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Editorial

Press releases and law firm thought leadership

This page is dedicated to keeping readers informed of the latest news and thought leadership articles from law firms across the globe.

If your firm wishes to publish press releases or articles, please contact Shehab Khurshid on +44 (0) 207 396 5689 or shehab.khurshid@legalease.co.uk

 

The coming into force of the legislative package on the second stage of "Capital amnisty"

On 19th February 2018, a legislative package on the extension of the tax capital amnesty and the tax-free liquidation of foreign companies came into force.

New standards on the unjustified tax benefit included in the tax code

October 2017 - Tax & Private Client. Legal Developments by Schekin & Partners.

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The Federal Tax Service of Russia issued Letter № CA-4-7/ 6152 @ of 16.08.2017, in which it clarified to its subordinate tax authorities the application of new Art. 54.1 of the Tax Code of the Russian Federation "Limits on the Exercise of Rights in Calculating the Tax Base and (or) the Amount of Tax, Levy, Insurance Contributions", which was included in the Tax Code of the Russian Federation by Federal Law № 163-FZ of 18.07.2017.

Localised production and import substitution: new business opportunities under the sanctions

Localised production and import substitution: new business opportunities under the sanctions

Vladimir Tchikine

Partner, Customs & International Trade Practice, Goltsblat BLP

Vladislav Safonov

Senior Associate, Customs & International Trade Practice, Goltsblat BLP  

The weakening of the Russian economy under the impact of the sanctions imposed by the West and against the backdrop of falling global energy prices is having an adverse effect on foreign trade, which has contracted significantly over the last year. In the current situation, the Russian authorities’ intent to support development of domestic manufacturing is both predictable and consistent.

An important step in this direction is Federal Law No.488-FZ dated December 31, 2014 "On Industrial Policy in Russia", which came into force on June 30, 2015.  

Concession agreements as practised by Russian companies

September 2014 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Sergey Savseris (PhD in Law), Partner, Pepeliaev Group

It is becoming increasingly common practice for Russian companies to enter into what can be classed as concession agreements.
The most commonly encountered general definition of concession agreements involves one party (the grantor) granting to the other party (the concessionaire) the right to use an item that is state or municipally owned or to carry out a particular type of operation to which the grantor has a prerogative (monopoly) right.
There are several types of legal relationship that companies may become involved in and that fall within this definition.
The first of these that should be discussed is a concession agreement entered into under the Law No. 115-FZ dated 15 July 2005 ‘On concession agreements'. The notable legal feature of a concession agreement introduced by Law No. 115-FZ lies in the fact that it is not marked out as a separate type of contract which has its own specific regulation; rather, it is a mixed agreement containing elements of various contracts. Accordingly, the rules applied to the parties to a concession agreement are the civil law rules relating to the types of contract of which the concession agreement contains elements. For example, if the concession agreement can be broken down into elements of a lease and of a contractor agreement, then the relationship of the parties is considered with reference to the provisions of the Civil Code regarding leases and contractor agreements. The tax consequences are determined separately for those elements which comprise the concession relationship.

The Russian Supreme Commercial ('Arbitration') Court provides explanations concerning VAT

July 2014 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Authors: Andrey Nikonov, Senior Partner; Natalya Faizrakhmanova, Senior Associate; Egor Lysenko, Head of Siberian office on Krasnoyarsk; Sergey Sosnovsky, Head of St. Petersburg's practice "Tax law and tax disputes", Pepeliaev Group

On 30 May 2014 the Plenum of the Russian Supreme Commercial ('Arbitration') Court adopted a Resolution concerning issues arising when VAT is being charged . With this explanation adopted, significant changes will be introduced to the practice of implementing chapter 21 "Value-added tax" of the Russian Tax Code. Please note the most important provisions of the Resolution which entail material risks or create fresh opportunities.


Russia: the first hardline draft law on CFC rules & corporate tax residency is out

By Artem Toropov, senior associate in international tax, Goltsblat BLP 

On March 18, following the Russian President's address on "de-offshorisation" of the Russian economy and only a few months of drafting, the Russian Finance Ministry published the first draft law on anti-avoidance rules that has already sent ripples through the Russian business community.

