On March 25, 2020 President Putin addressed the nation on the coronavirus disease (COVID-19) outbreak. The Head of state announced a series of social and economic measures to be taken in the nearest future. The measures are mainly aimed to support small and medium enterprises, which are most vulnerable to such economic situation.
Changes should be made by a federal law on amendments to the Tax Code. The law should be adopted by the State Duma, then approved by the Federation Council, signed by the President and published. Changes that improve the situation of taxpayers and payers of social contributions should come into force from the date stipulated by the law on amendments, but not earlier than the date of its publication. Other changes – may come into force not earlier than one month after the publication of the law on amendments and not earlier than the 1st day of the next tax period for the corresponding tax / settlement period for social contributions, i.e. not earlier than 01.01.2021.
1. Reduction of social contribution rates for small and medium-sized enterprises
It is proposed to halve social contribution rates for small and medium enterprises from 30 to 15 %. The reduced rate will be applied to the salary amount above the SMIC, the minimum salary. If the salary will be in line or below the SMIC, the rate remains the same, 30%.
The reduced rate is introduced not only as an anti-crisis measure for a few months, but for the long-term perspective. Therefore, it creates a long-term incentive for employers to raise their employees’ salaries.
We remind you that small and medium-sized enterprises include entities whose average number of employees for the previous calendar year is:
• up to 100 people for a small enterprise (among small enterprises there are microenterprises - up to 15 people);
• 101 to 250 people for a medium-sized enterprise,
while the income received from business activities for the previous calendar year, which is determined in accordance with the procedure established by the legislation of the Russian Federation on taxes and fees, is summed up for all types of business activities and applied to all tax regimes, does not exceed the following values:
* microenterprises - 120 million rubles;
* small enterprises - 800 million rubles;
* medium-sized enterprises - 2 billion rubles.
However, these organizations should meet at least one of the following criteria:
• participants - the Russian Federation, the constituent entities of the Russian Federation, municipalities, public or religious organizations (associations), charitable and other funds (excluding investment funds) own a total sum of no more than 25% of the share capital of a limited liability company (LLC) or joint capital of a business partnership or more than 25% of the voting shares of a joint stock company (JSC) and participants in business companies or business partnerships - a foreign legal entity (except for foreign legal entities that meet the criteria of the Russian medium enterprises in terms of a number of employees and annual revenue) and (or) legal entities are not subjects of SME, own a total sum of no more than 49% of the share capital of a limited liability company (LLC) or joint capital of a business partnership or more than 49% of the voting shares.
• shares of a JSC traded on the established securities market are classified as shares of the high-tech (innovative) sector of the economy in accordance with the procedure established by the Government of the Russian Federation;
• the activity of business companies, business partnerships is in the practical application (implementation) of the results of an intellectual activity (programs for computing machines, databases, inventions, utility models, industrial samples, selection achievements, topologies of integrated circuits, production secrets (know-how), the exclusive rights to which belong to the founders (participants), respectively, of these business companies, business partnerships - publicly funded, autonomous scientific institutions or organizations of higher education that are publicly funded institutions or autonomous institutions;
• business companies and business partnerships have been granted the status of a project participant in accordance with Federal law No. 244-FZ of September 28, 2010 "On The SKOLKOVO innovation center»;
* founders (participants) of business companies and business partnerships are legal entities included in the list of legal entities approved by the Government of the Russian Federation that provide state support for innovation activities in the forms established by Federal law No. 127-FZ of August 23, 1996 "On science and state scientific and technical policy».
The Federal Tax Service maintains a Unified register of small and medium-sized enterprises. The legal entities and individual entrepreneurs registered there are entitled to take advantage of the benefits. Provision of information to the register about the legal entity as a small or medium-sized enterprise is made by information providers - authorized ministries, stock exchanges, SKOLKOVO Foundation, owners of registers of joint stock companies’ shareholders, and audit organizations. The law does not provide for a form of application directly from a legal entity or an individual entrepreneur for inclusion in the register.
However, a company or entrepreneur who does not find themselves in the register has the right to apply online to the Federal Tax Service with a request to check the register data directly on the website: https://rmsp.nalog.ru/appeal-create.html.
2. Increase of dividends and interest rates paid to offshore jurisdictions
It is proposed to fix a single level of tax rate of 15% for incomes, which are paid in form of dividends and interest rates and interest on the foreign accounts in offshore.
These measures may require changes of existing double taxation agreements with some countries. The Government is responsible for drafting of relevant amendments.
According to the President, if foreign states will not accept amendments to the agreements, Russia is ready to withdraw unilaterally from agreements with such States.
Due to the President’s direct reference to the withdrawal of dividends and interest in off-shore, we cannot exclude a significant increase in the number and quality of checks on the validity of the application of reduced tax rates at source.
We are constantly monitoring the situation and will be sending further updates on the topic.
3. Applying the tax of 13% on interests received by citizens in case the total volume of their deposits exceeds 1 million rubles
It is proposed to introduce a tax of 13% on interest income for those, whose total amount of bank deposits or investments in debt securities exceeds 1 million rubles. Thus, the interest earned from such investments will be subject to personal income tax.
Recall that currently interest income on deposits (account balances) with banks located in Russia is taxed only in terms of excess of the accrued interest which is calculated as CBR rate + 5% for ruble deposits and as 9% per annum for foreign currency deposits.
4. Loan and tax deferral (except VAT) for small and medium-sized businesses during the next six months. Moratorium on initiating bankruptcy
In order to prevent staff reduction in small, medium-sized companies and micro-enterprises, a deferral of all taxes other than VAT for the next six months is suggested. Micro-enterprises may also receive a postponement on insurance contributions to social funds.
SMEs that face complicated situation, should also receive a deferment on loans for the next six months. The Government and the Central Bank, on behalf of the President, should develop additional measures to ensure sustainable lending to the real sector, including the provision of state guarantees and subsidies.
In order to protect enterprises from bankruptcy, the Government may introduce a six-month moratorium for creditors on filing bankruptcy petitions and collecting debts and fines.
The measures will apply to all companies that operate in the sectors most affected by the current context. In this regard, the Government was instructed to conduct continuous monitoring of the situation and, if necessary, to expand and adjust the list of industries that need support.