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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.

WEBINAR 2 APRIL 2020

WEBINAR 7 APRIL 2020

Author

Sergei Zhestkov is a partner in the Moscow office of Baker McKenzie and a licensed Russian advocate. He is experienced in advising multinational corporate and private clients on the broad scope of tax and asset protection issues, including international tax and trust planning and structuring.

Author

Arseny Seidov is a partner in the Tax Practice Group of Baker McKenzie's Moscow office. Prior to joining Baker McKenzie in 2003, he worked at a Russian audit firm, a major Swiss bank and the Moscow office of a major US law firm. Arseny has been consistently recommended by Chambers Global, Chambers Europe and International Tax Review among leading tax lawyers in Russia. Arseny heads the Working Group on Taxation of E-commerce at the Association of European Businesses, the Working Group on Taxation of Digital Economy at the American Chamber of Commerce and co-chairs the tax subgroup of the Innovation Working Group of the US-Russia Bilateral Presidential Commission. He also acts as Russia representative of Baker McKenzie's Digital Economy Group headquartered in Silicon Valley. Arseny is a frequent speaker at leading tax and IT-related conferences in Russia and abroad. Since 2007, he has been a visiting professor of international tax law at the Moscow State University for International Relations. He has authored over 40 publications.

Author

Kirill Vikulov is a partner in the Tax law practice group of Baker McKenzie’s Moscow Office. He has extensive experience in advising Russian and multinational clients on a wide range of complex tax issues, including M&A deals, joint ventures, international holding and financing structures, and various financial and capital markets transactions. Prior to joining Baker McKenzie in 2007, Kirill worked as a tax consultant in the international tax structuring department of an international audit company. Kirill is also a visiting professor of international tax law at MGIMO.

Author

Maxim Kalinin serves as managing partner of Baker & McKenzie’s St. Petersburg office and head of the Mergers & Acquisitions, Corporate, Real Estate & Construction and Employment practice groups. He was named a European legal expert in Russia by European Legal Experts 2008, and was recognized by Chambers Europe "for his expertise in M&A and real estate work". He is also cited by Legal 500, Who’s Who Legal 2009, The International Who’s Who of Real Estate Lawyers 2008 and the Private Equity Handbook 2007/2008 for his corporate and real estate work