreneurs in relation
to copy-rights payments:
RR
Remuneration under copy-right agreement
XX
less
Actual expenses or fixed professional deduction (XX)
Tax base (threshold limit 1 150 000 RR)
XX
Tax at (22%+5.1%) % / (10%+5.1%)
XX
Все права защищены.
«Эрнст энд Янг»
Examination answer format
Taxpayers – legal entities and individual entrepreneurs in relation
to payments to employees:
Gross remuneration payable to physical persons in cash
Gross remuneration payable to physical persons in kind
Tax base
Tax to:
Pension Fund (threshold limit 1 150 000 RR)
22% / 10%
Social Securiy Fund (limit 865 000 RR)
2.9%
Medical insurance (no limit)
5.1%
Taxpayers - legal entities and individual entrepreneurs in relation
to copy-rights payments & civil-law agreements:
Remuneration under copy-right/civil-law agreement
less
Actual expenses or fixed professional deduction
Tax base
Tax to:
Pension Fund (threshold limit 1 150 000 RR)
22% / 10%
Medical insurance (no limit)
5.1%
Все права защищены.
«Эрнст энд Янг»
RR
XX
XX
RR
XX
XX
RR
XX
(XX)
RR
XX
XX
Corporate
Property Tax
Corporate Property Tax NEW
►
►
►
Movable property shall not be taxable with Property tax (item 2 article 374 TC)
Taxable base in the amount of cadastral value of immovable property can be
changed during the tax period in case property’s attributes or cadastral value
are changed (item 15 article 378.2 TC)
Taxable base in the amount of cadastral value can be changed for the previous
years in case of mistakes recovered or according to court decision (item 15
article 378.2 TC)
Corporate Property Tax
Taxpayers
Tax base
Tax period
Legal entities
Net balance value
Cadastral value
Calendar year
Object of taxation
Immovable
property
Tax rate
PT
Maximum 2.2 % (NBV)
1.6 % (Cadastral)
Payment
Reporting
Tax calculation
Quarterly:
+ 30 days
till 30th March the
following year
Average value * 2.2%
Cadastral value * 1.6%
Все права защищены.
«Эрнст энд Янг»
Reporting & payment procedures
Object of taxation:
BUT NOT:
Immovable property
► Land & natural resources
► Objects of cultural heritage
Corporate property tax is paid at the location of:
►
Legal Entity (Russian or Foreign via permanent establishment)
►
Separate subdivision (balance and a separate bank account)
►
Immovable property
Declaration
Annual tax return:
by 30th of March the following year
Payments
Quarterly advance payment:
by 30th of the following month
Final annual payment:
by 30th of March the following year
Все права защищены.
«Эрнст энд Янг»
Average property value (old rules)
1. Add NBV of FA (accounting) as at the 1sts of months:
Q1 – January, February, March, April
Q2 – January, February, March, April, May, June, July
Q3 – January, February, March, April, May, June, July, August, September,
October
Q4 – January, February, March, April, May, June, July, August, September,
October, November, December + 31st of December
2. Divide by the number of months
Quarterly advance payment:
Average property value * ¼ * 2.2 %
Annual tax = Average property value * 2.2 %
Annual tax liability= Annual tax – Quarterly advance payments
Все права защищены.
«Эрнст энд Янг»
Cadastral value (new rules)
► Tax
base of the certain immovable property shall be recognized as cadastral value:
►Business centers;
►Shopping centers;
►Business premises intended for offices, shops, dining and services
►Premises belonging to foreign companies without permanent office in Russia.
► Tax base defined as cadastral value shall be excluded from calculation of average property value
► Cadastral value shall be fixed as at 1 January:
►At Federal State Registration official site: https://rosreestr.ru/wps/portal/
Exam rate:
►At official site of Region of Russian Federation;
1.6 %
►In the Tax Authorities office at the location of immovable property.
► Cadastral value shall be defined for each
Region
Tax period
object of property separately
2014
2015
2016 and
► Cadastral value of premises shall be equal
after
it’s share in the building
► If cadastral value is not defined as at 1
Moscow
1,5 %
1,7 %
2%
January, old rules shall be applied
Other regions
1%
1,5 %
2%
Quarterly advance payment:
Cadastral value as at 1 January * ¼ * tax rate % * number of months of ownership
Annual tax = Cadastral value as at 1 January * tax rate % * number of months of
ownership
Annual tax liability= Annual tax – Quarterly advance payments
Все права защищены.
