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Featured Article:   Russia's Simplified Taxation: Part I - The Basics of the System With the current market realities, companies are focusing more than ever on cutting costs, including taxes. One possible method of tax reduction in Russia is to switch to the simplified tax system (STS). This article will lay out the basics of what every company manager considering transferring to STS should know.    Russia's Simplified Taxation: Part II - Advantages and Disadvantages This article by the specialists of Alinga Consulting Group will allow you to weight positive and negative aspects of the simplified tax system, to consider facts, risks, possible complications and advantages.        Alinga news:   Our Resume New page on Alinga's website will introduce you to our history, our name, our mission, as well as our licences and memberships.   Alinga is Growing! we are seeking:    Ведущий специалист отдела бухгалтерского сопровождения    Ассистент отдела бухгалтерского сопровождения    Специалист отдела бухгалтерского сопровождения      business in russia :   Economic News in Review - July 2010 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.   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!   Revitalizing U.S.-Russia Trade After a year and a half of diminished trade flows and slow-moving negotiations, recent months have seen hopeful signs of a revival in U.S.- Russia trade relations.   PBN IPO TRACKER for Russia/CIS There have been 100 reports of potential IPOs out of Russia, Ukraine, Kazakhstan and other CIS countries since January 1, 2010. Of these, 89 IPOs are pending while 8 have been completed and 3 were cancelled.   Alinga Consulting Group +7 (495) 988-21-91 consult@acg.ru

Welcome!

To all of you in Moscow or other heavily affected regions of Russia, we wish you health and rain. The smoke, drought, and fires have been extensive and the economic and human impact has been and will be significant. Current estimates predict that Russian GDP may drop by one percent or more due to not only agricultural damage and infrastructure damage, but also to lost productivity as companies cut work days and employees use more sick days. Moscow, at least, has finally cleared of the heat and smoke that lead the word "apocalypse" to gain frequent usage there. Here's to hoping that the effects of this summer will also have little effect on you, your business, or those close to you.

Our latest Market Update presents a fully updated two-part article on Russia's Simplified Taxation, which is always of interest to the small and medium sized clients we serve. If you have any questions on this, please do not hesitate to contact us!

Featured Articles:

With the current market realities, companies are focusing more than ever on cutting costs, including taxes. One possible method of tax reduction in Russia is to switch to the simplified tax system (STS). While this may seem simple enough at first in reality STS has shortcomings that can actually increase, not decrease, expenses. This article will lay out the basics of what every company manager considering transferring to STS should know.

Choosing an optimal tax system for your company requires considering a wide array of factors and making careful calculations. This article by the specialists of Alinga Consulting Group will allow you to weight positive and negative aspects of the system, to consider facts, risks, possible complications and advantages.

I recently ran into a situation where one of the company’s department heads did not want to take his yearly paid vacation. He was working on an important project, on which a lot depended, and he asked if he could somehow be monetarily compensated for the 28-day vacation time. At first I tried to make the case that he was obligated to take his vacation. According to Article 126 of the Labor Code, it is possible to monetarily compensate only any days beyond the 28-day minimum. When the department head began to insist, I researched the issue and found that there are means by which vacation time can be substituted with monetary compensation which wouldn’t violate the current legislation.

In some instances, companies only have the right to deduct input VAT after the tax is actually paid, for example, when importing goods. If the company did not have the legal right to deduct VAT in even just one of the specified situations, then the tax authorities may revoke its right to the deduction and reinstate the input VAT. As a result, the company will then have VAT arrears subject to fines and late fees. Input VAT may not be deducted from the value of donated commodities. This is because when the property is handed over, the party donating it does not present any VAT to the receiving party, but rather transfers the amount into its budget (as a part of the total amount of tax calculated) at its own expense.

Determining Benefits: Refining The Technique

Specialists from Russia’s Ministry of Public Health and Social Development and Social Insurance Fund have jointly reviewed issues concerning adopting new regulations for calculating mandatory social insurance benefits. One of the issues had to do with determining the average wage when calculating temporary disability compensation for unused vacation time when it is not related to an employee’s dismissal. Temporary disability benefits and benefits for maternity and childcare leave are assessed based on the average wage of the insured, calculated by the last 12 calendar months of employment preceding the insurable event. The average wage includes all types of pay and other compensation to the employee which is included in the base for calculating insurance premiums. This is stipulated in Parts 1 and 2 of Article 14 of Federal Law #255-FZ “On Social Insurance in Case of Temporary Disability or Pregnancy,” dated December 29, 2006.

Confused about financial reporting in Russia? Let Alinga's professionals explain it all to you!

Foreign Employee Taxes Paid For Each Work Facility

Construction companies that have to transfer their foreign employees between various construction sites must pay the tax for its foreign employee on each facility that they work at. Russia's Ministry of Finance affirms this in Letter #03-05-05-03/28 from 07.08.2010. The tariff amounts to two rubles for each day spent in Russia, not to exceed 200 rubles.

Transferring Property Into Charter Capital Not Subject To VAT

The Ministry of Finance has stated its position on levying VAT on property transfers to a branch company’s charter capital and similar transactions. The Ministry outlines its position in Letter #03-07-07/42, dated 06.28.2010. These transfers are considered investment-related and not considered a sale of goods as defined by Russia’s Tax Code. In addition, in the event that property rights are transferred to the charter capital of parent companies, the amount of VAT deducted by the taxpayer on the property rights is recoverable. These amounts are not included in the initial cost of the property rights and are subject to a tax deduction from the receiving company according to the procedure established by Chapter 21 of the Tax Code. Following this, property transfers to the charter capital to a branch company are not subject to VAT.

Taxes Withheld Erroneously Are Retrievable

In its Letter #03-03-06/1/464 dated 07.16.2010, the Ministry of Finance addresses the issue of refunding profit tax withheld and paid by a tax agent from a foreign company’s income when this income is exempt from taxation according to Russian legislation. In such a situation, the tax agent is obligated to submit an adjusted calculation to their local tax authorities. After this is done, the tax agent then has the right to appeal to these same tax authorities for a refund of the excess taxes. In this case, the foreign organization may request back the amount of taxes that the tax agent wrongfully withheld.

An Excise Tax Is Still An Excise Tax

Parliamentary deputies intend to review necessary amendments to legislation in September so that in 2011, roads can start being built not from transportation tax revenue, but from revenue from excise taxes on fuel. During a round table discussion late last week, Duma deputies expressed support for the idea of forming special funds for road construction. Repair and maintenance of roads is being planned at the expense of excise taxes on fuel. The excise taxes, which already exist now, will increase an average of three rubles per liter of gasoline.  Special federal budgetary funds and regional funds will be established on account of the taxes. However, there are many other suggestions being made for the form the fund should take.

Mediation Law To Allow Dispute Settlement Outside Of Court

Rossisskaya Gazeta has published a law which will assist citizens in resolving serious disputes outside of the courtroom and to keep them from holding grudges against one another. A completely new concept has been legally codified in Russia – the process of mediation and the concept of mediation specialists. According to experts, mediation will change the very roots of the administration of justice and perhaps even improve the country’s moral climate. Special mediators will help both parties in a conflict to find common ground and forget about old disagreements. In addition, experts are hoping that the new law on mediation will lessen the burden on courts and allow them to focus on more complex matters, for example, trials where the conflict between the disputing parties is so severe that mediation is not possible.