Russian Federation: Practical Steps In Implementing Certain Provisions Of The Russian Finance Ministry's Main Tax Policy Objectives For 2017 And The 2018 And 2019 Planning Period

It took the RF Finance Ministry less than a month to implement certain measures for improving tax administration and ensuring a balanced budget and revenues to the budgetary system envisioned by the draft Main Tax Policy Objectives for 2017 and the 2018 and 2019 Planning Period. The following measures that have found support among lawmakers and affect most groups of taxpayers particularly stand out:

Change in the penalty amount for late performance of tax payment obligations (Federal Law No. 401-FZ of 30 November 2016)

As of 1 October 2017 a differentiated procedure for calculating late payment interest for late performance of the obligation to pay taxes and levies (Article 75(4) of the RF Tax Code) will be introduced for corporate taxpayers, where, starting with the 31st day of delay, the late payment interest increases from 1/300 to 1/150 of the RF Central Bank key rate. The previous late payment interest rate applies to delays of 30 days or less.

Third parties can perform the obligation to pay tax (levy) (Federal Law No. 401-FZ of 30 November 2016)

Starting on 30 November 2016, the law has provided the opportunity for third parties to pay taxes and levies on behalf of taxpayers (Article 45(1) of the RF Tax Code). A similar provision for performing the obligation to pay social insurance contributions entered into force on 1 January 2017. The law does not clarify whether the taxpayer should or may agree on such payment with the third party in the form of a contract or in any other form, from which it can be concluded that such agreements of a mixed nature (civil-law and tax) between companies and even between companies and individuals are allowed.

Change in allocation of profit tax revenues between the federal budget and the budget of Russian Federation constituent entities (Federal Law No. 401-FZ of 30 November 2016)

In order to balance the budgets of Russian Federation constituent entities, for the period from 2017 through 2020 a different allocation of profit tax revenues between the federal and regional budgets is being introduced (Article 284(1) of the RF Tax Code). During that period the amount of tax to be credited to the federal budget will be calculated based on the 3% tax rate (previously it was 2%), and 17% to the regional budgets (previously 18%). The regional authorities  have been granted the right to reduce the rate for tax received by the regional budget to 12.5% (currently to 13.5%), and the rate will become the maximum possible rate for residents of special economic zones (again, for the "regional" tax). This change obviously first and foremost affects taxpayers using reduced tax rates on money going to the regional budgets under the preferential tax regimes established by the laws of such Russian Federation constituent entities.

Limits on the amount of tax losses to be carried forward when calculating profit tax (Federal Law No. 401-FZ of 30 November 2016)

Amendments to Article 283 of the RF Tax Code limit in 2017-2020 the amount of tax losses generated in prior periods that can be used to reduce the tax base of the current reporting (tax) period to 50% of the tax base of that tax (reporting) period determined by the taxpayer without taking that loss into account (Clause 2.1 of Article 283 of the RF Tax Code). An exception to this rule is made only for certain groups of taxpayers receiving preferential terms and paying profit tax at reduced rates in accordance with Article 284 of the RF Tax Code. The law eliminates the time limit on carrying tax losses forward that was previously equal to 10 years.

Procedure changed for creating provisions against bad debts (Federal Law No. 401-FZ, No. 405-FZ of 30 November 2016)

Starting 1 January 2017 the amount of provisions against bad debts (Article 266 of the RF Tax Code) at the end of each reporting period should not exceed the greater of the following values: (i) 10% of the previous tax period's revenue, or (ii) 10% of revenue for the current reporting period (previously not more than 10% of the revenue in the current reporting (tax) period). The amount of the cross obligation to the same contracting party is not included when creating the bad debts provisions for tax purposes.

New conditions for applying the property tax incentive to fixed assets that are movable property (Federal Law No. 401-FZ of 30 November 2016)

Starting in 2018 tax exemption with regard to the objects of movable property on the grounds contemplated by Article 381(25) of the RF Tax Code will apply only if the Russian Federation constituent entity enacts a law to this effect (Article 381.1 of the RF Tax Code).

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