«Эрнст энд Янг»
Tax Planning,
Administration &
Control
Tax Administration and Control NEW
Late payment interest shall be increased in case payment is delayed for more
than 30 days and is calculated using 1/150 of Central Bank Refinancing Rate
per each day of delay (item 4 article 75 TC);
► The total amount of late payment interest shall not exceed the amount of
delayed payment (item 3 article 75 TC);
►Taxpayer can decrease tax base or tax amount provided that:
► Legal entity has not misstated tax and accounting reports and presented
correctly all deals and objects of taxation
► Counterpart has fulfilled its part of the deal (article 54.1 TC).
►
Все права защищены.
«Эрнст энд Янг»
MINIMISATION OF TAXES vs DELIBERATE TAX EVASION
Taxpayer has right to pay minimum of tax established by law
Tax optimisation
Tax evasion
minimization of tax liabilities by considerable
legal actions of taxpayer which means
utilization of all preferences and allowances,
tax deductions and other legal options and in
general eliminate or minimize unreasonable
overpayment of taxes and tax penalties
deliberate actions of taxpayer to
violate law in order to minimize
taxes payable or to completely
avoid tax payments, which is
actually tax offence or even tax
crime
Example:
- contract planning: choice of type of
agreement, of legal entity, terms of agreement
- choice of region of company’s location /
registration
- legal structure of business
Example:
- sham transactions
- deals with suspicious parties
- lack of economic benefit
(business purpose)
Business purpose in taxpayer’s operations
Minimisation of tax payments
substitutes business purpose in
taxpayer’s operations
Все права защищены.
«Эрнст энд Янг»
Tax Planning – Focus on exam
TARGET
Maximize
tax deductions
CPT - 10 % (30 %) write off
Minimize tax paid
Choice of option between
- maximum deductible expenses activities of IE or
incorporated business
PIT - standard deductions
- social deductions
Choice between options
- housing incentive
with different level of
- professional deductions
deductible expenses
Все права защищены.
«Эрнст энд Янг»
Tax Penalties
TAX VIOLATIONS
Chapter 16 TC
1. Breach of tax registration rules – deadline for submission of
registration application & business activities without registration
2. Non-submission of tax return – breach of deadline and method of
submission of tax return (calculation)
3. Serious violation of tax accounting rules for income, expenses
and tax objects
4. Non-payment or underpayment of taxes, also in controlled
transactions by using non-market prices
5. Neglect of tax agent’s duties on withholding & remitting taxes.
Все права защищены.
«Эрнст энд Янг»
Breach of tax registration rules
art. 116 TC
Tax offence
Breach of terms for submission of
registration application to tax authorities
conducting business activities without tax
registration
Все права защищены.
«Эрнст энд Янг»
Tax penalty
10 000 RR
10 % of income earned
during the period (not less
40 000 RR)
Breach of tax audit rules
art. 126 TC
Tax offence
Non-submission of documents and/or other
information within the established period
Tax penalty
200 RR
for each nonsubmitted document
Tax agent’s provision of documents
500 RR
containing false information
for each document
with false information
Non-provision of information about a taxpayer
or provision of documents containing false
10 000 RR
information
Все права защищены.
«Эрнст энд Янг»
Breach of deadlines for tax payment
art. 122, 123 TC
Tax offence
Understating the tax base and incorrect
calculation resulted in understatement of tax
paid, if discovered by the tax authorities during
on-site audit.
the same committed intentionally
failure of tax agent to fulfill the duty of
withholding and/or remitting taxes
Late payment interest:
Tax penalty
20 % of unpaid
liability
40 % of unpaid
liability
20 % of the amount
that was subject to
withholding and
remittance
art. 75 TC
First 30 days: unpaid tax liability * 1/300 of CB RR * days of delay
From 31st day on: unpaid tax liability * 1/150 of CB RR * days of delay
Все права защищены.
