Digest of Economic and Financial News from the Russian Federation

THE DRAFT LAW ON TRANSFER PRICING HAS BEEN SUBMITTED TO THE STATE DUMA

Previously, only plans were announced to submit the draft law on transfer pricing to the State Duma.

The draft law provides for maintaining two groups of grounds to classify parties as interrelated: by law and by court ruling. The draft law envisages six methods to determine compliance of prices used in transactions with market prices for taxation purposes:

• the comparable uncontrolled price method;
• the resale price method;
• the secondary product method (the method of sale of processed product);
• the cost method;
• the comparable margin method;
• the profit split method.

NEW 3-ÍÄÔË TAX RETURN FORM TO BE RELEASED BEFORE LONG

As of now, the order of the Ministry of Finance of the Russian Federation ¹145í dated December 29, 2009 “On Approval of Tax Return Form for Personal Income Tax (3-ÍÄÔË form) and procedure for Filling it in” has been submitted for state registration to the Justice Ministry of the Russian Federation. Prior to state registration of the abovementioned order at the Justice Ministry of the Russian Federation, its formal publication and entry into effect, the current tax return form for personal income tax should be used and procedure for filling it in, approved by the order of the Finance Ministry ¹153í dated December 31, 2008, given amendments in the legislation related to the 2009 tax period.

THE LONDON CLUB OF CREDITORS RECEIVES THE LAST MONEY TRANSFER

The Finance Ministry has made a formal announcement that the Russian Federation has fully repaid FSU debts to the London Club of Creditors. Experts view this development as symbolic. Although the amount was insignificant, the fact of repayment itself will be an additional positive for Russia, since as early as this year the government plans to enter the external debt market. The Ministry of Finance said in a press release that some USD 1 mn was wired to creditors at the end of last year. This means that FSU’s debt to commercial banks of West Europe, the US and Japan under credits raised by Vnesheconombank before December 31, 1991 has been fully repaid.

AN ATTEMPT TO PASS TRANSPORT TAX FROM VEHICLE OWNERS ONTO GASOLINE SELLERS

The draft law has been submitted to the State Duma with revolutionary amendments to Chapter 28 of the Tax Code of the Russian Federation. The authors of the document have proposed to make tax payers companies and individual businessmen which sell gasoline and diesel fuel.

The tax is to be paid on a monthly basis from the price of fuel sold at the rate ranging from 3% to 6%.

The precise rate is to be set at the regional level, in addition, it could vary for various types of fuel.

This is not the first attempt to transform the transport tax. Specifically, it was proposed to include the tax amount in the per liter cost of gasoline. Therefore, owners of powerful and “greedy” vehicles which often use their “iron horses” were supposed to pay the most.

LAW MAKERS PROPOSE TO CANCEL 13% PERSONAL INCOME TAX

The State Duma is reviewing at once two draft laws on introduction of progressive scale of personal income tax.

The first draft law provides for the 2% tax rate for annual income below RUR 10,000 and 10% from RUR 10,000 to RUR 50,000 per year. And the 13% tax is to be imposed on wages from RUR 50,000 to RUR 200,000.

The highest 40% tax rate is to be applied to residents with annual income over RUR 5 mn. In addition, it is proposed to charge the personal income tax at the progressive scale not only on salary but also on dividends.

The second draft law envisages the minimum tax rate of 10%. Residents with income not exceeding RUR 52,000 are to be subject to personal income tax at such rate. The 13% tax rate is to be maintained for income ranging from RUR 52,000 to RUR 600,000. The 15% rate is to be paid by residents with income in the range of RUR 600,000 -RUR 1,400,000, with maximum 20% rate to be applied to amounts exceeding RUR 1.8 mn.

ELECTRONIC INVOICES WILL APPEAR IN 2010

Federal Tax Inspection is completing its work over draft law with amendments in RF Tax code; the draft states formats of electronic invoices, and also techniques of their communication. It is being planned that amendments in Tax code will start functioning from the beginning of the following year.

In the first place the biggest taxpayers will be put to electronic invoices.

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