As of 1 January 2009, a number of amendments have been introduced to the Russian Tax Code (the "Tax Code"). Some of these amendments contribute to the development of the Russian tax system, while others specifically address the consequences of the financial crisis.
Below we summarize the most important amendments that have come into effect as of 1 January 2009, or otherwise as indicated.
The profit tax rate has been reduced from 24% to 20% and regional legislatures are permitted, for certain categories of taxpayers, to decrease the rate still further, to 15.5%.
The scope of deductible expenses has been extended, including:
- for the period from 1 September 2008 to 31 December 2009, the threshold for deducting interest expense has been increased from 1.1 to 1.5 times the refinancing rate of the Russian Central Bank (i.e., currently up to 19.5%) with respect to ruble loans and from 15% to 22% with respect to foreign currency loans;
- thresholds for deducting daily business trip allowances have been abolished;
- the threshold for deducting insurance premiums for employees' voluntary personal insurance has been increased from 3% to 6% of the total payroll expense;
- deduction of expenses for voluntary property insurance is now available if the relevant insurance is required by law for particular types of activity;
- an increased ratio (1.5) is introduced for faster deduction of certain R&D expenses as per a list approved by the Russian Government, including those that did not yield any positive results; and
- limited deduction (with simultaneous exemption from individual income tax and unified social tax) is now allowed for certain benefits provided by the employer, including:
- compensation of interest on loans used for purchase or construction of residential premises;
- education in higher or specialized educational institutions; and
- voluntary pension insurance contributions.
The depreciation rules have been altered as follows:
- the depreciation premium that permits a one-off deduction of a part of an acquisition cost has been increased from 10% to 30% for fixed assets with statutory life from 3 to 20 years (i.e. belonging to depreciation groups 3-7);
- the reducing depreciation ratio (0.5) for expensive cars and minibuses has been abolished, which permits faster depreciation of these assets;
- upon reorganization or liquidation, depreciation now accrues up to and including the month when such reorganization/liquidation is registered (previously, it was not possible to accrue depreciation in that month).
Important VAT amendments include the following:
- since the third quarter of 2008, for each tax period (which is a quarter for VAT purposes) VAT is to be remitted to the state budget in three equal installments over three subsequent months (by the 20th of each month). Taxpayers are effectively granted an "installment plan" for paying VAT;
- the VAT exemption for the importation of technological equipment, which was available where equipment was imported as an in-kind contribution to the capital of a company has now been extended to apply to any import. At the same time, this exemption is available for technological equipment where no equivalent equipment is produced in Russia, and which is included in a list which is to be approved by the Government;
- for the first time, purchasers are given the right to offset input VAT paid with advance payments, before the acquired goods (works, services) are actually received; and
- the requirement to pay VAT to the seller by wire transfer when completing barter transactions, offsetting counterclaims and using securities as a payment instrument, which had been introduced in 2007, is now abolished.
Natural resources production tax ("NRPT") and export customs duty
The following amendments have been introduced to reduce the NRPT burden for oil producers:
- the tax rate was revised and the tax is now assessed on the oil price exceeding USD 15 per barrel (instead of USD 9 previously);
- zero rate (for a limited volume of oil produced) is extended to apply to oil fields north of the Arctic Circle, on the Azov and Caspian seas, in the Nenets Autonomous Area and the Yamal Peninsula.
In order to reflect the fluctuation of world crude oil prices in a timely manner, the export duty rate for crude oil is now adjusted monthly (instead of bi-monthly) based on world prices in the relevant previous month.
Taxation of concession agreements
The Tax Code has been amended to regulate specifically the taxation of concession agreements i.e., agreements on the creation and/or reconstruction and subsequent use of state or municipal property by private investors:
- concession agreements are to be treated for VAT purposes in the same way as simple partnership and asset management agreements, so, among other features:
- transfers of property or property rights under concession agreements is exempt from VAT; and
- the obligation to pay VAT and issue factura-invoices with respect to transactions made under a concession agreement lies with the concessioner, who is also entitled to offset input VAT on goods (works, and services) purchased for the purpose of executing the concession agreement;
- the concessioner is exempt from profit tax on the receipt of property and property rights under a concession agreement, and is allowed to deduct concession payments;
- the concessioner is now subject to property tax with respect to property received under concession agreements and accounted for on its balance sheet; and
- foreign companies without permanent establishments in Russia pay property tax only with respect to real estate received under concession agreements.
A decision of a tax authority issued on the basis of tax audit results can now be disputed in court only after it is disputed with the superior tax authority by filing an appellate or general complaint.