Many amendments to the Russian Tax Code came into force on 1 January 2017. Some of them, such as the changes to the thin capitalisation rules, had been reported on in our earlier Alert. Most of the latest amendments to the Tax Code are associated with the adoption of Federal Law No. 401-FZ of 30 November 2016*, which introduced some new concepts and clarified the existing taxation rules. The most important changes that can have a significant impact on the activity of businesses are outlined below.
In our view, one of the key amendments relates to the performance of tax obligations. The revised Tax Code now allows third parties to pay taxes of a taxpayer. This novelty will help quickly solve many problems faced by taxpayers in practice. It will be useful in cases when a taxpayer’s account is frozen in connection with the revocation of its bank’s licence or if the account is blocked by the tax authorities. Similar problems also occur with payments of taxes when an organisation, which is liquidated, closes its accounts, and some unpaid taxes are discovered in the course of preparation of its liquidation balance sheet. It should, however, be noted that third parties who have paid taxes of another person will not be entitled to a refund of the amounts paid from the public funds.
Also, taxpayers should pay attention to the increase in the size of penalties for organisations in case of payment of taxes and fees at a date later than that provided by the Tax Code. Thus, when a tax payment is overdue by more than 30 days, the interest rate from the 31st day will be 1/150th of the Russian Central Bank’s key rate (this rate is currently 10%) for each day of delay. For commercial entities for the first 30 days of the delay, the old rules will apply – 1/300th of the Central Bank’s key rate for each day of delay. The increase in the size of the penalty will make it unprofitable for taxpayers to “borrow” from the state by failing to pay their taxes and fees on time.
The amendments also implement the Ministry of Finance’s initiative to limit the recognition of the losses generated in the previous tax periods. Under the new rules, from 2017 to 2020 inclusive, the amount of recognised loss cannot exceed 50% of the tax base of the current period. Meanwhile, the ten-year limit for carrying the losses forward was abolished. We believe this limitation may increase the tax burden on businesses.
Transactions to provide independent guarantees between related parties (including between non-credit organisations) will not, from now on, be subject to the transfer pricing rules. Moreover, it is now expressly stipulated that the provision of independent guarantees to non-credit institutions is not subject to VAT. In addition, the provision of interest-free loans between Russian related companies is no longer subject to control within the framework of transfer pricing.
In addition, the rates of excise duties on petrol, alcohol and tobacco products have increased from the beginning of the year.
In light of the numerous amendments to the Tax Code, we recommend taxpayers to assess the possible impact of these developments on their activities, and if necessary, make the appropriate changes to the internal policies of their organisations. * In Russian