At the beginning of July, several changes in the tax regulation were introduced by the Law of 02.06.2021 No. 305-FZ. The changes are related to VAT, income tax, profit tax and other taxes.
Reverse-charge
As of September 1st, 2021, the list of circumstances under which the procedure for payment of VAT by tax agents is applicable in regard to transactions with foreign persons (reverse-charge) was expanded.
In particular, foreign persons are no longer obliged to independently calculate and pay VAT on sales of goods, works, services in Russia if:
- a foreign person is registered with the Russian tax authority only on the basis of owning real property and vehicles or in connection with opening a bank account in Russia;
- a foreign person is registered with the Russian tax authority through a separate business unit (provided that such unit does not participate in the relevant transaction).
The above-mentioned positive change will simplify the conditions of conducting business in Russia by the companies registered on the above-described grounds.
Independent calculation and payment of income tax for non-residents
Income tax on interest income from Russian state securities paid to non-residents will no longer be calculated and withheld by the tax agent. Therefore, in the future, non-residents will be required to file their own tax returns and pay income tax on such income no later than April 30th, 2022. This notably applies to tax residents or in cases when the respective double taxation treaty does not apply.
Profit tax changes
Income from the reduction of share capital
The list of circumstances, under which, the income is not taken into account for the purposes of profit tax determination in case of a reduction of the share capital has been expanded. This now includes cases when, according to the results of a fiscal year, the share capital is more than the value of net assets.
This provision is retroactively effective as of January 1st, 2021.
Loss carry forward
Despite numerous proposals from companies to remove the current 50%-restriction on loss carry forward, this restriction is prolongated until December 31st, 2024.
Extension of the list of expenses for research and development work
The exhaustive list of expenses for research and development (R&D) activities is to be expanded starting in 2022. Subject to use only for R&D purposes, expenses for acquisition of the following rights may be recognized for profit tax purposes (under license agreements or agreements on alienation of rights):
- rights to industrial property;
- rights to software and databases;
- rights to topologies of integrated circuits.
This change appears to be evidently positive. In particular, it will be possible to claim an investment tax deduction in relation to such expenditure amounts, which may actually be more profitable because the investment tax deduction directly reduces the tax amount and not the tax base.
Amendments to the provisions on interest rate ceilings
The following technical amendments are made to Article 269 of the Tax Code:
- reference interest rate EURIBOR is substituted by € STR;
- reference interest rate LIBOR GBP is substituted by SONIA;
- reference interest rate LIBOR CHF is substituted by SARON;
- reference interest rate LIBOR JPY is substituted by TONAR;
- reference interest rate LIBOR USD is substituted by SOFR.
The interest rates themselves remain unchanged. The changes are related to the reform of financial indicators and the global phase-out of the EURIBOR and LIBOR interest rates.
Profit tax benefits in regard to intellectual property rights (IP Box)
The Tax Code provides for the possibility of applying a reduced profit tax rate (in part payable to regional budgets) in regard to profit from the use of IP rights under the following conditions:
- the rights are transferred pursuant to a license agreement;
- the rights are owned by the taxpayer and registered in Russia;
- the regional legislation provides for the application of the reduced profit tax rate;
- profits and expenses related to such activities are booked separately by the taxpayer.
At the same time, types of intellectual property rights in respect to which the reduced profit tax rate applies are subject to regional legislation. Assuming the entry into force of respective laws in the regions, this new tax treatment of such activities in certain regions of the Russian Federation could be very favorable in the future, allowing Russia to participate in tax competition with other countries. However, looking at other regional tax benefits, it is not unfounded to assume that the practical application of the respective benefits may be subject to fulfillment of a significant number of conditions.