The president recently signed Federal Law 259-FZ of 2 August 2019 on Raising Investments via Investment Platforms and on Amending Certain Legislative Acts of the Russian Federation. The law, which is set to take effect from 1 January 2020, reflects the growing trend in Russia of increased regulation of digital economy issues.
In recent years, intragroup services provided by foreign parent companies to their Russian subsidiaries have come under scrutiny. As such, a shareholder activities test was added to the tax audit process in order to identify profit distribution disguised as service fees. To clarify the authorities' approach to conducting this test, the Federal Tax Service has issued a letter which defines shareholder activities with regard to intragroup services and clarifies when intragroup services will qualify as shareholder activities.
Numerous tax law amendments recently entered into force, including the introduction of a rule concerning the taxation of transactions involving the transfer and acquisition of property rights. Now, the law directly states that property rights, along with other property, are exempt from taxation. The introduction of this rule has put an end to numerous disputes between the tax authorities and taxpayers with respect to transfers of property rights between parents and their subsidiaries.
Federal Law 368 of 11 September 2020, which could significantly simplify the tax payment process for the owners of a large number of controlled foreign corporations (CFCs) and significantly reduce such taxes in some cases, was recently adopted in Russia. It is fair to say that, in a sense, the new legislation introduces an alternative simplified tax system for CFC owners. However, the new tax regime will not be beneficial to all taxpayers.
In 2020 Russia launched an intensive process of revising its bilateral tax agreements with numerous jurisdictions. According to the Cyprus minister of finance and the Russian Ministry of Finance, significant amendments to the double tax avoidance agreement between Russia and Cyprus were agreed in August 2020. The most important amendment is the increase in the tax rate levied on the payment of dividends and borrowed money.
President Vladimir Putin recently announced the next set of measures to amend tax legislation to help the Russian economy overcome the crisis caused by the COVID-19 pandemic. Most of the new tax changes relate to companies in the IT industry, for which a so-called 'tax manoeuvre' has been proposed in order to significantly reduce the corporate income tax rate for such companies from 20% to 3%.
From 1 January 2021, Russia-based employers must comply with new requirements regarding their remote employees. The amendments to the Labour Code were triggered by the COVID-19 pandemic and will significantly change the work management of many companies. This article highlights some of the new rules and provides employers with guidance as to their next steps.
The government recently enacted Order 1848, which approves a new version of the rules on remuneration for employees' inventions, utility models and industrial designs. The new rules replace those that were approved in 2014 and increase the amount of remuneration to be paid annually to inventors.
In May 2019 an interstate agreement was concluded within the framework of the Eurasian Economic Union, under which it was agreed to introduce a system to enable certain categories of imported goods to be traced. Now, Russia has launched an experimental version of such system, which will remain in place until 31 December 2019. Among other things, the system is expected to lead to a reduction in the level of record falsification in the market and better control the payment of taxes.
The Duma provides certain incentives to encourage businesses to operate in Russia. For example, it recently passed a law which permits Russian exporters and Russian subsidiaries of foreign companies that provide services to foreign clients and other companies within such client's groups to deduct the full amount of value added tax for these services. The new law, which was drafted in response to the digital economy, will increase competition in the outbound services market.