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Welcome!
While President Medvedev continues to speak of the need to hold corruption and bureaucracy in check, Alinga Consulting Group continues to act to help businesses like yours stay in compliance with ever-changing and often-contradictory legislation. Whether tax, labor, or migration issues, or concerns about your real estate, acquisitions, or contracts contact us to find out how to stay compliant and profitable in Russia!
Our latest Market Update also as a newly-updated, original article on financial reporting in Russia and useful information on things like how to handle grant money and cross-currency foreign transactions in your accounting! Read below to find out more!
Taxpayer Legally Obligated To Appear Before Tax Authorities If Summoned
In the past few years, the tax authorities have started to make a practice of summoning company officials to commissions on explaining financial losses, payroll, and various other company issues. Tax officials justify these commissions by citing the right to summon taxpayers to give explanations regarding payments as well as any other instances related to compliance with tax legislation. Analyzing the terms of Articles 23 and 31 in the Tax Code, there is the following discrepancy: the tax authorities are given the right to summon taxpayers to give explanations, but at the same time, the legislation does not directly obligate the taxpayer to appear before the tax authorities. It indeed turns out that inspectors are imposing an obligation on taxpayers that is not specifically provided for in the tax legislation.
VAT Paid To Foreign Governments Not To Be Expensed
According to Russia’s Tax Code, organizations that charge VAT to foreign purchasers in connection with providing work, services, or property in Russia are not legally allowed to consider this an expense when calculating their profit tax base. Furthermore, “foreign” VAT paid to suppliers for goods, work, or services in a foreign country should, for the same reason, not be considered part of one’s profit tax base in Russia. Ministry of Finance Letter #03-03-06/1/407 from June 11, 2010 introduced these clarifying points.
What To Do With Large-Scale Tax Evaders?
Federal Law #383-FZ, dated 12-29-09, went into force on January 1, 2010. It significantly increases the amount of back taxes a taxpayer needs to accumulate before incurring criminal responsibility. This law changes Point 3 of Article 32 of the Tax Code which requires the tax authorities to give the police any pertinent information regarding those suspected of large-scale tax evasion. Under the new law, taxpayers who fail to pay arrears within two months after the deadline for doing so may be suspected of tax evasion. Moreover, violation of this requirement could carry the threat of legal consequences (Point 3, Article 32 of the Tax Code).
Featured Articles:
Explanatory Notes to Financial Reporting in the Russian Federation: A How-to Guide
Once again, it's time to prepare the annual financial statements. As a rule, explanatory notes are the source most of the questions chief accountants have in this process. All businesses must present explanatory notes in their financial statements. Exceptions to this requirement are those registered as small businesses or those organizations which do not carry out business activities. What these explanatory notes should address is the subject of this article.
14 Typical Schemes for Evading Taxes
The Federal Tax Service has sent to all its local offices instructional guidelines describing "14 Typical Schemes for Evading Taxes." Judging by this document, inspectors are most concerned with evasion of value-added tax (VAT) and profit tax. These guidelines were issued "for internal use only," but specialists of Alinga Consulting Group were able to obtain information about all 14 schemes. A company can expect numerous court battles and additional tax assessments if the inspectors begin denying reimbursement of VAT or tax reductions on profits using these guidelines, since many of the "schemes" are actually legal and have been used by businesses for some time.
Foreign Companies Calculate Tax In Domestic Currency, But Pay In Rubles
Russia’s Federal Tax Service (FTS) has notified taxpayers and tax agencies of the proper procedure for calculating, paying, and withholding deductions on income received from a source in Russia by a foreign organization. This issue was outlined in Letter #ShS-37-3/2379@ dated 05-25-2010 and is supported by the Ministry of Finance. According to Article 309, Point 1 of the Tax Code, the Russian organization (or the foreign organization’s representative office in Russia) should calculate taxes and deductions in the currency the income was received in (with certain exceptions). However, the taxpayer should always pay the tax to the Russian government in rubles. Tax calculated in a foreign currency is converted into rubles according to the Russian Central Bank’s exchange rate on the date that the tax is paid.
Grant Aid From Foreign Parent Companies Not Considered Taxable Income
Ministry of Finance Letter #03-08-05 dated 05-20-2010 outlines the taxation procedure for financial grant assistance given to Russian organizations from companies outside of Russia that have at least a 55% ownership stake in the Russian company they are granting aid to. The letter notes that income in the form of property or cash that a Russian organization receives as a grant from an organization registered in a foreign country and which owns more than a 50% share in the target company is not counted as part of its income tax base.
Filing Taxes From Temporary Residences
The Ministry of Finance has outlined the proper procedure for filing tax returns if the individual taxpayer does not have an official place of residence in the Russian Federation; for example, if the taxpayer has sold their apartment and is not officially registered anywhere else at the time that their return is filed. This is explained in the Ministry’s Letter #03-02-08/29, dated 05-11-2010. The letter notes that the individual taxpayer is registered with the tax authorities either according to their place of residence, according to the location of any property they own, or as otherwise stipulated by the Tax Code. In cases where the taxpayer is not registered with the tax authorities according to a permanent place of residence because they currently do not have one in Russia, then they have the right to apply for registration at the branch of the tax inspectorate where they temporarily reside and submit their income tax return to this branch.
Duma Passes Law On Corporate Raiding
On June 9, Russia’s State Duma approved in its second reading a law outlining punishment for corporate raiding. The law introduces penalties for such actions as falsification of data on the Unified State Register of Legal Entities, share registers, resolutions of general shareholders meetings, or resolutions of board of directors meetings. Before the bill’s second reading, four amendments were recommended by the Duma’s special-purpose committee as well as three amendments proposed by other Duma deputies which were ultimately dismissed. The law will impose a fine of 100,000 to 300,000 rubles or up to two years imprisonment, plus up to a 100,000 ruble fine, for falsifying data on the Unified State Register or on shareholder registers. Furthermore, if this crime was committed by someone who did not have lawful access to the registers to begin with, then the fine could also be up to 300,000 rubles along with imprisonment.
Credit Without Trial
In Russia, a method to resolve disputes between banks and customers without having to bring such cases to court may soon be in place. This would allow conflicts to be resolved much faster and with less cost to both parties involved. The arbitration would be impartial and free for the claimants. The idea for such a system originated with Russia’s Association of Regional Banks. The Association’s vice-president, Oleg Ivanov, thinks that the project may be ready for implementation as early as next year. Establishing the role of a commissioner to defend the rights of bank customers or creating a financial ombudsman is also being discussed. Aside from the association, the International Confederation of Consumers and the Lawyer’s Association are also ready to sign onto the project.
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09.07.10
ACG commentary
English
