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About Alinga | |
 13.03.10
April 15 is a day of true unity for the US and Russia – the day when the citizens of both countries are united in the common human task of… paying taxes. This issue of the Alinga Market Update will give you the tools you need to pay them in both countries – with an article on Declaring Personal Income Tax in the Russian Federation .
Contact Alinga today to find out how we can help you stay legal in Russia – as a tax resident, an employee, and/or as a business – with your reporting, tax, and legal issues.
We've also include our regular line up of great articles, hand picked by our professionals, to keep you up-to-date in this changing market!
If you have comments, questions, or suggestions on other ways we can improve our site and newsletter, please contact the editor! To subscribe to this newsletter, send an email with "Subscribe Alinga" in the subject field to our editor.
Consultation For Foreign Companies Outside The Scope Of VAT The Ministry of Finance has issued a letter concerning VAT on consulting and marketing services provided to foreign organizations. The Ministry of Finance clarified the services, provided by Russian organizations directly to foreign organizations (and not their representative offices), are considered to be provided outside Russia. Therefore, these services are not subject to VAT. At the same time this letter does not contain legal standards and is not a regulatory legal act that must be recognized by the tax authorities.
When A Foreign Company Is Not Profit Tax Agent If a foreign company has only a branch office in Russia and pays a foreign company (including Belorussian) for services rendered outside of the Russian Federation, the contracting company will not be a Profit Tax agent. The basis for this conclusion is that income received as a result of a foreign contractor rendering services outside of the RF is not subject to the Profit Tax in Russia.
There is much more "Accounting and Payroll" information available in the Russian version of this same newsletter!
Declaring Personal Income Tax in the Russian Federation This article, written and maintained by the professionals at Alinga Consulting Group, explains the procedure and many aspects of declaring personal income tax and filing tax declaration in the Russian Federation. It addresses the issues of tax status (tax residents vs. non-residents of RF), tax rates for residents and non-residents, the categories and maximum amount of tax deductions amoung other issues.
Review Of Recent Changes To Tax-Related Legislation In The Russian Federation This monthly Russian-language service from Alinga and regular feature of the Alinga Market Update is designed to bring your financial personnel a broad view of recent changes to the Russian Tax Code. Forward this link to them!
Personal Income Tax For Qualifying Foreigners On February 26 the State Duma passed, in its first reading, a bill that would simplify taxation and visa considerations for some foreign workers in Russia. The first change would be to how PIT for foreign employees is withheld. If the foreigner's work contract covers at least 183 consecutive days, that employee immediately becomes a Russian tax resident, meaning that they qualify for a tax rate of 13% rather than 30%. Currently, the company must withhold 30% of the wages until the employee is physically in Russia for 183 days, and then apply for a refund of the 17% difference between the two tax rates. This bill would also amend Article 207 of Russia’s Tax Code to affect work permits for foreign professionals with higher education, including scientists, scholars, and teachers, who could receive permission to work in Russia for the duration of the contract. Currently, a new work permit must be issued every year. Both amendments are expected to pass into law.
Foreign Deposits And Personal Income Tax Russia’s Tax Code regulations on bank interest earnings are applied regardless of the deposit’s physical location. Meanwhile, a Ministry of Finance letter dated June 3, 2009 #03-04-05-01/410 clearly states that all interest received from a foreign bank by tax resident for the use of funds in a deposit account is income subject to declaration in Russia and makes up part of the tax base for PIT. According to Point 4 of Article 229, as of 2010 taxpayers have the right to not declare income that is 1) tax-exempt in accordance with Article 217, or 2) fully withheld by a Tax Agent, as long as this does not interfere with the taxpayer’s tax deductions specified in Articles 218-221 of Russia’s Tax Code. Article 217 does not include interest on deposits in foreign banks, although interest income received by the taxpayer from foreign currency deposits starting from 9% per annum in banks located within Russia is classified as non-taxable income in Point 27. In short, it is wise to proceed with caution when deciding what to do about bank interest earnings interest on PIT.
Employment Contracts Cannot Infringe Employee Rights The Russian Labor Code detail the basic rights and obligations of workers and employers as concerns employment contracts, working conditions, schedules, etc. More specific commentary regulating relations between the specific organization and employee are contained in the employment contract as well as in the organization’s internal documents (internal labor policies, collective labor agreement, etc). These contracts and documents cannot contain stipulations that infringe on the employee’s rights and guarantees as established by legislation.
Re-registration — second round The Ministry of Economic Development and Trade published on its website a statement of intent to radically reshape regulations for corporations. The result of these innovations, the government promises, will merge the current divisions of CJSC and OJSC. At the same time, various legislative regulations are being planned for public-traded companies and private companies. Rather stringent demands will be implemented for the disclosure of information and corporate management regarding OJSCs, while companies that are not planning to list on a stock exchange will be able to operate according to more flexible rules. The bill promises to increase the scope of functions of a publicly-traded company’s managing bodies will change significantly. The general meeting of shareholders will have more responsibilities, with the range of their responsibilities determined by both the Law on Joint-Stock Companies and the company’s charter.
Agent Contracts Are Frequently Tax Traps Agents are commonly used in business. In spite of their prevalence, however, relationships involving agents harbor tax traps that can land a company in court. However, the majority of problems can be avoided if they are thought through before the contract is written. The tax base for the Value Added Tax (VAT) on the sale of merchandise can be determined at the time prepayment is received or when the shipment is received (Article 167 of Russia’s Tax Code). At first this provision may seem like it would not affect agents, who are only subject to VAT for compensation, but it is not so simple.
The following resource is meant to quickly introduce the reader to some of the major English-language commentary concerning the current financial crisis in Russia, how that crisis might affect Russia's government and ruling structure, and what the international outlook is for Russian business.
Russian Financial Activities (PDF) This issue of the Russian Analytical Digest examines Russian financial activities after the 2008-2009 financial crisis. First, Laura Solanko and Zuzana Fungáčová analyze the Russian banking sector, arguing that although it has shown rapid growth in recent years, it remains highly fragmented. Second, Philippe Rudaz discusses the problems of the Russian stock market, which he believes reflect the low levels of trust within Russian society.
Audit and Taxation Legal Accounting and Payroll Questions? Ask Alinga's Experts!
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