While the draft law may be amended following discussions with corporates and readings in the Duma, the law, along with other laws on "de-offshorisation", is expected to be passed before 15 June 2014 and come into effect on 1 January 2015.  Now is the time for Russian corporates and Russian HNWIs to urgently assess the risk of their existing international  structures - both corporate and private - and identify the best strategies going forward.

2019 UNIVERSIADE IN KRASNOYARSK: WHAT IT MEANS FOR BUSINESS

February 2014 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Andrey Tereschenko, Partner (Tax); Alexey Konevsky, Partner (Real Estate and Construction); Egor Lysenko, Head of Siberian office in Krasnoyarsk; Sergey Spasennov, Partner and Head of Saint Petersburg office

Preparations have started for staging the World Winter Universiade 2019 in Krasnoyarsk. There are several issues that companies face when major international sport events are staged in Russia.

On 14 January 2014, the Russian President signed Decree No. 16 ‘On preparing for the XXIX World Winter Universiade 2019 to be staged in Krasnoyarsk' (‘Universiade 2019').
This decree is a framework document addressed, first of all, to the Russian Government, which is charged with carrying out a set of organisational actions to prepare for Universiade 2019, as well as to executive authorities of constituent entities of the Russian Federation, which are recommended to participate in carrying them out.
In particular, the Russian Government needs to:

  • establish an organising committee;
  • develop and carry out, in cooperation with the government of the Krasnoyarsk Region, measures aimed at preparing and staging Universiade 2019;
  • determine the list of capital construction facilities belonging to the Russian state, which are required to prepare and stage Universiade 2019 with financial support from the federal budget;
  • assist with covering in the state mass media how Universiade 2019 is being prepared and staged.

IMPLEMENTING MEASURES TO DEVELOP EASTERN SIBERIA

February 2014 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Andrey Tereshchenko, Partner; Sergey Sosnovsky, Head of Practice (St Petersburg) "Tax law and tax disputes" and Egor Lysenko, Head of Siberian office in Krasnoyarsk

For the attention of: managers of companies in Eastern Siberia and companies of the federal and interregional levels operating in Eastern Siberia.

Pepeliaev Group advises of the progress of measures being implemented to develop Eastern Siberia as communicated by the President of Russia in his Address to the Federal Assembly.

On 12 December 2013, Russian President Vladimir Putin gave his annual address to the Federal Assembly, announcing a number of initiatives to develop Eastern Siberia, including Krasnoyarsk Krai and the Republic of Khakassia. These initiatives aim to:
- set up a preferential tax regime for new investment projects; and
- create a network of special areas of advanced economic growth with special conditions for setting up non-resource enterprises.

TAXES IN 2014: ATTENTION ON CROSS-BORDER TRANSACTIONS

February 2014 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Foreign investors often arrive in Russia through companies incorporated in places like the Netherlands, Luxembourg, Cyprus and Switzerland, which are high up the list of the most popular jurisdictions in Russia. These companies are often created with a view to investing or are designed to finance other group companies. Though the above countries, of course, fall outside the definition of ‘offshore' jurisdictions, such structures could also be affected by measures for the ‘deoffshorization' of the Russian economy. Therefore, it is advisable for companies that are part of international holding structures to undertake a ‘stock take' in 2014 to check whether they face any risks and to take the steps that are needed so that the holding structure and its Russian subdivisions can work in peace in the future.

VAT and bonuses: practice of the Federal Commercial (‘Arbitration’) Court for the Moscow Circuit

January 2014 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Valentina Akimova, Partner, Pepeliaev Group

Pepeliaev Group advises that positive judicial practice has been forming in relation to calculating VAT when receiving bonuses and other incentive rewards for fulfilling the pre-agreed terms and conditions of delivery. For instance, in late November the Federal Commercial (‘Arbitration') Court for the Moscow Circuit issued three awards in which it upheld the taxpayers' position.


