Accountor hosted another TaXmas event at the Embassy of Finland as it has been doing for already more than 6 years. The first speaker, Olga Mazina, Head of Tax Consulting, talked about the taxation changes anticipated in 2017. Olga outlined the changes in the taxation of electronic services supplied by foreign providers, as well as the upcoming changes in transfer pricing and other significant changes in tax and accounting regulations.

1. TAX: CHANGES ANTICIPATED
IN 2017
17.12.2016
Olga Mazina
Director of Tax Consulting and Audit Department
Accountor Russia & Ukraine
TaXmas 2016

2. From January 01, 2017
Foreign companies providing electronic services to
Russian consumers will pay Russian VAT (No. 244-FZ dd
July 03, 2016)
 If a foreign company operates through an agent (foreign or
Russian), VAT is withheld and paid by this agent
 If a foreign company sells to Russian individuals directly, it
will be required to register with Russian tax authorities and
pay VAT itself
VAT on electronic services (1)
23.11.20162

3. Electronic services are services rendered through Internet/other networks using
information technologies
E.g.
 Granting rights to use computer programs, databases
 Advertising on the Internet
 Posting on the Internet proposals for sale/purchase of goods/services/property rights
 Processing technical information and offering other options for exchanges between
sellers and buyers. For example, trading platforms operating in real time
 Website maintenance and modification, provision of access to websites
 Data storage and processing provided the entity submitting data has access to data
through the Internet
 Provision of domain names and hosting services
 Administration of information systems and websites
 Services automatically provided through the Internet (search, translation, etc.)
 Granting rights to use electronic books, information, materials, music through the
Internet, including provision of remote access to view and listen through the Internet
 Providing access to search engines on the Internet
 Provision of website statistics
23.11.20163
VAT on electronic services (2)

4. Tax registration must be done within 30 days of start of service provision by sending an
application to tax authorities. A list of other documents required for registration will be
approved at a later date by the Russian Ministry of Finance
Calculation: VAT is calculated on the last day of the quarter in which payment from Russian
customer is received; VAT rate: 15,25%; conversion into rubles done using the exchange
rate of the Bank of Russia on the last day of the quarter.
Declaration: VAT to be declared through the taxpayer account at www.nalog.ru. Deadline:
25th of the month following the reporting quarter.
Payment: VAT to be paid by 25th of the month following the reporting quarter.
! No need to issue VAT invoices, maintain sale/purchase ledgers as well as VAT invoice
registers
! No right to VAT deductions
! Providing electronic services does not give rise to a permanent establishment in Russia
! The granting of rights to computer programs under license agreements remains exempt
from VAT for Russian and foreign sellers
VAT on electronic services (3)
23.11.20164

5. • In 2014, Russia ratified the Convention on Mutual Assistance in Tax Matters (No.
325-FZ dd November 04, 2014) which has been effective since July 01, 2015
• Countries from the G20, BRICS, OECD signed this Convention
• The Convention sets out instruments for all forms of tax cooperation among signatory
countries to tackle tax avoidance
• Administrative assistance includes:
- Exchange of information, including automatic exchange
- Simultaneous tax checks and participation in tax checks abroad
- Assistance with tax collection
- Taking measures to ensure document forwarding
• In Russia, the Convention applies in relation to income and property taxes, VAT,
excises, severance tax, transport/water/land taxes, special tax regimes, etc.
• Special focus on Transfer Pricing. TP-documentation will be standardized and
automatic data exchange will begin from 2017 onwards
17/11/20165
International exchange of tax information:
Focus on Transfer Pricing

6. • Companies are entitled to adjust taxes if transfer pricing results in tax
understatements
• Adjustments for 2016 may be included in annual profit tax return until
March 28, 2017
• A group of companies operating in Russia may make voluntary
symmetric tax adjustments
• All companies which concluded transactions with related non-residents
in 2016 must file a notice with tax authorities by May 20, 2017
• Fine for tax understatement in 2016 is set at 20% of unpaid tax and
40% of unpaid tax in 2017
• Transfer Pricing Documentation substantiating market level of transfer
prices releases company from fines. It is recommended to prepare
such documentation before entering into transactions.
17/11/20166
Transfer pricing: existing rules

7. From 2017
• Standardization of TP-documentation to facilitate automatic exchange of information
with foreign countries
• New rules will apply to Russian companies and foreign companies’ permanent
establishments in Russia provided foreign companies are part of a multinational
group of companies preparing consolidated reporting and the group’s annual
turnover is RUB 50 billion (= EUR 750 million)
• Additional reporting:
1) Notice of affiliation with a multinational group of companies
Submitted by Russian group members annually
Deadline: within 3 months of the end of the financial year
2) Country-by-Country report
Submitted by Russian companies - parent companies or authorized group members
Deadline: within 12 months of the end of the financial year
3) Global documentation (=Master File)
Submitted by Russian companies – parent companies or authorized group members
Deadline: within 3 months of a request from tax authorities
4) Local documentation (=Local File)
Deadline: within 3 months of a request from tax authorities
17/11/20167
Transfer pricing: anticipated changes

8. From July 01, 2016
Exporters may claim VAT deductions before submission to tax authorities
of documents supporting 0%-rate
Change applies to VAT deductions for goods/services/rights acquired by
exporters after July 01, 2016 (150-FZ dd May 30, 2016)
Change does not apply to export of raw materials (wood, chemicals,
minerals, metals, etc.)
17/11/20168
VAT refund for exporters