«Эрнст энд Янг»
Breach of deadlines for tax reporting
art. 119 TC
Tax offence
Failure to submit tax return to tax
authorities within the deadline
Tax penalty
5 % of tax payable as per tax
return per each month (not more
30 % of tax amount, not less than
1 000 RR)
failure to submit tax agent’s report
1 000 RR for each month
on PIT calculated and withheld
(part or full)
Breach of the procedure for
electronic submission of tax return
(calculation)
Все права защищены.
«Эрнст энд Янг»
200 RR
Breach of tax accounting rules
Tax offence
Serious violation of tax accounting rules
which didn’t result into any decrease of a tax
base, took place in one tax period
Serious violation of tax accounting rules
which didn’t result into any decrease of a tax
base, took place in several tax periods
Serious violation of tax accounting rules
which resulted into the decrease of a tax
base
Tax penalty
10 000 RR
30 000 RR
20 % of tax underpaid
(not less than 40 000
RR)
Serious violation of tax accounting rules:
- lack of supporting document
- systematic undue and incorrect booking of operations
Все права защищены.
«Эрнст энд Янг»
Breach of transfer pricing rules
Tax offence
Tax penalty
Understatement of tax due to use of
prices outside the market range
40 % of tax underpaid
(but not less than 30 TRR)
Non-submission or late submission
of notification on controlled
transactions or incorrect information
5 000 RR
Все права защищены.
«Эрнст энд Янг»
Procedures for Tax Enforcement
art. 45, 46, 47,48 TC
If taxpayer failed to pay tax within deadline tax collection shall be enforced:
- for legal entities and individual entrepreneurs – out of court
- for individuals – in court
Out of court tax collection – By cash at taxpayer’s bank accounts:
1. Tax authorities: issue tax payment demand
2. After expiration of payment term stated in tax payment demand (not later than 2 months):
enforced collection (collection order to bank)
3. Otherwise: appeal to court within 6 months after expiration of payment term stated in tax
payment demand
4. Besides, securing collection – blocking the accounts in the taxpayer’s banks
Out of court tax collection – By other taxpayer’s assets:
In case there is no cash in taxpayer’s bank accounts or information on it in tax authorities:
1. Tax authorities shall decide on tax collection by taxpayer’s assets (not later than 1 year
after expiration of payment term in tax payment demand) – decision on tax collection by
other assets is submitted to court bailiff for seizure of assets
2. Otherwise, appeal to court within 2 years after expiration of payment term in tax payment
demand.
Все права защищены.
«Эрнст энд Янг»
Refund & offset procedure
art. 78, 79 TC
Refund & offset procedures are done:
1. Upon written application of a taxpayer
2. Within 3 years form the day tax overpayment or tax collection
Offset procedure:
1. Decision of tax authorities shall be issued within 10 days after application
from taxpayer
2. Is performed for taxes paid to the same budget
Refund procedure:
1. Decision of tax authorities - within 10 days after application from taxpayer
2. Refund is done after offset of all outstanding tax liabilities
3. Refund must be done within 1 month after application from taxpayer
If this deadline is not met by tax authorities - interest for each day of delay
in the refund at CBRR payable from the budget to the taxpayer.
Все права защищены.
«Эрнст энд Янг»
INTEREST payable TO TAXPAYER for undue release of BLOCKED
ACCOUNTS of taxpayer
it.9.2. art 76 TC
Blockage of taxpayer’s bank accounts shall be performed in case of:
1. Taxpayer doesn’t settle tax payment demand on overdue taxes, penalties, fines
2. Taxpayer doesn’t submit tax return within deadlines
3. As security during in-house/on site tax audit
4. Breach of deadlines for submission of receipt on documents from tax authorities
The decision of tax authorities is base for:
- Blockage of taxpayer’s bank accounts
- Release of blocked bank accounts of taxpayer – shall be issued and send to bank on
the day following the date of remedy of tax violation
If decision on release of blocked accounts is not issued within the due term or in case of
illegal blockage of taxpayer's bank accounts:
►
taxpayer shall receive interest on the amount which is illegally blocked
►
for each day of overdue blockage
►
at current CB RR.
Все права защищены.
