On March 25th the Russian President announced the following steps in connection with the COVID-19 pandemic:
March 30 to April 3 will be non-working days with salary retention;
- six months' deferral on paying taxes (except for VAT) for small and medium enterprises (SMEs); the deferral also applies to social security contributions for microbusinesses;
- long-term reduction of social security contributions from 30% to 15% on salaries exceeding minimal wage for SMEs;
- increase in the withholding tax to 15% on dividends and interest payable “abroad, to offshore jurisdictions.” The Ministry of Finance will need to work through the changes to tax treaties, including potential withdrawal from treaties with jurisdictions that do not cooperate. The Ministry of Finance clarified that the measures will focus on Cyprus and other jurisdictions used for transiting funds and will not affect payments on Eurobonds, bonds of Russian issuers and foreign bank loans. The effect of these measures will greatly depend on the specific laws passed to implement them;
- introduction of a 13% individual income tax for interest on bank deposits and investments of individuals into debt securities exceeding 1 million rubles in total (currently exempt within the Central Bank key rate increased on 5% for ruble deposits and within 9% for foreign currency).
Tax measures increasing tax burden may enter into force in 2021, unless the retrospective application is allowed for emergency measures adopted during the pandemic.
The Russian Federal Tax Service has published a list of measures aimed at supporting businesses during the pandemic, which will apply until May 1, 2020, including:
- a freeze on new on-site tax audits and suspension of current ones (chamber tax audits may continue);
- a switch to the remote reviewing of appeals and other claims via telecommunication channels; permission to submit materials during a tax audit in scanned copies.
The Russian Government will be entitled to grant tax deferrals and extend tax reporting deadlines (subject to approval by the respective new law)1. Currently announced measures include deferrals (installment plans) for taxes and social security contributions for 3 months for taxpayers in certain industries significantly affected by the quarantine (which should include tourism, transportation, sports, culture, arts, and cinematography).
Actions to consider
Taxpayers are recommended to:
- timely apply to the tax authorities to extend deadlines for providing the requested documents, e.g., due to the transfer of employees to a remote working regime;
- apply early for necessary official documents (e.g., tax residency certificates) in foreign jurisdictions;
- apply to the tax authorities for tax deferrals;
- file a motion to postpone hearings on tax and customs cases if a case cannot be considered in the absence of the claimant;
- identify and restructure “transit” payment schemes and other risky tax planning mechanisms.
We will be holding a webinar on April 2 or April 7 on the suggested tax rules and specifics of interacting with the tax authorities. Please click on the buttons beIow if you would like to receive an invitation to the webinar.