· list of documents submitted to multifunctional centers is amended alongside with the procedure for their submission;
· the new provision decreases the minimum amount of tax debt that enables tax authorities to file cases against taxpayers-natural persons;
· cases when tax return is deemed unreported are specified;
· the procedure for taxing dividends paid to a foreign company is defined;
· the new procedure for obtaining tax benefit is provided;
· the moment of defining cadaster cost of real estate for tax purposes is shifted;
· the new procedure for taxing profit of controlled foreign companies is introduced.
The new Federal law № 374-FZ “On the introduction of amendments to the first and second parts of the Russian Tax Code and certain other legislative acts of the Russian Federation (hereafter – “the Law”) providing for several amendments to tax legislation concerning taxpayers’ rights was published on November 23, 2020, some parts thereof entered into force. Moreover, the Federal law № 368-FZ “On the introduction of amendments to the first and second parts of Russian Tax Code” containing rules on taxing controlled foreign companies entered into force on December 29, 2020.
List and order for submission of tax documents to multifunctional centers amended
With the coming into force of some provisions of the Law a list of documents that can be submitted by taxpayers to multifunctional centers was expanded. For instance, since December 23, 2020 multifunctional centers can be used for filing notifications of real property and/or vehicles that are subject to taxation. Similarly, since January 1, 2021 multifunctional centers taxpayers can provide an application on loss or destruction of taxation object with other documents confirming its loss or destruction. Moreover, it was specified that tax notification of tax payment would be introduced to taxpayers in multifunctional centers not later than five days after tax authority receives application on the issuance of such notification.
The new provision decreases the minimum amount of tax debt that enables tax authorities to file cases against taxpayers-natural persons
Currently tax authority can apply to court to recover tax debt when the total debt sum, including obligations to pay taxes, insurance premiums, penalties or fines exceeds 3 000 rubles. The sum was increased up to 10 000 rubles on December 23, 2020. It should be noted that it’s not the first time this sum was increased. In 2013, before the Federal law № 20-FZ “On the introduction of amendments to certain legislative acts of the Russian Federation” entered into force, tax authorities had recovered sums exceeding 2 500 rubles in court.
Cases when tax return is deemed unreported are specified
Starting from July 1, 2021 tax return submitted by tax payer will be regarded as unreported when:
¾ it is stipulated within tax control that tax return is submitted by unauthorized person;
¾ natural person who is entitled to act on behalf of taxpayer without power of attorney and signed tax return was disqualified by resolution on disqualification relating to administrative offence and the term for such disqualification did not expire before submitting such tax return to tax authority;
¾ the Unified state register of records on civil registration contains information on death of natural person that had occurred before tax return was endorsed with the qualified electronic signature of such natural person;
¾ record of a person who is entitled to act without power of attorney on behalf of a taxpayer is included in the Unified state register of legal entities (USRLE) and such record included before submission of tax return indicates that information on this person is inaccurate;
¾ record of a company-taxpayer is included in the USRLE indicating that the activity of legal entity was terminated (by way of reorganization, liquidation or exclusion from the USRLE by decision of registration authority) before this taxpayer submits tax return to tax authority;
¾ tax authority discovers that indicators of submitted tax return are inconsistent with ratio approved by the federal tax service if such inconsistency reveals that the tax return was filled incorrectly.
Herewith, if tax authority found the tax return unreported on one of the above grounds (with the exception of a record on termination of a taxpayer), it shall notify the taxpayer not later than five days from recognizing tax return unreported.
The procedure for taxing dividends paid to a foreign company is defined
The Law specifies that sources of income in the Russian Federation include dividends on shares of a Russian company that are paid to a foreign company and are listed in taxpayer’s tax return. Herewith, since January 1, 2021 a taxpayer can list dividends among other sources of income in his tax return. Such dividends shall be stated in the amount proportionate to his indirect participation in a foreign company at the date when persons entitled to such dividends are selected. The Law sets criteria to the amount of dividends paid to a foreign company.
If a taxpayer has direct participation:
¾ dividends shall be received on shares, participatory units, depositary receipts confirming rights of a foreign company to the shares (hereafter – “on shares”);
¾ the dividends received by a foreign company on shares in the amount proportionate to taxpayer’s direct participatory interest in a foreign company is not less than the total amount of dividends on shares paid to a taxpayer increased by the sum of tax withheld in the payment of dividends.
Similar rules are provided for cases for indirect participation of a taxpayers in a foreign company (foreign structure).
The new procedure for obtaining tax benefit is provided
The Law introduced amendments so that the right to tax benefit arises within tax period when the right to such benefit arose. Previously such right arose from the moment when tax authorities became aware of such right.
The new procedure for taxing profit of controlled foreign companies
Citizens who are controlling persons of foreign companies will be able to pay income tax from fixed amount of income stated in the Federal law № 368-FZ “On the introduction of amendments to the first and second parts of Russian Tax Code”. This provision encourages controlling persons to disclose information of income. The amount of income for the year 2020 is 38 460 000 rubles, i. e. 38 460 000 × Income tax 13 % = 4 999 800, meanwhile the amount of income will be 34 000 000, i. e. 650 000 + (34 000 000 – 5 000 000)×НДФЛ 15 % =5 000 000. Herewith, taxpayers who are natural persons shall submit notification of controlled companies before April, 30 of the year following tax period where controlling persons received income from the controlled company. Otherwise, taxpayers may become liable under para.1 art. 129.6 of Russian Tax Code and pay fine in the amount of 500 000 rubles for each unreported controlled company. It shall be noted that if a taxpayer chooses to pay tax on the fixed amount, this does not exempt him from his liability to provide accurate information on income of the foreign controlled company.
The moment of defining cadaster value of real estate for tax purposes is shifted
Land tax is calculated with reliance on cadaster value of the land plot (para. 1 art. 390 of Tax Code). Under art. 66 of Land Code of the Russian Federation when market value of a land plot is determined, cadaster value of such land plot is deemed equal to its market value. Herewith, before entry of the Law into legal force, changes of cadaster value of real property subject to taxation within one tax period were not taken into account when defining tax base in the ongoing and previous tax periods with the exception of the following cases:
¾ changes of qualitative and/or quantitative characteristics of a land plot that are ground for determination of cadaster value shall be taken into account from the date of inclusion of such changes in the Unified state register of real property;
¾ correction of technical mistake in the information in the Unified state register of real estate on the cadaster value from the date of application of cadaster value for tax purposes;
¾ if cadaster value is decreased due to correction of mistakes, committed when determining cadaster value, due to cadaster value review by resolution of dispute settlement commission or court resolution from the date of application of challenged cadaster value for tax purposes;
¾ changes of cadaster value of the land plot on the basis of determining its market value by dispute settlement commission or court resolution from the date of application of the challenged cadaster value for tax purposes.
Currently the only exception is that when cadaster value of a land plot is amended due to determination of its market value information on the renewed cadaster value included in the Unified state register of real property shall be taken into account from the date of application of changing cadaster value for tax purposes.
Novelties in tax area are multiple and touch upon various areas of tax legislation. Several novelties, for instance, provision on submission of tax documents to multifunctional centers, shift of date when tax benefited is provided were designed to the best interests of taxpayers. However, some of the amendments such as determination of procedure for taxation of dividends are aimed at elimination of legislative gaps.