The Russian Supreme Court has advised that, when income is paid to a foreign legal entity, it is permitted not to withhold tax even if the document is not available at the date of payment confirming the foreign counterparty’s permanent residency abroad, i.e. a certificate of residency.
In the recent legal overview, which was approved by the Presidium of the Russian Supreme Court, it was concluded that a Russian legal entity does not have to possess a certificate of residency on the date when income is paid in order not to withhold the tax. A tax agent should be given the opportunity to submit the certificate on a later date, e.g. during a tax audit. In this case no default interest should be charged.
Acsour will provide its expert opinion as to whether transactions with foreign legal entities have been taxed as they should have been.
The Russian Finance Ministry has recognized that electronic certificates of residency of a foreign counterparty are lawful.
According to the explanations of the Finance Ministry, the procedures and methods by which certificates of residency are issued (i.e. in hard copy or in electronic form) fall within the exclusive competence of the foreign state in question. Therefore, if the legislation of such foreign state provides that confirmation of a taxpayer’s residency is permitted to be in electronic form, Russian tax agents may treat such electronic documents as a counterparty’s confirmation of its taxpayer status.
For any issues relating to confirmation of the status of a foreign counterparty, please contact your manager at Acsour.