31.03.2020 the Russian State Duma passed a law amending the Tax Code and legislation on payment of social insurance contributions.
We would like to inform you that on March 31, 2020 the Russian State Duma passed a law on the basis of the Draft Law No. 862653-7 amending the Tax Code and legislation on payment of social insurance contributions. Once approved by the Federation Council and signed by the President, it will come into force. Some changes will be applied from the moment of their publication; other will take effect next year.
1. Non-working days are equated to public holidays and weekends for calculating time PERIODS
After the President declared the period from March 30 to April 3, 2020 as non-working days, there was uncertainty: whether to submit annual reports during the non-working week or to wait for the first working day.
The draft law introduces changes that will allow avoiding this situation in the future: henceforth, if the Decree of the President establishes non-working days, the end date of a given time period is the nearest working day following non-working days and weekends.
This procedure will be applied to all cases where the Tax Code sets periods of time in days (i.e. working days, not calendar ones), and therefore will affect the reporting due dates, as well as the deadlines for submitting documents requested during a tax audit.
The changes will take effect as soon as the Law is officially published.
2. The Russian Government haS been given expanded powers for 2020
The Russian Government is entitled to issue regulations providing for the period from 01.01.2020 to 31.12.2020:
- Suspension, cancellation, or postponement of tax control measures, including transfer pricing audits, suspension of the running of the expiry period, including the terms of appointment (conduct) of tax audits, for the period of suspension or postponement of these tax control measures.
- Extension of the deadlines for paying taxes (advance tax payments), including those stipulated by special tax regimes, of fees and social insurance contributions.
- Extension of the deadlines for advance payments on the transport tax, property tax for organizations and land tax imposed by Federal Subjects and municipalities.
- Extension of the deadlines for submitting tax returns (calculations), accounting (financial) and (or) other documents(s) to the tax authorities.
- Extension of the deadlines for sending and executing requests for the payment of taxes, fees, social insurance contributions, penalties, fines and interests, and for taking the decisions on its collection.
- Additional grounds for granting a deferral (installment) in 2020 for the payment of taxes, social insurance contributions, penalties, fines, interest, as well as changes in the procedure and conditions of its provision.
- Grounds and conditions for non-application or new ways of applying methods of enforcing the obligation to pay taxes, fees, and social insurance contributions.
- Grounds and conditions for absence of liability in case of failure (late submission) of tax declarations (calculations), accounting (financial) reporting and (or) other documents (information) to tax authorities.
Similar powers are granted to the Government regarding social insurance contributions against industrial accidents and occupational diseases.
The amendments will come into force since the date of the official publication of the Law. Government regulations can be applied to legal relations arising from January 1, 2020.
As the Government of Russia obtains extended powers, we draw your attention to the draft Government Resolution published on the Federal Portal of Draft Normative Legal Acts. In our opinion, the Government of Russia will adopt this resolution as soon as the law in question enters into force.
The current version of the draft Resolution provides a number of preferences for taxpayers, including:
- extension of some tax payment deadlines for organizations and individual entrepreneurs included in the unified register of SMEs as of 01.03.2020 and operating in sectors of the economy identified by the Russian Government as the most affected, and for microenterprises – of the deadlines for paying social insurance contributions as well;
- temporary suspension of initiation and conduct of the first and the second rounds of field tax audits, Transfer Pricing audits, checks on currency control legislation compliance (with some exceptions) for all taxpayers (tax agents, social contributions payers);
- extension of the deadlines for submitting tax returns (except for VAT returns), advance payments, accounting (financial) statements, documents, explanations and other information provided upon request;
- temporary non-application of sanctions under Article 126 of the Russian Tax Code (failure to submit documents and information to the tax authority) and some other.
We plan to prepare a separate alert with our detailed comments after the resolution is adopted by the Government.
3. SUPREME EXECUTIVE AUTHORITIES OF FEDERAL SUBJECTS HAVE BEEN GRANTED EXTENDED POWERS FOR 2020
The supreme executive authorities of the constituent entities have the right in 2020 to issue normative acts providing for the period from January 1, 2020 to December 31, 2020:
- extension of tax payment due dates stipulated by the following special tax regimes: Unified Agricultural Tax, Simplified Taxation System (STS), Unified Tax on Imputed Income (UTII), and Patent System of Taxation;
- extension of due dates established by federal constituent entities and municipalities for payment of regional and local taxes (advance payments of tax) and trading fee, if these due dates are not extended by the Government of Russia, or if the Government has established earlier due dates for their payment.
The modifications will come into force on the date of publication of the Law. Normative acts of the supreme executive authorities of the constituent entities may provide for their application to legal relations that have arisen since 1 January 2020.
! We recommend you monitor the advent of relevant acts of the constituent entity of the Russian Federation where you conduct business.
4. Changes in taxation of interest income of individuals
Pursuant to the Instructions reflected in the President’s address with respect to the spread of coronavirus infection, Draft Law №862653-7 proposes the following changes to the personal income tax legislation.
Banks are obliged not later than February 1 of the year, following the reporting tax period, to submit to the Tax Authorities (at their registration) information on the amount of interest paid. Based on the information provided, the Tax Authorities calculate the amount of tax based on the results of the tax period.
This taxation procedure applies to income received by taxpayers starting from January 1, 2021. Therefore, aсcording to the new regulations, the tax on interest income must be paid by individuals (based on a tax notice sent by the Tax Authorities) for the first time by 1 December 2022.
5. Reduced social INSURANCE contribution rates for small and medium-sized enterprises
Draft Law №862653-7 proposes starting from 2021 the implementation of the following reduced social insurance contribution rates with respect to payments, exceeding the minimum wage, for payers regarded as small and medium-sized enterprises:
- on obligatory pension insurance - 10%,
- on obligatory social insurance in case of temporary disability and with respect to maternity - 0%,
- on obligatory medical insurance - 5%.
It is proposed to apply the same rates for small and medium-sized enterprises for the period from April 1, 2020 to December 31, 2020.
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