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Coronavirus – Tax support for businesses – Russia

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06-04-2020

The main support measures proposed by the government that affect the payment of taxes, fines and penalties

On March 31, 2020, the State Duma and the Federation Council of the Russian Federation approved the Draft of Federal Law No. 862653-7, which introduces a number of measures to support businesses during the COVID-19 pandemic (the "Law"). In addition to direct legislative support measures, the Law gives the Government of the Russian Federation the authority to issue legislative acts extending the deadline for paying taxes, fees and insurance payments in 2020. The draft of the relevant Resolution, (the "Draft Resolution"), was developed by the Federal Tax Service of Russia[1]. This introduces anti-crisis operational tax regulation of certain issues by the Government of the Russian Federation, as well as by the Executive authorities of the subjects of the Russian Federation (in terms of regional and local taxes).

To read our global Tax summary of key developments in major jurisdictions click here.

The key measures affecting the level of business tax burden and the timing of tax payment are set out in the following review.

Extension of tax payment periods for enterprises included in SME registry doing business in one of the 22 supported business sectors[2]

According to pp. 1 – 3 the Draft Resolution provides for the following extended periods of payment of taxes and insurance payments for enterprises included in the SME register as of 01.03.2020, operating in one of the 22 industries most affected by the pandemic:

VAT

Income tax

Payment on time

(payment period extension or payment by installments is not provided)

For 2019 – deferred tax payment for 6 months

For the 1st quarter of 2020 – deferred advance payment for 6 months

For the 2nd quarter of 2020 – deferred advance payment for 4 months

Insurance payments

Other taxes and fees

6-month-extension for microenterprises in respect of contributions calculated from payments and other remuneration to individuals for the period March – May 2020

4-month-extension for microenterprises in respect of contributions calculated from payments and other remuneration to individuals for the period June – July 2020

Extension of the payment period for advance payments in respect to transport tax, corporate property tax and land tax for the 1st  quarter of 2020 for 6 months (until October 30th), for the 2nd  quarter of 2020 – for 5 months (until December 30th)

Extension of tax payment period or payment by installments for strategic[3], system-forming[4] or city-forming[5] enterprises as well as enterprises doing business in one of the 22 supported business sectors

According to the rules for granting of tax payment period extensions provided for in the Draft Resolution, enterprises operating in 22 supported industries, as well as strategic, system-forming or city-forming enterprises that are also doing business  in these industries[6] ("interested parties"), can apply for granted tax payment period extension or can pay tax by installments, if there is at least one of the following indicators:

|     decrease in revenue by more than 10% in the quarter preceding the quarter in which the application for extension is submitted[7]

|     receipt of a loss based on income tax returns for the reporting periods of 2020, provided that there was no loss for 2019

|     inclusion as of March 1, 2020 in SME register and application of a special tax regime prescribed by the Tax Code of the Russian Federation

Extension of the period for tax payment is granted on the basis of an application, which can be submitted before December 1, 2020. The extension of the tax payment period depends on the size of the reduction in income (the size of losses) and is:

The period of deferment

Terms of services

1 year

  • 50% reduction in revenue (30% for certain categories of organizations[8])
  • losses combined with 30% reduction in revenue

9 months

  • 30% reduction in revenue (20% for certain categories of organizations)
  • losses combined with 20% reduction in revenue

6 months

  • 20% reduction in revenue (10% for certain categories of organizations)

3 months

  • In all other cases

Reduced insurance payments rates

According to art. 6 of the Draft Law, until the end of 2020, the following reduced rates of insurance payments are applied for insurers recognized as SMEs in respect of payments in favor of employees exceeding 1 minimum wage:

|     for compulsory pension insurance – 10%

|     for compulsory social insurance for temporary disability and maternity – 0%

|     for compulsory medical insurance – 5%

Thus, for SMEs, the total amount of insurance premiums is reduced from 30% to 15%

Measures for non-application of penalties and fines, suspension of tax control measures, and extension of reporting deadlines for all categories of taxpayers

In accordance with the pp. 4, 5, 9, 12, 15, 17 the Draft Resolution additionally provides for the following measures to support all types of businesses:

|     in the period from March 1 to June 1, 2020, interest on arrears on taxes and insurance payments will not be charged in respect to interested persons

|     the deadline for submission of any requests for payment of taxes, insurance payments, penalties, fines and interest by the tax authorities is increased by 6 months

|     until June 1, 2020, it is prohibited to appoint and conduct on-site (repeated on-site) tax audits as well as transfer pricing audits

|     until June 1, 2020, it is prohibited to make suspend taxpayer’s bank transactions or electronic transfers

|     the deadline for submitting tax returns, advance payments and accounting statements, which are due in March – May 2020, has been extended by 3 months

WHT increase for dividends and interests

The President has announced[9] an increase in the withholding tax rate on income in the form of dividends and interests to a single rate of 15%, applicable to all states regardless of the provisions of tax agreements. At the moment, these changes have not been worked out at the level of the draft law.

According to the Russian Ministry of Finance[10], the changes should not affect all countries, but will only tackle the so-called "transit jurisdictions" (among which only Cyprus has been explicitly named so far).

In addition, the changes will not affect interest income paid in respect to Eurobond loans, bond loans of Russian companies, and loans provided by foreign banks.



[1] https://regulation.gov.ru/projects#npa=100768

[2] Is determined by the Government and include the following industries: air transportation, airport operation, transportation, culture, leisure activities and entertainment; fitness and sports activities; activities of travel agencies and other organizations in the tourism sector; hospitality; catering, organization of additional education and private educational institutions; organization of conferences and exhibitions; activities to provide consumer services (repair, Laundry, dry cleaning, hair and beauty salons). Attribution of an organization to these industries is determined by the OKVED on the basis of information from the EGRUL

[3] The list was approved by order of the Government of the Russian Federation dated 20.08.2009 No. 1226-R

[4] The list was approved by the Government Commission for improving the sustainability of development of the Russian Federation from 20.03.2020 No. 3

[5] Organizations whose average number of insured employees according to the calculations of insurance premiums for the last 4 reporting periods is more than 5 thousand people (clause 3 of the rules for Granting Deferrals)

[6] The list is subject to the approval of the Government of the Russian Federation

[7] Income, determined in accordance with the procedure, established by the legislation of the Russian Federation on taxes and fees; income from the sale of goods (works, services), transfer of property rights; income from the sale of goods (works, services) on transactions subject to the 0% VAT rate

[8] Strategic, system-forming, city-forming organizations; organizations that sell preferential goods (services); organizations that belong to the category of the largest taxpayers

[9] http://kremlin.ru/events/president/news/63061

[10] Information message of the Ministry of Finance of Russia dated 26.03.2020: https://www.minfin.ru/ru/press-center/?id_4=37007-informatsionnoe_soobshchenie