Tax Flash Reports

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Key developments in tax law

As the tradition goes, at the beginning of each year we recap the results of legislative activities and inform you about the most important developments. For more details, please refer to our tax flash reports.

CFC notification form is approved

A controlled foreign company (CFC) notification form and its completion instructions were approved on 10 January 2017. The corresponding Order of the Federal Tax Service of Russia (FTS) has been published on the official Internet website for legal information.

Will the implementation of the provisions of Russia-Cyprus DTT Article 13 “Capital Gains” be postponed to a later date?

The Cypriot Ministry of Finance has announced that it has reached an agreement with the Russian Ministry of Finance to postpone the implementation of the provisions of the Russia-Cyprus Double Tax Treaty (DTT) on the procedure for taxing capital gains from disposal of shares and similar rights, the value of which is represented by real property. Based on the provisions of DTT taxpayers must pay a tax on such income in the country where it was received. But, under the new provisions that is in effect from 1 January 2017, such income is taxable in the country where the real property is located. According to official sources in Cyprus, however, the taxation procedure will not change in 2017 if an additional protocol to the DTT is signed.

How will the thin cap rules work in 2017?

The amended thin capitalisation rules become effective starting from 1 January 20171. Let’s review the key changes. Please also note that the “freeze” of currency exchange rates for the purposes of the rules is prolonged until 31 December 20192. This measure was adopted in order to mitigate the impact of rise in foreign exchanges against the Russian Rouble for purposes of thin capitalisation rules. The “freeze” applies to “old” loans, provided that the terms of debt obligations remain unchanged over the whole period when the new rules are in effect. Thus, for calculating controlled debt and net assets amounts, the exchange rate as of 1 July 2014 is used. These temporary rules reduce the number of cases when interest expenses are reclassified into dividends.

Property Tax in Moscow

On 29 November 2016, the Moscow Government published a list of commercial property for which property tax will be calculated based on the cadastral value, not the balance sheet value in 2017.