9. From January 01, 2016
 Bank loans are not deemed controlled debts, if
- The bank (including foreign banks) is not related to the Russian borrower or the entity that
secures the loan;
- The entity that secured the loan did not repay the loan or interest for the Russian borrower
(e.g. the provision was not claimed)
From January 01, 2017
 Loans received from related foreign individuals are controlled debts so their interest is
limited for tax purposes
 Loans received from sister companies are controlled debts so their interest is limited for tax
purposes
 Relatedness is identified by the general rules set out in the Russian Tax Code
(direct/indirect share of more than 25%, share of 50%, etc.)
 Controlled debt amount is calculated as the sum of all the debts owed to a foreign entity
and its related parties
 Interest is limited on a quarterly basis and no annual recalculation is required
(No. 25-FZ dd February 15, 2016).
17.11.20169
Corporate income tax/profit tax:
thin capitalization rule is changed

10. From January 01, 2017
More companies will apply the simplified taxation system. A company will be
entitled to apply this system if:
 its income for the 9 months preceding its application for simplified taxation
system does not exceed RUB 90 million (currently RUB 45 million indexed at
1,329)
When companies’ total annual income exceeds RUB 120 million (currently
RUB 60 million indexed at 1,329), they no longer are entitled to apply the
simplified taxation system
The new thresholds will not be indexed in 2017-2019, and the index for 2020
will be 1.
 The book value of company’s fixed assets does not exceed RUB 150 million
(No. 243-FZ dd July 03, 2016)
Reminder: companies may apply the simplified taxation system provided no other
companies own more than 25% of their share capital
17/11/201610
Simplified taxation system

11. From January 01, 2017
Federal Law 212-FZ will be abolished in 2017. Chapter 34 of the Russian Tax Code will
regulate social contributions (No. 243-FZ dd July 03, 2016)
 The administration of contributions (except contributions for insurance against work-
related accidents and occupational diseases) will be transferred to the Federal Tax
Service, including payment monitoring, debt collection and reporting
 No substantial changes to the procedure for calculating contributions. Daily
allowances for business trips exceeding RUB 700 for trips in Russia and RUB 2,500
for trips abroad will be subject to social contributions (except contributions for
insurance against work-related accidents and occupational diseases)
 Report on contributions for pension, social and medical insurance will be sent
quarterly until 30th of the month following the reporting period. The Federal Tax
Service approved the report form (Order No. MMB-7-11/551@ dd November 10,
2016)
Social insurance against work-related accidents and occupational diseases
 If a company fails to inform the Social Insurance Fund about its actual type of
activity, this company will pay contributions calculated on the basis of the
company’s most hazardous type of activity as recorded in the State Register of
17/11/201611
Social contributions

12. From January 01, 2017
 Companies are to send to the Pension Fund monthly data on insured
employees (SZV-M). Deadline: by 15th of the month following the
reporting period (currently by 10th)
 Personalized reports on pension data to be sent to the Pension Fund
annually by March 1st of the year following the reporting year (currently
quarterly by 15th/20th of the second month following the reporting
period)
17/11/201612
Personalized reports for Pension
Fund

13. From January 01, 2017
 From 2017 onwards, companies will be able to make arrangements for
an independent assessment of their employees’ qualifications. The cost
of this assessment will be:
- deductible from profit tax base
- not included in employees’ taxable income
 Individuals will be able to arrange for an independent assessment of
their qualifications and the cost of such assessment could be claimed as
social deduction up to a maximum of RUB 120,000 (together with
educational, medical costs, etc.) To apply for deductions, personal
income tax must be declared on Form 3-NDFL
(251-FZ dd July 03, 2016)
17/11/201613
Independent assessment of
qualification: tax implications

14. • New thresholds for transfer of tax loss for future periods
Maximum of 30% of tax loss of past periods may be deducted from taxable
profit (currently 100% of tax loss of past periods may be deducted)
No time limit for such deduction (currently 10-year limit)
• New profit tax rates
3% - state budget 17% – regional budget (currently 2% and 18%
respectively)
17.11.201614
Corporate income tax/profit tax:
anticipated changes

15. • Penalties may increase
First 30 calendar days – 1/300 of Central Bank rate, from 31st day – 1/150
of Central Bank rate (i.e. if Central Bank rate is 10%, penalties will be
calculated at 24%)
• Taxes may be paid by a 3rd party
A company’s owner, general director or counterparty may pay taxes on
behalf of the company
17/11/201615
Tax administration: anticipated
changes

16. :
• ISA in Russia
International Standards of Auditing (ISA) issued by the International Federation of Accountants
(IFAC) will be applied in Russia from 2017 onwards
ISA and information about their implementation status may be found at:
http://minfin.ru/ru/perfomance/audit/standarts/international/
The scope of audit work will be extended, audit approaches will become global, audit will cover
different parts of corporate activities (risks, internal control, etc.)
Auditors working under audit contracts signed before 2017 will still be able to apply old audit
standards.
• Mandatory audit of construction companies
From 2017 onwards, construction companies that raised money for shared construction will be
subject to mandatory audit (No. 304 –FZ dd 03.07.16).
REMINDER: statutory audit is mandatory if in the year prior to reporting
Asset value > RUB 60 million Net turnover > RUB 400 million
17/11/201616
Audit

17. 17/11/201617

18. Thank you for your time
and attention
191015, Russia, St. Petersburg, Shpalernaya ul. 54
Phone: +7 812 325 82 94 (281)/cell: +7 921 189 88 34
Olga.Mazina@accountor.ru
www.accountor.ru
01/12/201518

19. PASSION FOR
RESULTS
01/12/201519