Review of Russian Legislative Changes in 2020

As always, the legislator has thoroughly prepared for the 2020 and made sure in advance that both legal practitioners and average citizens had something to do during the long New Year holidays: like study how our life will change with the entry of many changes to regulatory acts of all levels into force.

Following the established tradition, Korpus Prava has prepared a general overview of the most interesting short stories of the Russian legislator that will come out in 2020.

A procedure has been established for resolving disputes concerning the procedure for taxation of entities regarding their income, profit and property when applying provisions of the international taxation agreement of the Russian Federation

From January 01, 2020 the Tax Code of the Russian Federation will be supplemented with chapter 20.3 Mutual Agreement Procedure in Accordance with the International Taxation Agreement of the Russian Federation.

The mutual agreement procedure in accordance with the international taxation agreement of the Russian Federation is the procedure for resolving disputes on the procedure for taxation of entities regarding their income, profit and property when applying provisions of the international taxation agreement of the Russian Federation.

The procedure for conduction of the mutual agreement procedure is determined by provisions of the relevant international taxation agreement of the Russian Federation. The mutual agreement procedure may be initiated at the request of a taxpayer or at the request of a competent authority of a foreign country (territory) being a party to the international taxation agreement of the Russian Federation.

The procedure and deadlines for submitting an application for the mutual agreement procedure as well as procedure and deadlines for consideration of this application are determined by the Ministry of Finance in view of provisions of international taxation agreements of the Russian Federation.

In addition, from 2020 a new article 105.18-1 of the Tax Code of the Russian Federation Adjustments Based on the Results of the Mutual Agreement Procedure in Accordance with the International Taxation Agreement of the Russian Federation will apply which establishes the following rules:

  • For the purposes of applying adjustments based on the results of the mutual agreement procedure in accordance with the international taxation agreement of the Russian Federation, no adjustments shall be made to tax accounting registers and primary accounting documents;
  • These adjustments are reflected in the tax returns referred to in sub-clauses 1 and 2 of clause 4 f article 105.3 of the Tax Code of the Russian Federation – corporate income tax and personal income tax;
  • If a Russian taxpayer entity receives the right to offset or refund the amount of tax following the adjustments, the said tax amount shall be subject to offset or refund in the manner established by the Tax Code of the Russian Federation.

From 2020 submission of settlements on advance payments on corporate property tax shall be canceled

It has also been established that in calculation of advance payment on corporate property tax, different cadastral value can be applied which is different from the cadastral value as of January 1 of the year being the relevant tax period.

In addition, it has been established that a taxpayer registered with several tax authorities at the location of their property items in the territory of a constituent entity of the Russian Federation can submit a tax return for all items to a tax authority of their choice. The form of notification about the procedure for submission of tax returns to a tax authority in the territory of a constituent entity of the Russian Federation is established by the Decree of the Federal Tax Service of Russia No. ММВ-7-21/311@ dated 19.06.2019.

The deadline for submission of the 6-NDFL (personal income tax) calculation and the 2-NDFL (personal income tax) certificate has been moved from April 1 to March 1 of the year following the expired tax period.

It has also been made possible to submit tax returns on personal income tax in paper form through Multifunctional Centers for Provision of Public Services.

Notice about controlled foreign companies shall be submitted in a new form

The procedure for filling in and submission of the said form has also been updated.

Now, only those notice sheets shall be subject to filling in for which there are grounds for filling them in. The scope of information submitted in respect of a controlled foreign company has been reduced.

The procedure for filling in the notice in the event of its submission by a successor entity and clarified notices for the reorganized entity has been established.

Notices about controlled foreign companies, the obligation to submit which starts from January 1, 2020, shall be submitted in a new form.

The list of income not taxed with personal income tax shall be expanded

Now the following items, among other things, are not subject to taxation with personal income tax:

  • Income in cash and in kind received in accordance with the laws in connection with the birth of a child;
  • Payment of additional days off provided to parents, guardians and caregivers caring for children with disabilities;
  • Compensation of travel of employees living and working in the Far North and equivalent areas and non-working members of their family to the place of vacation and back within the Russian Federation;
  • Monetary compensation in lieu of a land plot due from public property determined by federal or regional laws.