Subject matter of the dispute and background


The tax authorities have for a long time kept a close eye on companies' revenue in the form of various incentive rewards (such as premiums and bonuses) which the companies received from their suppliers. The inspectorates have more than once attempted to make the companies pay VAT on these amounts under various pretexts:
- by obliging companies to recover VAT in relation to goods purchased which the tax authorities considered to be unlawfully deducted owing to discounts granted;
- qualified such revenue as consideration for services and charged VAT on sale, etc.
The taxpayers successfully challenged the tax authorities' claims in court.
One and a half years ago, after the Presidium of the Russian Supreme Commercial (‘Arbitration') Court had issued Resolution No. 11637/11 dated 7 February 2012 for the case of Leroy Merlin Vostok, the tax authorities raised again claims in connection with that case. They interpreted the legal position of the Supreme Commercial (‘Arbitration') Court as a pretext to treat incentive rewards as an attempt to decrease the price of the goods purchased and claim that the deductions of VAT declared be decreased accordingly. Virtually all regions of the country have evidenced tax audits with considerable amounts of VAT being additionally charged on the taxpayers.  
The three positive resolutions issued on the level of cassation mean that there is a strong judicial position coming into sight in the Moscow Circuit.
Pepeliaev Group's lawyers worked on two cases out of these three (refer to Resolutions of the Commercial (‘Arbitration') Court of the Moscow Circuit dated 14 November 2013 for case No. А40-5347/13-91-18 and dated 22 November 2013 for case No. А40-9139/13).

Other Treaty Interpretation Mistakes in Case Law

Further to the above issues that have a degree of uncertainty requiring court analysis and judgement, sometimes you can face fairly odious errors in tax treaty application. These include such "casualties" as the Promleasing case, where both the taxpayer and the tax authorities were drawn into an embarrassing discussion proving that a Russian LLC is a Russian enterprise because its CEO is a Russian citizen, evidently misinterpreting the term "enterprise" for treaty purposes (see Resolution No. КА-А40/6805-11 dated 08 July 2011).  Another renowned case included a court ruling that the Protocol to the Russia-Germany Double Tax Treaty expressly specifying an additional guarantee of unlimited interest cost deduction could not apply at all, because this benefit discriminates against Russian companies qualifying as Russian subsidiaries of German residents (See the Rulog case No. А40-37344/11-107-160 dated 19 November 2012). This statement is as outrageous as the suggestion that an international tax treaty is required for Russia not to discriminate its Russian companies against one another. No practical advice can be given for avoiding such an odd situation other than ensuring that development and presentation of the legal position in a tax dispute is assigned to adequate professionals.

Are Formalities Still Important for Tax Agents?

The turn in the direction of denying formal approaches discussed above does not work equally in all respects. Given the above SCC position that the full amount of tax not withheld can be claimed from the tax agent, it is in the interests of Russian paying entities to invest sufficient efforts in ensuring the formal side of the matter where a double tax treaty exemption applies. The core recommendation is simple: to obtain, in a timely fashion, an adequate and duly apostilled tax residence certificate for the payee that is entitled to double tax treaty exemption. If this seems natural with independent parties, it is often an annoying routine with group companies: why bother obtaining new certificates if the parties are quite sure where the parent company is located and tax resident? Yet it is crucial to prepare all the documents beforehand, since these formalities might take a substantial time and, if you fail to present the documents during a tax audit, you might lose the case.

Reclassifications and Substance over Form: Closing the Loopholes

Interestingly, where courts notice alleged tax base erosion, they try to go further than the existing legislation allows and expand it by referring to tax treaties. Among recent examples is the United Bakers case, where the court ruled that thin capitalisation rules may apply to a foreign sister company, a case not envisioned in the Tax Code, by referring to Article 9 of the Luxembourg-Russia Double Tax Treaty, claiming that these are associated enterprises (see No. А52-4072/2012 dated 18 September 2013).

Adverse Treaty Interpretations: Thin Capitalisation and Non-Discrimination

From our recent practice, we see a general decline in respect of double tax treaty provisions by law-enforcers and growing apprehension and concerns on the part of clients applying tax treaty benefits. We believe that this incorrect interpretation of double tax treaties has been provoked by inaccurate wording of the SCC Resolution on the Severny Kuzbass case (No. 8654/11 dd. 15 November 2011). In this infamous ruling, the SCC overthrew the stable case law based on consensus that the Russian thin capitalisation rules could not apply where double tax treaty non-discrimination provisions were in place. The court found the rules applicable to Russian corporates with foreign capital only as being non-discriminatory and stated that the treaties did not interfere in Russia's right to apply domestic thin capitalisation rules as it saw fit.

New Tax Environment: Will Courts Continue Mistreating Double Tax Treaties?

