1. The working conditions of employees are irrelevant for the formation of a separate business unit
The Russian Ministry of Finance has clarified that the form in which work is arranged and the period during which a specific employee works at a fixed workplace the company created for him or her have no legal relevance for the registration of a company with a tax authority in the place where a separate business unit of the company (referred to below as a “unit”) is located.
The Ministry of Finance has stressed that a unit (i.e. any unit of a company whose address is different from the company’s address recorded in the Unified State Register of Legal Entities (in Russian abbreviated as EGRUL)) will be registered with a tax authority regardless of the following factors:
- whether the formation of the unit is stipulated in the company’s constituent documents;
- the powers which are granted to the unit;
- the form in which work is arranged (rotation shifts or business trips);
- the period during which a specific employee has been working at a fixed workplace the company has created for him or her.
Please note that a separate business unit is deemed to have been formed and should be registered with the tax authority within a month if all the conditions below are met:
1) there is at least one permanent workplace at the address of the unit for a period of over a month;
2) the workplace is in the premises which your company controls (generally, your company either owns or rents such premises);
3) the company has started its operations where the unit is located - in other words, an employee has been hired to work there.
On all issues regarding the registration of your company’s units, please do not hesitate to contact Acsour.
2. A foreign counterparty’s debt cannot be recognized as bad debt because of sanctions the country of such counterparty has introduced against Russia
If a foreign counterparty cannot repay its debt to a Russian company because of the restrictions imposed on settlements with Russian legal entities, such debts, in the opinion of the Ministry of Finance, cannot be recognised as bad debts, which may be written off, and, accordingly be booked as expenses for corporate profit tax purposes.
In its recent clarification the Ministry of Russia underscored that the Russian Tax Code lists all possible grounds for recognizing debt as bad debt and writing it off as expenses for corporate profit tax purposes, namely:
- the limitation period has expired;
- the debtor company has been liquidated;
- the debtor company has been excluded from EGRUL as a dormant legal entity (on or after 1 September 2014);
- a court bailiff has issued a resolution bringing enforcement proceedings to an end and returning the writ of execution to the claimant because the debt is impossible to collect.
Even if the country of the foreign counterparty has introduced restrictions on the performance of obligations with respect to Russian companies, the debt to the Russian company is not bad debt because it does not meet the criteria listed in the Russian Tax Code. Therefore, it is impossible to include such amounts as part of the non-sale expenses.
Acsour’s specialists are always ready to analyze whether your will be able to recover what is owed to you.
3. Simplified document flow for currency transactions
According to the indication of the Bank of Russia, starting from 22 July, companies may submit to the bankonly statements about currency transactions, without any other documents being enclosed, with respect to contracts worth under USD 1,000.
The simplified procedure may be applied if the conditions below are met simultaneously:
- obligations under the contract with a non-resident do not exceed USD 1,000, or the equivalent of this amount;
- when transactions are made, foreign currency is credited to a transit currency account and is deducted from a settlement account in the foreign currency.
Earlier, it was required to enclose documents relating to currency transactions, as listed below:
- a so-called ‘transaction passport’ issued by the authorized bank and stating details about the transaction;
- a state registration document of the relevant legal entity;
- a certificate of registration with the tax authority;
- documents constituting the grounds for the currency transactions, such as agreements and addenda to them, powers of attorney, extracts from the minutes of the general meeting or any other management body of the legal entity;
- documents confirming that the goods were actually handed over (that work was performed and services were supplied);
- other documents, depending on the type of the currency transaction.
At Acsour we are happy to provide you with recommendations on how to apply various types of benefits for employees.
4. Increased fines for a refusal to disclose information
From 12 July 2017, the amount of administrative fines will be increased for an individual or a company that has unlawfully refused to disclose information, the disclosure of which is provided for by federal laws.
Fines have been increased for a refusal to provide information, the provision of information after the deadline, or the submission of information that is known to be inaccurate.
This relates to the following cases, among others:
- when an individual receives information from an Operator of Personal Data regarding such individual’s personal data;
- when information is disclosed to an attorney in reply to a formal attorney’s request as provided for by Russian law.
For the above offence, the law establishes a higher fine ranging from RUB 5,000 to 10,000. Previously, the figure was between RUB 1,000 and RUB 3,000.
Acsour’s specialists are ready to advise you on how to avoid administrative fines by complying with Russian legislation.
5. Deduction of expenses indicated in electronic boarding passes
In the opinion of the Russian Ministry of Finance, to deduct such business trip expenses as air tickets of an employee for corporate profit tax purposes, the boarding pass should bear the stamp from security screening.
In its recent clarifications, the Ministry of Finance advised that if an air ticket was purchased in electronic form, the itinerary receipt of the electronic air ticket and the boarding pass will be the documents evidencing expenses for profit tax purposes.
The boarding pass should contain the corresponding details confirming that an employee took the flight. One of the pieces of information in question is typically the stamp from security screening.
This clarification of the Ministry of Finance casts doubts over the ability to deduct expenses from flights abroad. In many airports outside Russia, a printed out boarding pass is not mandatory for boarding the plane; it is sufficient for a person to present his or her electronic boarding pass on the screen of his or her mobile device. Moreover, in many cases no security screening stamp will be affixed because passengers are admitted to the inspection area by having the code of their boarding passes read on a mobile device.
If there is no security screening stamp, a taxpayer will need, as an alternative, to confirm in some other manner that its employee took the flight.
For this purpose, a statement issued by the air carrier or its representative may be used, indicating the following details: the full name of the passenger, the flight number, the flight departure date, the time when boarding was completed, the number of the boarding gate and the seat number on the plane.
At present Ascour is waiting for an official reply from the Russian Ministry of Finance to our request as to how flight expenses should be confirmed when electronic boarding passes are used abroad.
6. The Russian Federal Tax Service has approved the time limits for posting open data about legal entities
On 25 July, the Federal Tax Service will, for the first time, post open data about legal entities. The information will be posted on the Service’s official website and will be available to the public for three years.
Information regarding companies will be posted on the website of the Federal Tax Service, broken down as listed below.
Data concerning the following will be updated on a monthly basis:
- amounts of arrears and outstanding default interest and fines (by each tax and levy);
- tax offences and any liability imposed for them;
- any special tax treatment applied by taxpayers;
- a taxpayer being part of a consolidated group of taxpayers.
Data concerning the following will be updated on an annual basis:
- the average headcount of a company for the calendar year;
- the amounts of income and expenses according to the annual accounts (financial statements);
- the taxes and levies a company paid in a calendar year (by each tax and levy), excluding the amount of taxes (levies) the company paid when it imported goods into the customs territory of the Eurasian Economic Union, and amounts of taxes paid by a tax agent.
In February 2018, the Federal Tax Service will post information about amounts of insurance contributions.
The disclosure and public availability of tax information will help members of the business community to assess their risks and to exercise due care when they select counterparties.
Acsour will help you with assessing the good faith of your counterparties and evaluating what tax risks you might face.