At the same time, income in the form of compensation for unused holidays and for unused additional days of rest provided shall not be exempted from taxation.

The minimum tenure of the only accommodation after which payment of personal income tax is not required during its sale shall be reduced from 5 to 3 years

The lack of other accommodation (ownership interest therein) shall be determined as of the date of registration of transfer of the ownership (ownership interest therein) of the sold accommodation. In this case, the accommodation purchased within 90 days before the registration of the transfer of ownership of the sold accommodation shall not be taken into account.

The innovation shall also apply to the land plot on which the accommodation with farm buildings and structures is located.

The law governing relations arising from investing through investment platforms (crowdfunding) comes into force

An investment platform is an information system on the Internet that is used to conclude investment contracts using information technology and technical means. Investments are made by acquiring securities or digital rights or by granting a loan.

Most notably, the law establishes:

  • Requirements for the platform operator and the person attracting investments;
  • Requirements for the investment platform rules;
  • Means and procedure for investment using the investment platform;
  • Requirements for disclosure and provision of information by the investment platform operator.

The investment platform operator can provide an individual with a possibility to invest funds in the amount of not more than 600,000 rubles during one calendar year. This restriction does not apply to:

  • Individual entrepreneurs;
  • Individuals with the qualified investor status;
  • Individuals in the event of acquisition of utilitarian digital rights under investment agreements concluded with a public joint-stock company.

The relevant changes have also been made to a number of federal laws.

Entities attracting investments using investment platforms as of January 1, 2020 are required to bring their activities in line with these requirements by July 1, 2020.

An individual who is a bona fide purchaser from whom accommodation has been reclaimed by virtue of a judicial act will be able to receive a one-time compensation at the expense of the budget of the Russian Federation

The compensation shall be paid by virtue of a judicial act that has entered into legal force on the relevant action of the bona fide purchaser against the Russian Federation. The judicial act shall be passed if recovery on the basis of an enforcement document has been carried out partially or not been carried out within 6 months from the date of enforcement of this document for reasons beyond the control of the bona fide purchaser in accordance with the judicial act concerning compensation for losses incurred in connection with reclamation of accommodation therefrom that has entered into legal force.

The amount of the compensation shall be determined by court based on cadastral value of the accommodation valid on the date of entry the judicial act on reclamation of the accommodation into force.

If the court determines that the bona fide purchaser has been compensated for losses incurred in connection with reclamation of accommodation therefrom, the amount of the compensation shall be reduced by the amount of the compensated losses.

In the event of payment of the compensation, the right (claim) which the bona fide purchaser has to the person (entity) responsible for causing losses in connection with reclamation of accommodation therefrom shall be transferred to the Russian Federation within the paid amount.

An individual who is a bona fide purchaser from whom accommodation has been reclaimed to the ownership of the Russian Federation, a constituent entity of the Russian Federation or a municipal entity based on a judicial act that has entered into legal force before January 1, 2020 may file a claim against the Russian Federation, the constituent entity of the Russian Federation or the municipal entity concerning payment of a one-time compensation within 3 years (until January 1, 2023).

Claims concerning the compensation submitted by the bona fide purchaser from whom accommodation has been reclaimed by virtue of a judicial act that has entered into legal force before January 1, 2020 are subject to consideration in accordance with the laws in force on the date of submission of the said claims.

The rights of holders to emission securities are now certified with entries in personal accounts in a register maintained by the registrar

In the event of taking account of rights to emission securities in the depository, rights are certified with entries on custody accounts with depositories.

The Federal Law No. 514-ФЗ dated 27.12.2018 also establishes the following aspects:

  • Assertion of claims to the issuer concerning early redemption or acquisition of bonds;
  • Registration of issues (additional issues) of emission securities by registration agencies;
  • Issue of shares during the establishment of a joint-stock company and aspects of bond issue.

In addition, the term ‘depository activities’, rights and obligations of the depositary have been clarified; requirements for contents of decisions to issue emission securities and terms of their placement have been changed; aspects of receipt of dividends in cash on shares as well as income in cash and other cash payments on bonds have been changed.

To take account of rights to emission securities, depositaries and registrars can open escrow agent accounts.

Roman Moskovskikh

Lawyer

Tax and Legal Practice

Korpus Prava (Russia)

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