Evgeny Timofeev, Partner, Head of Russian/CIS Tax Practice, Goltsblat BLP

Anna Zelenskaya, Senior Associate Russian/CIS Tax Practice, Goltsblat BLP

A foreign investor operating in Russia through any form of corporate presence faces the need to make use of and rely on at least some international tax law concepts. Having double tax treaty protection is a benefit that, if properly structured, can provide significant tax savings in the long run. Yet enforcing the tax treaty provisions in Russia might be a challenge, considering the gaps in the tax legislation, which courts tend to fill by interpreting tax treaties broadly and borrowing the international anti-avoidance concepts, which often has unexpected results.

SIGNIFICANT AMENDMENTS TO CURRENCY LEGISLATION

July 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that the State Duma has passed two laws that relate to currency transactions. Moreover, draft amendments are being prepared to the Bank of Russia's Instructions No. 138-I dated 4 June 2012, which deal with currency control.

 

I. The Federal Law On amending the Federal Law ‘On currency regulation and control' (draft law No. 446118-5)

 

The law in question was passed with a view to including within the area of currency regulation cross-border transfers in roubles between residents. It also clarifies the legal rules in terms of non-residents making cross-border transfers in roubles and the ability for residents to open rouble accounts in banks located outside Russia.

 

The list of currency transactions is supplemented with the following types of transactions involving Russian roubles:

- cross-border transfers between the accounts of residents (a transfer of Russian currency from a resident's account opened outside Russia to another resident's account opened within Russia, as well as from a resident's account opened within Russia to another resident's account opened outside Russia);

- transfers between the accounts of residents abroad (a transfer of Russian currency from a resident's account opened outside Russia to another resident's account opened outside Russia);

- transfers between accounts of the same resident abroad (a transfer of Russian currency from a resident's account opened outside Russia to an account of the same resident opened outside Russia).

B2B: Fed Up With Cyprus? Where Would You Go

Cyprus hit the headlines for a very bad reason this year. The sunny Mediterranean island has long been a number one choice both for Russian businesses to purchase, hold, finance and sell domestic assets and for many foreign investors to invest in Russia. But the 2012-2013 Cypriot financial crisis has resulted in a temporary freezing of the bank accounts of many businesses, the balances in the Bank of Cyprus and Laiki Bank being diminished by being given a haircut, people getting angry and losing faith in the once-trusted jurisdiction and its banks. Even your favourite Cypriot Meze does not taste as good anymore. Once you thought you were protected by a stable legal system and a reliable banking system. One can bet you are not so sure now. So the question is: What should you do now?

IMPORTANT AMENDMENTS IN CONTROL OVER TRANSFER PRICING

Amending the deadline for notifications to be filed and audits to be conducted

Article 4 (transitional provisions) of Federal Law No. 227-FZ dated 18 July 2011 “On amending specific items of the legislation of the Russian Federation in connection with improving the principles of determining prices for tax purposes” has been supplemented with a clause 8.1 which reads as follows: “8.1. A taxpayer shall submit a notification of controlled transactions, income and/or expenses in relation to which is booked in accordance with article 25 of the Tax Code in 2012, to the tax authority where such taxpayer is located (resident) no later than 20 November 2013.”

VAT on bonuses, premiums and retrospective discounts: the disputes go on

April 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Major foreign trading companies have been active on the Russian market for more than 15 years. With them, they have brought Western standards of doing business, including, among other things, offering financial incentives to distributors and stores in the form of bonuses, premiums and retrospective discounts.

These ways of working have taken root quickly in Russian soil, becoming widespread. However, tax legislation and the courts and regulators who applied this legislation were not ready for this. In 2005, after numerous court disputes, a provision was introduced to the Russian Tax Code, according to which bonuses (discounts) granted for performing certain terms and conditions of agreements should be deducted as expenses (article 265(1)(19)(1) of the Tax Code). This provision has almost completely prevented the tax authorities from raising claims with regard to profit tax.

However, to date, the VAT implications in terms of bonuses, premiums and retrospective discounts remain uncertain. Since tax legislation fails to regulate the payment of rewards, companies have been treating these relations in various manners for VAT purposes and have determined the tax implications differently.

ADMINISTRATIVE LIABILITY TIGHTENED FOR VIOLATING CURRENCY LEGISLATION

February 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The amendments to part 1 of article 15.25 of the Russian Code of Administrative Offences tightening the liability for violating currency legislation will go into effect on 13 February 2013.

