Publications for:
Activity Start Date:

Newsletter Tax Update October-November 2013

11.12.2013

Newsletter

Tax Update

October – November 2013

Taxes

Proposed revocation of the special procedure for initiation of criminal tax offence cases

Draft Federal Law on Recognition of Certain Legislative Acts of the Russian Federation as Ceased to be Valid, No. 357559-6 .

 
Under Article 140(1.1) of the Code of Criminal Procedure, only the materials filed by tax authorities in accordance with the tax laws may serve as a ground for initiation of a criminal tax offence case (Articles 198 - 199.2 of the Criminal Code).
The RF President submitted to the State Duma Draft federal law No. 357559-6 which repeals the said rule in favor of the general procedure for initiation of criminal cases, i.e., an investigator of the RF Investigation Committee may decide to open a criminal tax offence case irrespective of whether or not tax authorities provided him with tax audit materials. As the result, there would be more causes for initiation of criminal tax offence proceedings, in particular, a statement about tax offence and a communication about committed or planned offence received from sources other than tax authorities. Consequently, the number of criminal tax offence cases initiated by the RF Investigation Committee might increase drastically.
Men of office unofficially note that they plan to make certain changes in the draft law so as to prevent arbitrary initiation of criminal tax offence proceedings.
At present, the draft law is under consideration by the State Duma in the first reading.

A new procedure for imposition of the individual income tax and the profit tax on earnings from securities paid to foreign organizations acting on behalf of third persons

Federal Law on Amendment of Part One and Part Two of the RF Tax Code and Certain Legislative Acts of the Russian Federation, dated November 2, 2013, No. 306-FZ (the “Law” and “Law No. 306-FZ”)

The Law falls within the recent tendency of waging a fight against offshore companies and is aimed at giving tax authorities the possibility (so far a limited one) to detect ultimate beneficiaries of offshore entities if such entities directly or indirectly own shares in Russian joint stock companies (but not shares in limited liability companies). This is evidenced by the terms “a person exercising the rights attaching to securities” and “a person in whose interests the trustee exercises the rights attaching to securities”, the mechanism of withholding the individual income tax and the profit tax by the depositary as a tax agent, the list of documents to be provided to the depositary and to tax authorities, introduced by the Law.
According to the Law, the duties of a tax agent are performed by the depositary that transfers income on the basis of a depositary contract to the foreign organization acting in the interests of third persons, if:
(i) income is paid with respect to the following securities:
(a) governmental or municipal securities with obligatory centralized keeping;
(b) securities with obligatory centralized keeping issued by Russian organizations, and the issue was registered or assigned the identification number after January 1, 2012; and/or
(c) other securities issued by Russian organizations, except for securities with obligatory centralized keeping issued by Russian organizations, and the issue was registered or assigned the identification number before January 1, 2012; and
(ii) the said securities are recorded in the depo account  of:  (a) a foreign nominal holder; (b) a foreign authorized holder; or (c) depository programs.
The depositary calculates the individual income tax/profit tax on the basis of generalized information that includes details of the persons exercising the rights attaching to securities (persons in whose interests the trustee exercises the rights), number of securities owned by them, countries in which the said persons are tax residents, and tax benefits applied in accordance with the RF Tax Code or the corresponding double taxation treaty. The generalized information is provided to the tax agent by the foreign nominal holder or the foreign authorized holder or the person for whom the depositary opened a depo account of depositary programs.
We note that the Tax Code does not define the terms “a person exercising the rights attaching to securities” or “a person in whose interests the trustee exercises the rights attaching to securities”. Therefore, in practice the said terms are likely to be construed broadly and be understood as “a person having the actual right to income” (“actual receiver of income”), especially if one takes into consideration that the latter term is proposed to be included in the Tax Code in 2014 – 2015. Consequently, that circumstance might lead to a disclosure of the ultimate beneficiary and increase the volume of generalized information which the depositary as a tax agent would have to require before remittance of dividends for their proper taxation.
If the generalized information was not provided to the depositary at all or was not provided in full, the depositary must withhold the individual income tax/profit tax at the rate 30% (with certain exceptions).
The changes will come into force on January 1, 2014.

Undercapitalization: the coefficients for calculation of the limit interest on a loan subject to deduction with respect to the profit tax are retained for 2014

Law No. 306-FZ
 
The procedure for calculation of the limit interest on a loan on the basis of the Central Bank’s refinancing rate will remain the same in 2014: 1.8 of the refinancing rate for loans in rubles and 0.8 of the refinancing rate for loans in foreign currency. The limit interest on a loan is subject to deduction with respect to the profit tax. The corresponding changes in Article 269(1.1) of the Tax Code were made by Law No. 306-FZ.
The changes will come into force on January 1, 2014.

Earnings from sale (redemption) of shares in mutual investment funds are included in the list of earnings from a source in Russia for the profit tax purpose

Law No. 306-FZ

 
Law No. 306-FZ included earnings from sale (including redemption) of shares in mutual investment funds falling into the categories of annuity funds or real estate funds into the list of earnings from a source in Russia in accordance with Article 309 of the Tax Code. The tax on such earnings is withheld by the tax agent from the amount due to a foreign receiver.
The changes will come into force on January 1, 2014.