Tax Flash Reports

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Draft CFC notification form available for public discussion

The Russian FTS has published a draft CFC notification form and the procedure for its completion and submission for the public discussion that will run through 6 June 2016.

Draft Law amending procedure of input VAT recovery related to export operations is passed in the third reading

On 20 May 2016 the Russian State Duma accepted in the third reading a draft law № 730216-6 introducing amendments to Chapter 21 of Part Two of the Russian Tax Code. The Draft Law abolishes the special procedure of recovery of input VAT related to some zero-related supplies, namely, to export of goods (except for export of certain mining products) and to supplies of precious metals to funds of precious metals and precious stones, to the Central bank and to banks. Currently, taxpayers performing export of goods and sales of precious metals are obliged to maintain separate accounting of input VAT related to such transactions. Respective input VAT may be recovered only after the documentary confirmation of 0% VAT rate. The Draft Law introduces amendments allowing recovery of such input VAT under the general rules, i.e. without the delay of recovery until the documentary confirmation of 0% VAT rate.

A simpler way to check counterparties will be available soon

Pursuant to Federal Law No. 134-FZ of 1 May 2016, certain information about taxpayers will no longer be considered a tax secret. This law becomes effective on 1 June 2016.

Individual tax residency: Is it still based on 183 days present in Russia, or some other criteria?

The Russian Ministry of Finance (MinFin) has repudiated a number of letters issued by the Russian Federal Tax Service (FTS), which imply that, under certain circumstances (e.g. when one’s “centre of life interests” is located in Russia), individuals may be deemed Russian tax residents even if they were physically present in Russia for less than the statutory threshold of 183 days in a given calendar year. It was done to ensure consistency in legal practice and to reduce the number of tax disputes.

Tax rulings to be introduced in Russia

An option of getting tax rulings on taxpayer’s planned transactions will be introduced in Russia soon. The relevant bill drafted by the Russian Government amends Section V.2 of the Tax Code on “Tax Control in the Form of Tax Monitoring”. The third reading of the bill is scheduled on 22 April 2016. The tax ruling tool would be available only to those major corporate taxpayers that apply tax monitoring regime (so, as of now, the number of such taxpayers is quite limited). It’s possible, however, that with time the scope of this new tool may be expanded. Those taxpayers that currently use the tax monitoring regime can get opinion of tax authorities only on transactions that have already taken place. The new tool would allow for pre-agreeing the tax implications of future transactions with the tax authorities, thus minimising tax risks where tax law is vague and court practice is ambiguous.