“Effecting illegal currency transactions or in other words currency transactions prohibited by the currency legislation of the Russian Federation or performed in contravention of the currency legislation of the Russian Federation, including buying and selling foreign currency and cheques (including travellers’ cheques) whose nominal value is provided in foreign currency by bypassing authorised banks, or effecting currency transactions, payments under which were made bypassing accounts in authorised banks or accounts (deposits) in banks outside the Russian Federation, when the currency legislation of the Russian Federation does not provide for this, or effecting currency transactions, payments under which are made from the funds, credited to accounts (deposits) in banks outside the Russian Federation when the currency legislation of the Russian Federation does not provide for this – shall entail an administrative fine being imposed on citizens, officials and legal entities in a sum between three quarters and the full amount of the illegal currency transaction”.

Tax Planning and the Tax Code in 2013

February 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The Russian taxation outlook for 2013 may be viewed as having three main strands: transfer pricing, case law, and de-offshorisation.

COURT RULES ON ADJUSTED VAT INVOICES

January 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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On 11 January 2013, the Supreme Arbitration Court issued Decision No. 13825/12 with regard to adjusted VAT invoices, which has attracted serious attention from the business community.  Taxand Russia finds out why this decision is causing such a debate.

REDUCING THE TAX BURDEN IN FAR NORTH REGIONS (THE EXAMPLE OF SAKHALIN)

January 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Many taxpayers fail to use legitimate means to cut their tax burden, because they do not know that these means exist, they are afraid of having to prove their point before the tax authorities or are just unwilling to depart from their long-established accounting practice. In most cases, the companies operating in the Far North and equivalent territories (for example, Sakhalin Region is treated as such a territory) do not apply accelerated depreciation.

THE FIRST PRICING AGREEMENT FOR TAX PURPOSES HAS BEEN SIGNED

January 2013 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The rules that have been in force since 1 January 2012[1] for the control of prices between related parties granted taxpayers who fall into the category of major taxpayers a right to enter into a pricing agreement for tax purposes with the Russian Federal Tax Service (the “FTS”).

The Crusade Against Inflation, Tax-law Style

December 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The cost of borrowing for business in Russia has been increasing for the last 2 years in a row and reached post-crisis records as the Russian authorities, through the Central Bank, demonstrate their implacable determination to suppress inflation and tighten the money supply for Russian banks and the economy as a whole. In doing so, they see themselves as waging a holy war against price rises, which they see as the main evil for the national economy. The result is that Russian banks and companies have to pay high interest on the borrowings, and this, quite naturally, is passed on to consumers in the form of high interest rates for mortgages and consumer credit.

Russian Parliament ratified the DTT with Latvia, Argentina and the Protocol to DTT with Switzerland

November 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The Russian government has ratified their Double Tax Treaties (DTT) with Latvia and Argentina, as well as the protocol with their DTT with Switzerland.

Transfer Pricing - Notifications of Controlled Transactions

October 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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September 2012 - Law firm Pepeliaev Group reports that the Federal Tax Service of the Russian Federation has approved the documents which taxpayers will need in order to submit notifications of transactions that are subject to special control under the transfer pricing laws.

The tax risks of business: prospects for 2012

September 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The Russian President and Government have recently been talking more about the need to optimise groups of taxes, with high-quality economic growth depending on this.

Legislation on international taxation amended

July 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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For the attention of managers, finance directors and heads of companies’ finance and tax departments.

The Government Approves Key Tax Policy Areas for the Russian Federation for the Period from...

2013 through 2015

Legal Update No. 350

Goltsblat BLP advises that, on 02 May 2012, the Government of the Russian Federation approved key areas of tax policy in the Russian Federation for the period from 2013 through 2015 (the Policy).

Federal Tax Service Approves the Procedure for Extending the Period for Consideration of ...

Applications for Concluding Advance Pricing Agreements

Legal Update No. 351

Further to our information letter No 322 of 25 January 2012 regarding explanations by the FTS of Russia on concluding advance pricing agreements (APAs), Goltsblat BLP advises that the Russian Ministry of Justice has registered Order No ММВ-7-13/182@ of the Federal Tax Service of Russia dated 26 March 2012 (the Order), approving the eligible grounds and procedure for extending the period for consideration of applications for signing advance pricing agreements for tax purposes and the accompanying documents and also approving the formats for standard resolutions in connection with conclusion of such agreements.

