Federal Law 79-FZ on the Ratification of the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting recently entered into force. Once the ratification procedure has been completed, the convention will enter into force in Russia, introducing changes to the taxation procedure for transactions with counterparties from a large number of countries that have concluded double tax avoidance agreements with Russia.
The Federal Tax Service recently approved a form of inquiry which it will use to request information from legal entities regarding their beneficial owners in order to, among other things, identify tax evasion schemes. For the purposes of the law, 'legal entities' means not only Russian legal entities, but also foreign legal entities, including those that perform economic operations in Russia and interact with Russian clients.
The basic value added tax (VAT) rate recently increased from 18% to 20%. The new rate will apply to all goods, works and services which are sold, performed or provided from 1 January 2019. In addition, several estimated tax rates have also been amended. As entities are expected to reflect the increased VAT rate in the price of their goods, economists predict a rise in prices associated with the increase in early 2019.
The Federal Tax Service recently began publishing information concerning the various obligations of Russian taxpayers (ie, legal entities) and their financial reporting on its website. This practice is new in Russia, as such information was previously classified as tax secrets and, by virtue of the Tax Code, could not be disclosed. This development is useful not only for Russian taxpayers, but also for foreign companies choosing Russian counterparties.
In January 2019 a new law will come into force enabling the tax authorities to request client-related documents from auditors which constitute 'auditing secrets'. This law marks the end of years of struggle by the tax authorities to gain access to audit documents. Although these changes carry no significant risks for bona fide taxpayers, the business community is concerned that the authorities may be able to request auditors' documents and opinions on related services, such as accounting and tax consulting.