Major amendments to the Tax Code of the Russia in 2020 year 04.10.2019

Major amendments to the Tax Code of the Russia in 2020 year

On September 30, 2019, the President signed the draft Federal Law N 720839-7 On Amendments to Parts One and Two of the Tax Code of the Russian Federation (hereinafter - the Bill) that introduces a number of amendments to the Tax Code of the Russian Federation (hereinafter - the RTC or the Russian Tax Code). Note that earlier this Bill had been approved by the Federation Council of the Federal Assembly of the Russian Federation. Most amendments will come into force starting from 2020.

In the first part of the alert, we have analysed the main changes in the first part of the Russian Tax Code.

The ability to offset or refund overpayments was extended

The Bill removes the limitation that allowed an overpayment to be offset only against the same type of tax: federal against federal, regional - regional and local taxes against the local ones. Accordingly, the offset is carried out for all types of tax. In this regard, there is another amendment: a tax refund will be possible if there are no arrears of any tax and related penalties and fines.

! Effective date: October 1, 2020

Source:  paragraph 22 article 1; clause 6 Article 3 of the Bill

Controlled Foreign Companies (CFCs)

The list of income that are not taken into account when determining the profits of CFCs received from Russian entities has been expanded provided that the person who controls the CFCs has the actual right to such profits (beneficial owner). Accordingly, not only dividends but also other types of passive income specified in paragraph 1 of Article 309 of the Russian Tax Code will not be included in the taxable profit of a CFC.

Also, article 309.1 will specify that when selling or otherwise disposing shares in the organizations capital, the expenses also will include CFC expenses in the amount of money contributed to the property (capital) of such an organisation in the fiscal year beginning in 2015, or in any the following financial year, if the relevant expenses change the value of the shares in the authorised capital of the entity according to the CFC accounting.

   ! Effective date: The changes will be effective in determining the profit of the CFC for the period starting in 2019. 

Source:  paragraph 5 article 1; paragraph 2 article 2; clause 9 article 3 of the Bill


Automatic tax collection from a taxpayers bank account

A monetary criterion for collecting tax from a taxpayer account in the amount of 3,000 roubles has been established. If the amount of arrears is less than the threshold, then the decision on the collection will be made within two months from the moment that comes earlier:

  1. the amount of debt, including fines, penalties exceeded 3,000 roubles;

  2. three years have passed since the early unfulfilled claim.

In case the amount of debt exceeds 1 million roubles and the taxpayer did not repay it within 10 days from the date of the decision to collect, the tax authorities will have the right to no more than one decision to collect arrears to inspect the territories, premises, documents and objects of the entity.

 ! Effective date: April 1, 2020 

Source: paragraphs 11 and 32 article 1; clause 4 article 3 of the Bill

Other changes concerning issues  below (part 1) read by the link

  1. Interest rate for tax payment by instalments has increased

  2. Pledge by the force of law

  3. Freezing of property can be replaced by a bank guarantee, surety

  4. Subdivisions tax accounting

  5. Mutual Agreement Procedure

  6. Transfer Pricing

In the part 2 of this news we have described the main changes implemented to the Part 2 of the Tax Code of the Russian Federation (hereinafter referred to as - the RTC or the Russian Tax Code).


VAT when applying special tax regimes

It is clarified that, if a taxpayer while applying the general taxation regime switches to a special tax regime for the certain types of activities, then the VAT accepted for the tax deduction for these types of activities in respect of fixed assets, intangible assets and property rights is subject to recovery in that tax period when these assets are transferred or started to be used under the special tax regime.

During the reorganization tax amounts claimed for deduction are subject to recovery by the assignee only in case if it combines the general regime with special regimes or fully applies a special tax regime. VAT recovery is carried out on the basis of invoices (or copies) attached to the deed of transfer/separation balance sheet, based on the value of the transferred goods (works, services) and property rights indicated therein, and in relation to the transferred fixed assets and intangible assets in the amount proportional to the residual value excluding revaluation. In case of absence of invoices, VAT recovery is carried out on the basis of an accounting statement-calculation using tax rates established by the RTC of the Russian Federation, applicable at the time of the acquisition of the goods.

 ! Effective date: April 1, 2020

Source: paragraph 2 article 2; clause 3 article 3 of the Bill  

Personal income tax

Desk tax audit can be carried out without a tax declaration

The tax authorities will have the right to conduct a desk tax audit even if an individual fails to submit a personal income tax declaration relating to the income received from the sale or donation of property. The desk tax audit will be conducted on the basis of documents (information) available to the tax authorities on such taxpayer and on the specified income. The basis of such a tax audit could be, for example, information obtained through the automatic exchange of financial information CRS or data from the USR (Unified State Register).

 ! Effective date: April 1, 2020

Source: paragraph 30 article 1; clause 7 article 3, of the Draft Bill


Registration of individuals receiving income from sources in the Russian Federation

An additional basis for registration of individuals with the tax authorities has been introduced. In particular, registration of individuals foreign citizens and stateless persons who are not entrepreneurs and do not have a place of residence in the territory of the Russian Federation, as well as items of real estate and/or vehicles owned by them, is carried out at the location of the source of income in the Russian Federation. If an individual receives income from several sources, the registration is carried out at the place of the initial registration. However, the Bill does not state any sanctions (or other measures of administrative compulsion) in case of the failure to comply with this requirement.

 ! Effective date: April 1, 2020

Source: paragraph 25 article 1; paragraph 17 article 2; clause 4 article 3 of the Bill

Other changes concerning issues below (part 2) read by the link

  1. Winnings from gambling
  2. Tax forms 6-Personal Income Tax and 2-Personal Income Tax (PIT) - the deadline and procedure for submission of documents have changed
  3. Corporate Income tax 
    • Accounting for losses
    • Treatment of distributions as dividends
    • Increase of authorized capital of LLC
    • Changes in the procedure of accrual of depreciation 
    • Regional Investment Project (RIP)
    • Securities
    • Tax at source
  4. Property tax for legal entities
  5. Transport / Land tax