VAT treatment of bonuses under supply contracts

Legal Update No. 342

Goltsblat BLP advises that the Presidium of the Supreme Arbitration Court of the Russian Federation officially published the Resolution No 11637/11 dated 07 February 2012 on a case against OOO Leroy Merlin Vostok.

Personal income tax: the start of 2012 tax return filing period

April 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group remind you about the start of the filing period for 2012 returns. Individuals who generated taxable income in 2011 and have not paid personal income tax on it may start filing their tax returns now. The last day of the filing period is 30 April 2012. Under the general rule, individuals must pay the personal income tax, as stated in their returns, before 15 July 2012.

Protocol Ratified to the Russia-Cyprus Double Tax Treaty.

Legal Update No. 333

Goltsblat BLP advises that Federal Law No. 9-FZ “On Ratifying the Protocol Amending the Agreement between the Government of the Republic of Cyprus and the Government of the Russian Federation for the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital dated 5 December 1998” was adopted on 28 February 2012.

The Russian Federal Tax Service on how to conclude advance pricing agreements for tax purposes

Legal Update No. 322

Goltsblat BLP advises that the Federal Tax Service has circulated Letter of No. OA-4-12/85@ dated 12 January 2012 on how to conclude advance pricing agreements for tax purposes.

Tax discrimination against foreign investors in Russia

January 2012 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Julia Alexandrova, Senior Associate, Pepeliaev Group

Alongside actively developing cross-border economic, trade and customs law and adjusting to European standards and the WTO principles, Russia is seeing the adoption of rulings actually hampering foreign capital flow into the country.  

An Overview of Changes in Legislation September 2011

Taxes

1. Order of the Federal Tax Service (FTS) N ЯК-7-6/488@ of 11 August 2011 "On approval of forms and formats of documents used for tax registration and deregistration of Russian organizations and individuals, including individual entrepreneurs, and procedures for filling in forms and sending by tax authorities to organizations, individuals, including individual entrepreneurs, of a certificate of tax registration with tax authorities and (or) a notice of tax registration with tax authorities (a notice of tax deregistration with tax authorities) in electronic format via telecommunications channels" has been recorded by the RF Ministry of Justice and published.

Russia and Luxembourg sign a Double Tax Treaty Protocol

Legal Update No. 295

Goltsblat BLP advises of the signing, on 21 November 2011, of a Protocol on Amendments to the Treaty between the Russian Federation and the Grand Duchy of Luxembourg on Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital of 28 June 1993.

VAT, Profit and Income Tax Calculation and Payment Procedure Clarified

Legal Update No. 294

Goltsblat BLP advises that Federal Law No. 330-FZ "On Amending Part Two of the Tax Code of the Russian Federation and Article 15 of the Russian Law "On the Status of Judge in the Russian Federation" and Invalidating Certain Legislative Provisions of the Russian Federation" was adopted on 21 November 2011.

Loan agreement interest for calculating the ratio of VATable to non-VATable turnover

Legal Update No. 292

Goltsblat BLP advises that ruling of Supreme Arbitration Court No. VAS-12760/11 dated 13 October 2011 refuses to refer to the Presidium of the Russian Supreme Arbitration Court an application requesting supervisory review of judicial acts of three instances on case No. A58-2974/2010.

Application of thin capitalisation rules despite tax treaty non-discrimination clauses

Legal Update No. 286.

Goltsblat BLP advises that the Presidium of the Supreme Arbitration Court of the Russian Federation adopted, on 15 November 2011, a resolution on case No. ВАС-8654/11 on an application from a tax authority for supervisory review of judicial acts of lower courts in relation to OAO Coal Company Severniy Kuzbas.

Taxpayer group consolidation for calculating and paying corporate profit tax

Legal Update No. 288

Goltsblat BLP advises of publication of Federal Law No. 321-FZ dated 16 November 2011 “On Amendments to Part 1 and 2 of the Tax Code of the Russian Federation in Connection with Creation of a Consolidated Taxpayer Group” (except for certain provisions).

Several key changes in Russian tax legislation will take effect on 1st January 2012.