«Эрнст энд Янг»
Tax Audits
Tax audits of branches & subdivisions
►
►
All types of tax audits are possible, BUT ONLY:
►
for branches & representative offices
►
in relation to regional & local taxes
In-house tax audit of subdivisions:
only in relation of taxes reported by subdivision
►
►
On-site tax audit of subdivisions:
►
separate tax audit of subdivision
►
as part of tax audit of legal entity
Decisions & acts related to audits of subdivisions:
addressed/handed in at location of legal entity (head office)
Terms of on-site tax audit can be prolonged if LE has subdivisions:
Number
Term of audit
< 4 subdivisions
> 4 subdivisions
> 10 Subdivisions
Все права защищены.
«Эрнст энд Янг»
Conditions
If subdivisions have >50% taxes & >50% assets
up to 4 months
up to 6 months
In all cases
In-house tax audits
art. 88 TC
►
At the location of tax authorities
►
On the basis of tax declarations
►
On the basis of other documents concerning the taxpayer’s activities
►
Within 3 months (2 months – for VAT) starting from the day submission
of tax declaration (amended tax declaration)
►
In case of errors revealed the tax payer shall be notified and requested
to make appropriate corrections within the established time limit
►
Additional tax paid under demands of tax authorities
►
No penalty for tax underpayment
►
Late payment interest at 1/300 (1/150) of CB RR for each day of delay
►
Act on the in-house audit is issued within 10 days after it is finished
►
Taxpayer is allowed to present explanations on the results of in-house
tax audit within 1 month after the act on in-house tax audit and these
explanations are to be studied
Все права защищены.
«Эрнст энд Янг»
On site tax audits
art. 89 TC
►
May not exceed 2 months
►
Increased up to 4 months
►
In exceptional cases - up to 6 months
►
+ 1 month per each branch and representative office
►
The tax audit report must indicate document-supported tax offences
which were revealed or the absence of such violations and the
conclusions and the recommendations of the inspectors and references
to the articles of the TC
►
Consequent on-site tax audit can be performed upon submission of
amended tax return if the tax liability has been decreased
►
Report on the tax audit can be send to the taxpayer by mail only in the
case the taxpayer avoids it.
Все права защищены.
«Эрнст энд Янг»
Transfer pricing – tax audit
► Performed
by special tax authorities departments
► Based
on notifications from taxpayers within a new form of tax audits
& on information received during in-house and on site tax audits
► Tax
control of amounts of CPT, MET and PIT and VAT as a result of
controlled deals
► Period
of audit is limited to 6 months to be performed within 2 years
after the information on controlled deals received
► “Corresponding
adjustments” are allowed for additional tax
assessments as a result of a transfer pricing tax audit.
Все права защищены.
«Эрнст энд Янг»
During on site tax audits
Actions that may be carried by tax authorities during the tax audits:
►
Perform an inventory of the taxpayers assets and examine the
production, storage, trading and other premises used by a taxpayer
►
Witnessed may be summoned (except for taxpayer’s auditor and legal
adviser)
►
Provision of additional documents may be requested
►
Documents and other objects may be seized
►
Experts, interpreters and external specialists may be recruited to
perform audit.
Все права защищены.
«Эрнст энд Янг»
Documents on site tax audits
art. 100, 101 TC
Actions and procedures to be carried after the tax audits:
► Immediately after the end of the tax audit tax authorities shall issue a certificate
on audit having been performed
► Tax authorities shall issue audit act not later than 2 months after the certificate is
issued or within 10 days if tax violations are revealed
► Audit act shall be handled to the taxpayer within 5 days after it is issued
► A taxpayer has right to prepare and submit to tax authorities written objections
to tax audit act within 1 month after the act is received by the taxpayer.
► Tax authority shall consider taxpayer’s objections within10 days after receipt of
taxpayer’s objections and taxpayer has right to attend the hearing
► Report on the audit is issued by tax authorities after the consideration of
taxpayer\s objections. This report may provide for penalties imposed on the
taxpayer, no penalties and additional measures of tax control to be taken
► Demand for payment is issued along with the report on the audit in relation to
unpaid tax, penalties and late interest payment
► Decision of tax authorities on on-site audit come into effect within 1 month after
being handled to the taxpayer.
Все права защищены.
«Эрнст энд Янг»
Cancellation of results of on-site tax audit
it. 12, art. 101.4 TC
Decision on cancellation tax authority’s acts is made by higher tax authority or by
court.
