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1. A new procedure for assessing default interest on tax arrears
Starting from the fourth quarter of 2017, a new procedure for calculating default interest will take effect, i.e. the default interest rate will be doubled from the 31st day of any delay.
Default interest will now be assessed in the following way:
- 1/300 of the then effective refinancing rate of the Bank of Russia on the tax arrears for a delay of up to 30 calendar days;
- 1/150 of the then effective refinancing rate of the Bank of Russia on the tax arrears for the excess of the delay over 30 calendar days.
Thus, the rate of default interest is differentiated depending on the number of days of delay.
An example: tax arrears amount to RUB 1,000,000. The payment of taxes is 60 days late.
Here is the calculation of the default interest before 1 October 2017:
RUB 1 million * 1/300 * 8.5% * 60 = RUB 17,000.
And here is the calculation of the default interest after 1 October 2017:
RUB 1 million * 1/300 * 8.5 % *30 + RUB 1 million * 1/150 * 8.5 % * 30 = RUB 25,500.
Acsour will be more than happy to answer your questions relating to taxation.
2.Nuances of paying salaries and tax through third parties
Acsour has explored how salary, personal income tax and social insurance contributions can be paid through a third party.
There are certain situations in which a company cannot pay salaries to its employees by itself or withhold the corresponding personal income tax and pay social insurance contributions. An example is when its bank account is blocked. Now, it is possible to find a solution by making such payments through a third party.
- Payment of salary
The Russian Labour Code does not prohibit salaries from being paid to employees through a third party, i.e. an intermediary agency. For this purpose, an agency agreement should be concluded with the intermediary agency. Thus, the intermediary agency will transfer to the employees the salaries indicated in the agreement. The intermediary company will need to be instructed to transfer the funds in the amount corresponding to the salary, less personal income tax.
- Payment of personal income tax and social insurance contributions (except for contributions relating to ‘occupational injuries’)
Starting from 30 November 2016, any party may make tax payments on behalf of a company. Moreover, starting from 1 January 2017, it is now possible for a third party to make social insurance contributions (article 45(1) of the Russian Tax Code).
Consequently, an intermediary company may now be entrusted with the payment of personal income tax and social insurance contributions to the tax authorities.
- Payment of social insurance contributions against workplace accidents and occupational disease
The contributions for ‘occupational injuries’ are still controlled by the Russian Social Security Fund; therefore, the requirements of the Russian Tax Code do not extend to such contributions.
However, the official position of the Russian Finance Ministry is that the suspension of transactions on a taxpayer’s accounts does not cover transactions involving the payment of social insurance contributions for mandatory social insurance against occupational accidents and occupational disease to the Russian Social Security Fund.
Consequently, even if the bank account is blocked, the taxpayer may make such social insurance contributions by itself (provided it has sufficient funds on its current account), since there are no restrictions to be applied to such payments.
Acsour is ready to act as a third party and conclude an agency agreement with your company, if required.
3. A new minimum monthly wage for St Petersburg starting from 2018
The regional authority, trade unions and associations of employers have agreed on the new amount of the minimum monthly wage in St Petersburg starting from 1 January 2018. It will be RUB 17,000, which is an increase of RUB 1,000 on the current minimum monthly wage.
Current legislation obliges employees to pay salaries at a level not lower than the minimum monthly wage. Regional authorities may set their own minimum monthly wage which may be higher than the federal one. If a company or an individual entrepreneur pays the regional minimum monthly wage to their employees, they may file a grounded refusal with the corresponding regional authority (in St Petersburg, this is the Committee for Labour and Employment). Such a refusal should be filed within 30 days of the date when the minimum monthly wage is officially introduced in the region on the websites of the executive authorities of the Russian constituent entity or in the media outlet.
The regional minimum monthly wage influences only the size of salaries. The federal minimum monthly wage, which is now RUB 7,800, is used for the calculation of welfare payments.
There is administrative liability for the payment of salaries below the established minimum. A fine for a company may amount to RUB 30,000 to RUB 50,000 and to RUB 1,000 to RUB 5,000 for senior officers a company and for individual entrepreneurs.
Acsour is closely monitoring this issue and will keep you up to date with the recent news.
4. The issuing of documents to an employee on dismissal – replies from the Russian Ministry of Labour and the Russian Pension Fund
In reply to our inquiry, Acsour has obtained contradictory commentaries from state authorities regarding the issuing of documents to employees on their dismissal.
Under current legislation on individual record-keeping in the system of mandatory pension insurance, on the date of an employee’s dismissal, the employer must issue to the employee documents containing information about his or her length of service and social insurance contributions accrued (the forms referred to by the Russian acronyms ‘SZV’ and ‘DSV’, along with a calculation of social insurance contributions).
At the same time, under the Russian Labour Code, such documents are not issued in every case, but only when the employee makes a written application to this effect.
Acsour asked the Russian Pension Fund (the ‘Pension Fund’) and the Russian Ministry of Labour and Social Security to comment on the contradiction in the legislation and explain how employers should act.
In the opinion of the Pension Fund, it is an obligation rather than a right of the employer to issue the documents and, therefore, it should be performed at dismissal, whether or not the employee has submitted his or her application. Moreover, since the procedure for the issuing of such information to the employee is not regulated by legislation, the employer should independently decide in which form the required documents will be issued. Further, the Pension Fund indicated that it is prudent to obtain confirmation in writing from the employee that he or she has received the above information.
The Ministry of Labour expressed quite the opposite opinion, namely that the documents are to be released to the employee only further to his or her application in writing. The employer may, in internal regulations of the company, independently regulate the procedure for the issuing of the documents and of confirmation that they have been issued
Accordingly, the Pension Fund takes a more rigid position. However, the legislation does not contain any liability for the failure to provide the employee with the information in the absence of his or her application.
Based on the analysis of the position of government authorities, Acsour recommends that the above documents should be issued to employees who are being dismissed further to their application.
5. Confirmation of expenses based on electronic boarding passes
The Ministry of Finance has published a reply to Acsour’s inquiry regarding the confirmation of expenses for corporate profit tax based on electronic boarding passes.
In our July legal digest, we advised you of the request Acsour sent to the Russian Finance Ministry in relation to the methods for documenting flight expenses when electronic boarding passes are used abroad.
Now we have received a reply. According to the position of the Finance Ministry, an itinerary receipt and a boarding pass will serve as documentary confirmation of expenses on electronic air tickets for the purpose of corporate profit tax. The boarding pass should bear an inspection stamp.
Employees fly abroad on business trips. In many foreign airports no stamp is placed on a boarding pass because an electronic system is used.
Acsour asked the Finance Ministry to explain how business trip expenses from air flights may be confirmed for corporate profit tax purposes in that case.
The Finance Ministry advised that if there is no inspection stamp on a printed-out electronic boarding pass, the company should confirm the fact that the employee took the flight by presenting a certificate to this effect from the airline.
Acsour continues to make you aware of clarifications issued by official authorities regarding the controversial points in legislation.