The Russian government today approved guidelines for fiscal policy in the Russian Federation for 2008-2010. According to the document, the objectives of fiscal policy for the medium term are:
rejection of an increase to the nominal tax burden provided that the budget system remains in balance;
unification of tax rates;
improving the efficiency and neutrality of the tax system.
Thus, in the next three years the government proposes to change the law to counteract transfer pricing: expand the list of grounds for the recognition of interdependent entities, establish a closed list of controlled transactions, as well as provide in the Tax Code of the Russian Federation the obligation of organizations conducting controlled transactions to notify the tax authorities about them.
The Government also proposes to institute preliminary pricing agreements between the tax authorities and taxpayers engaging in controlled transactions. In the event of full compliance with the terms of such agreements, the price of the transaction will be recognized as market without additional assessments.
Another change concerns the introduction of new requirements for methods of assessment of market price ranges, as well as the principles of their application.
As of 2008, it is proposed to implement a zero tax rate on the receipt of dividends from the strategic participation of Russian companies in Russian and foreign companies. The criterion for strategic participation is 50% participation by the company (but not less than 500 million rubles.). For nonresidents the tax rate is proposed to be reduced from 30% to 15%. Also, effective January 1, 2008, it is proposed to introduce a system of registration of taxpayers subject to value-added tax (VAT) and, in stages, starting on 1 January 2008, optimize the list of operations subject to exemption from VAT.
In 2008-2009, it is planned to begin implementing specific rates of natural resources production tax (Mineral Extraction Tax) for coal, peat, salts, common minerals, mineral water and other resources.
In 2009, legislation on taxation of foreign-controlled companies is to take effect. This is necessary in the fight against concealment of revenue (sheltering of taxes) of Russian companies in offshore companies and countries with a low level of taxation. Also beginning in 2009 the Ministry of Finance proposes introduction into the Tax Code of the concept of residence of legal entities based on the criterion of "place of management" and the criterion of residence of participants of legal entities holding controlling interests. Thus, if an organization registered in an offshore zone will be recognized as a tax resident of Russia on the grounds that it was controlled by tax residents of Russia, it would have to pay tax to the Russian budget at the rate of the difference between the rates in the country where it is registered and the Russian rate. Moreover, in 2009, the government proposes the introduction of the institute of consolidated tax reports in the calculation by a group of companies of their obligations to pay profits tax. This would avoid the situation where the registration of the profit center of a group of companies as the taxpayer in a political subdivision of the RF results in the increase of the income tax paid to the budget in that region and reduction in the income of other regions in which the group members operate. Work will also be done to further improve administration of VAT, particularly the streamlining of reimbursement of tax with a zero rating. In the medium term, the introduction of a tax on real estate is proposed, which will become the main source of income for local budgets.
But most noteworthy is the fact that all the large and often unpopular changes are scheduled for the period after 2008, that is, after the elections.
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