Reason for cancellation of tax authority’s acts can be:
►
►
►
Neglect of tax authorities of TC requirements
Neglect of essential terms of consideration of acts and other materials of tax
control:
►
taxpayer was not invited to hearing
►
taxpayer was not allowed to present its objections
Other violations of consideration of materials of tax audit if such violations
resulted or could result in wrong decisions.
Все права защищены.
«Эрнст энд Янг»
Repeated tax audits
art. 89 TC
Limitation on tax audits:
Can be performed only for the three calendar years immediately
preceding the year of the audit
►
No repeated on-site tax audits are allowed for the same taxes for the
same tax period with the exception to:
►
► Audit
during re-organisation or liquidation of a taxpayer
► Audit
by a higher tax authority in the processes of control check
More than 2 on-site tax audits are not allowed for one taxpayer
(except for tax audit on special decision of head of tax authority).
►
Все права защищены.
«Эрнст энд Янг»
Appealing against the acts and decisions of
art. 137-139 TC
tax authorities
Every taxpayer or tax agent shall have right to appeal against
►
Acts of tax authorities of a non-normative nature and
►
Actions or inaction of their officials
if taxpayer thinks that his rights were violated
Appealing procedure:
1. Before act of tax authorities comes into effect – appeal petition to higher tax
authority
2. After act of tax authorities came into effect – appeal to higher tax authority:
-
within 1 year after taxpayer has revealed that his rights were violated
after appeal petition and decision of higher tax authority came into effect, tax payer
shall not have right to repeat appeal for the same reasons, but appeal can be made
to the Federal Tax Authority
-
3. After pre-court decision – appeal to Arbitration Court (for legal entities) and to
General jurisdiction court (for individuals)
-within 3 months after taxpayer was informed on higher tax authority’s decision.
Все права защищены.
«Эрнст энд Янг»
Appeal petition on acts and decisions of tax
art. 138 TC
authorities
1. A taxpayer shall appeal in writing to the higher tax authority within 1 month after
he discovered that his rights were violated or he received act he wants to appeal
2. Appeal petition is submitted to higher tax authority trough tax authority which
issued appealed act
3. Effective date of appealed act can be postponed for the period of appeal
procedures
4. The appeal of a taxpayer shall be considered by the higher tax authority not later
than 1 month after the day when it was received.
5. After considering the appeal tax authorities shall have right to:
►
Reject the appeal
►
Annul the tax authority’s act and order a further audit
►
Annul the tax authority’s act an terminate the tax offence case
►
Amend a decision or adopt a new decision.
6. The decision shall be made know with the taxpayer within 3 days after it has
been adopted.
Все права защищены.
«Эрнст энд Янг»
Tax Monitoring
for big LE
Form of tax control:
(based on LE appeal):
method of comprehensive information exchange
(based on special regulations):
≥300 mln RR of taxes
-
on-line access to accounting & tax data
≥ 3 bln RR of income
-
similar to in-house tax audit
≥ 3 bln RR of assets
Reasoned tax opinion:
Advantages:
document, stating opinion of tax authorities
whether taxes are correctly calculated, in full
amount, and timely paid (also issued on
request of taxpayer)
-
solve tax disputes
- avoid additional tax
assessment, fines, late payment
interest
- no tax audits
Pre-court resolution procedure at Federal Tax Authority level
Все права защищены.
«Эрнст энд Янг»
Revision
Exam Success Factors:
Practice ALL past papers
► Follow the layout of the model answers
► Attempt all parts of the questions
►
AND MOST IMPORTANT OF ALL:
Work through exam standard questions under exam
conditions
Все права защищены.
«Эрнст энд Янг»
Feedback from the examiner
►
Review of past papers performance
►
Lessons learned
Do not rely on typical questions Q5 & Q6 Section B
► Focus on VAT (Q4 Section B)
►
►
How to improve
Gain easy marks
► Focus on all parts of the question
► Structure the answer through workings
► Show the logic of answer if no time for calculations
►
Все права защищены.
«Эрнст энд Янг»
10 things to review 5 minutes before exam
1.
2.
3.
4.
5.
6.
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10.
Все права защищены.
«Эрнст энд Янг»