December 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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The new Transfer Pricing Law significantly changes the existing TP regulations in Russia. Under the new Law, there is no longer requirement that, to be subject to TP control, the price applied by the taxpayer must deviate by more than 20 % from the fair market price. Now, the tax may be recalculated based on the fair market price even if the actual price deviates from the fair market value by less than 20 %.

Amendments to Russia’s double tax treaties with Switzerland and Luxembourg

November 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that the Russian Government has approved draft Protocols amending the Agreement between the Russian Federation and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, and the Agreement between the Russian Federation and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital.


4 Typical Issues Russian High-Net-Worth Individuals Face When Using Trusts

Andrey Shpak , Partner, Tax

Despite being a feature of a different legal system, trusts are a common part of a personal ownership structure used by many Russian high-net-worth individuals (HNWI). Trusts are often sold by many providers as "a magic solution" without mentioning some of the potential practical difficulties that the beneficiaries may face. In this article, we look at some of the typical issues that Russian HNWI face when using trusts (in particular, English law trusts) and some of the approaches to solve these issues.

What is new in the application of Russian thin capitalisation rules

October 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group law firm advises that the Presidium of the Supreme Arbitration Court (the “SAC”) will for the first time consider how the non-discrimination provisions of international double tax treaties correlate with Russian thin capitalisation rules, which in certain cases provide for interest accrued on a taxpayer’s debt to be reclassified as dividends.

New rules for documenting relationships in the area of investment and construction: tax implications

October 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that, on 28 July 2011, a Resolution of the Plenum of the Russian Supreme Arbitration Court [1]  (the “SAC”) with direct implications for construction and investment activity was published on the SAC’s website. The Resolution creates substantial tax risks for all those involved in that sector: builders, investors and developers.

GRAVE AMENDMENTS TO RUSSIAN TRANSFER PRICING RULES

August 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that, on 22 July 2011, Federal Law №227-FZ was officially published. This Law makes extensive amendments to the Russian Tax Code with regard to transfer pricing rules. Such amendments are due to come into force on 1 January 2012, so the Russian Federal Tax Authority has already created a new department of transfer pricing and international cooperation. Staff of this department will be drawn not only from public officials, but also from private businesses.

 

Changes in Tax Control of Transfer Pricing

July 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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On 8 July 2011 the Russian State Duma adopted in the third reading the law On amending certain legislative items of the Russian Federation in connection with improving the pricing rules for tax purposes.


Tax treatment for foreign investors selling Russian stocks has changed

July 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that on 07.06.2011 were forced some regulations of Federal law №132-FZ "On Amendments to article 95 of the first part and to the second part of Russian Tax Code regarding creating favorable tax conditions for innovation activity and article 5 Federal law "On Amendments to the second part of Russian Tax Code and some laws of Russian Federation".

Interest on a late refund of VAT

Pepeliaev Group advises that on 24 April 2011, the Russian Supreme Arbitration Court published on its official website Resolution No. 14233/10 of the Court’s Presidium dated 17 March 2011. The Resolution considered the issue of the payment of interest on a late refund of VAT (clause 10, article 176 of the Russian Tax Code) in cases in which a taxpayer who has submitted a tax return declaring an amount of VAT to be refunded has not applied to the tax authority for the tax in question to be refunded.

Social payments for foreign employees and processual peculiarity tax disputes

April 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that on 11.04.2011 panel of judges Supreme Arbitration Court passed rulling in addition regarding to two questions, which can be very important for Companies, making business in Russian with foreign employees. The panel of judges SAC RF has told about social payments (in the Pension found RF for obligatory pension insurance) which should (not) be paid for foreign employee without plans of permanent living in Russia. In addition the panel of judges SAC RF has said about necessity of professional translator in tax authority and foreign taxpayers relations.

Taxes in Russia. The Lessons of 2010.

February 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Looking back on the year gone by, let me go through the most significant events that have affected taxpayers, the business climate and the tax system in Russia.

Skolkovo innovation centre: tax ‘super benefits’

January 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Federal Law No. 243-FZ has amended the Russian Tax Code with the aim of promoting and supporting investors’ activity in the Skolkovo innovation centre. The changes provide for benefits on an unprecedented scale for participants in the Skolkovo project.

