Tax Flash Reports

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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.

Can local tax authorities examine prices in uncontrolled transactions?

In this Tax Flash, we discuss a recent ruling by the Supreme Court of the Russian Federation (SCOTRF Ruling No. 308-КГ15-16651 of 11 April 2016). In the case in question, the tax authorities deemed the parties to be related, adjusted the prices with CUP (comparable uncontrolled price) method (Article 105.7.1 of the Russian Tax Code), and charged additional profits tax, VAT and fines. At the same time, however, the transactions under review were not classified as controlled under Chapter 14.3 of the Tax Code (“Code”). The taxpayer prevailed in the Supreme Court, arguing that the relevant tax inspectorate lacked authority to check the prices, and interdependence of the parties to a transaction, in and of itself, does not constitute evidence that unjustified tax benefits have been obtained.

Environmental fee is finally established

On 9 April 2016 the Russian Government adopted environmental fee rates. With the adoption of rates, it becomes possible for companies to calculate the final amount of the environmental fee payable for 2016. The Resolution №284 envisages environmental fee rates in respect of each of the 36 groups of goods included in the list established by the Russian Government in September 2015. The rates are stipulated in roubles per unit of weight (ton) of goods / packaging. As a result, currently all elements necessary for calculation of environmental fee payable for 2016 are established by the legislation, including the list of goods and packaging subject to the fee, recycling coefficients, environmental fee rates.

News from your personal tax advisor

Edition № 5, April 2016