Latest Amendments to Tax Legislation: brief overview

September 2010 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Federal Law No. 229-FZ dated 27 July 2010 introduced significant amendments to tax legislation relating to the calculation and collection of taxes, which will affect most taxpayers. The majority of these amendments will enter into force as of 2 September 2010

Tax authorities to repay taxes to British Airways

20 May 2010 saw the final session of the Federal Arbitrazh Court for the Moscow Circuit (FAC MC) hearing the case of British Airways (BA), the national flag carrier of the United Kingdom, closing the proceedings against the tax authorities, which were supported by the Tax Litigation Group of the Vegas Lex Law Firm representing BA.

Tax authorities to repay taxes to British Airways

20 May 2010saw the final session of the Federal Arbitrazh Court for the Moscow Circuit (FAC MC) hearing the case of British Airways (BA), the national flag carrier of the United Kingdom, closing the proceedings against the tax authorities, which were supported by the Tax Litigation Group of the Vegas Lex Law Firm representing BA.

Transfer Pricing: Expected Innovations

April 2010 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Russian tax law has applied transfer pricing rules since 1999. Law enforcement practice has, however, demonstrated that these rules are ineffective and that the tax authorities are incapable of applying them and exercising effective control over transfer pricing. The developers of the draft law have to a large extent taken into account the shortcomings and limitations of existing legislation in this area. We analysed the draft law on tax control for transfer pricing purposes to identify the underlying aspects of the proposed innovations.

Russia to Adopt New Transfer Pricing Rules by Q3 2010

March 2010 - Tax & Private Client. Legal Developments by Baker & McKenzie.

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The Russian government has been working on new transfer pricing rules for several years, but now businesses can realistically expect that rules, with heavy documentation requirements for taxpayers, will be adopted this year.

Tax Reforms Towards the Creation of an International Financial Center in Russia

February 2010 - Tax & Private Client. Legal Developments by Baker & McKenzie.

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In December 2009 the Russian Parliament adopted important changes further promoting the Russian holding companies regime. Starting from January 1, 2011 Russian holding companies will no longer be required to meet the present 500 million ruble threshold for investments made into companies qualifying as “strategic investments” to receive tax benefits.

Changes re Criminal Liability and Prosecution of Tax Crimes

January 2010 - Tax & Private Client. Legal Developments by Baker & McKenzie.

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On December 29, 2009 the RF President signed a law introducing important changes to criminal liability for tax evasion. It is established that a person violating the tax legislation may be relieved of criminal liability if the respective outstanding taxes and penalties connected to a crime are paid to the budget.

Russia: Social Contributions Replace Unified Social Tax

August 2009 - Tax & Private Client. Legal Developments by Baker & McKenzie.

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The law replacing the Unified Social Tax with social contributions will come into effect on January 1, 2010. The Unified Social Tax will completely disappear from the Russian Tax Code and will be replaced by social contributions payable to the State Pension Fund, Social Security Fund, Federal Medical Insurance Fund and Territorial Medical Insurance Fund.

Thin Capitalization - International Experience and Russian Practice

The thin capitalization rule was integrated into the Russian Tax Code in 2002. This special rule for tax treatment of interest paid on loans was introduced as a means of fighting tax minimization.

General Review of Tax Disputes in Russia

June 2009 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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When a company operates in a foreign country, it has to comply with local tax obligations. At the same time it can sometimes appear more important to know about the specifics of tax law practice and the modus operandi of the tax authorities than legal norms. In this article we draw the attention of readers to the most typical claims of the Russian tax authorities.

CIS Tax Newsletter January 2009

February 2009 - Tax & Private Client. Legal Developments by Baker & McKenzie.

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The CIS Tax Newsletter is intended to update you on the most recent legislative and case law developments in Azerbaijan, Kazakhstan, Russia and Ukraine and raise hot tax issues which you and your partners may face when doing business in these CIS jurisdictions.

Caution with Joint Ventures

The Russian Federation has been very popular for foreign investors for quite a long time, and setting-up a joint venture with another company is an alternative often used by such investors. However, there are still several issues in Russian commercial law, in particular, that investors entering the Russian market should be aware of. One is that there are three different types of incorporation, another is the unenforceability of shareholders agreements in Russia and there are also strict rules that an obligatory offer be made in open joint stock companies in the event of an acquisition of shares. Due to these aspects of Russian law, alternative foreign structures are often used for Russian joint venture transactions

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