Published on February 19, 2014
The International Comparative Legal Guide to: Corporate Tax 2014 10th Edition A practical cross-border insight into corporate tax work Published by Global Legal Group, with contributions from: Advokatfirma Ræder DA Aivar Pilv Law Office Ali Budiardjo, Nugroho, Reksodiputro Arqués Ribert Junyer Advocats Avanzia Taxand Limited B.C. Toms & Co Batliner Gasser Bentsi-Enchill, Letsa & Ankomah Boga & Associates Bredin Prat Bulit Goñi & Tarsitano Calderón, González y Carvajal, S.C. CASAHIERRO Abogados Debarliev, Dameski and Kelesoska DELACOUR Law Firm Georgiev, Todorov & Co. Gide Loyrette Nouel Glyn Marais Incorporated Greenwoods & Freehills Ikeyi & Arifayan Juridicon Law Firm Khaitan & Co Kilpatrick Townsend & Stockton Advokat KB Kyriakides Georgopoulos Law Firm Legance Lenz & Staehelin Lex Chambers Ltd Lidings LOGOS Legal Services Mason Hayes & Curran Mattos Filho, Veiga Filho, Marrey Jr. E Quiroga Advogados MNKS Nagashima Ohno & Tsunematsu Nithya Partners P+P Pöllath + Partners Paul, Weiss, Rifkind, Wharton & Garrison LLP Pekin & Pekin Slaughter and May Thorsteinssons LLP Uría Menéndez Vanhaute Attorneys
The International Comparative Legal Guide to: Corporate Tax 2014 General Chapter: 1 The X Factor – William Watson, Slaughter and May 1 Country Question and Answer Chapters: Contributing Editor William Watson, Slaughter and May Account Managers Beth Bassett, Maksim Dolgusev, Robert Hopgood, Dror Levy, Maria Lopez, Mahmoud Nedjai, Florjan Osmani, Oliver Smith, Rory Smith 2 Albania Boga & Associates: Alketa Uruçi & Andi Pacani 3 Andorra Arqués Ribert Junyer Advocats: Daniel Arqués i Tomàs & Mireia Ribó i Bregolat 12 4 Argentina Bulit Goñi & Tarsitano: Alberto Tarsitano & María Inés Giménez 19 5 Australia Greenwoods & Freehills: Adrian O’Shannessy & Andrew Mills 26 6 Belgium Vanhaute Attorneys: Patrick Vanhaute 33 7 Brazil Mattos Filho, Veiga Filho, Marrey Jr. E Quiroga Advogados: Luiz Felipe Centeno Ferraz & Renata Correia Cubas 42 Sales Support Manager 7 Toni Wyatt Sub Editors Nicholas Catlin Barbara Fitzsimons 8 Bulgaria Georgiev, Todorov & Co.: Georgi Kostolov 48 9 Canada Thorsteinssons LLP: Michael Colborne & Michael McLaren 54 10 Denmark DELACOUR Law Firm: Morten Brehm Jensen & Kristian Tokkesdal 59 Beatriz Arroyo Gemma Bridge 11 Estonia Aivar Pilv Law Office: Jaak Siim & Epp Lumiste 65 Senior Editor 12 France Bredin Prat: Yves Rutschmann & Marion Méresse 74 13 Germany P+P Pöllath + Partners: Dr. Michael Best & Dr. Nico Fischer 81 Alan Falach 14 Ghana Bentsi-Enchill, Letsa & Ankomah: Seth Asante & Frank Nimako Akowuah 88 Group Publisher 15 Greece Kyriakides Georgopoulos Law Firm: Panagiotis Pothos 94 16 Iceland LOGOS Legal Services: Bjarnfreður Ólafsson 101 17 India Khaitan & Co: Sanjay Sanghvi & Ritu Shaktawat 106 18 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Freddy Karyadi 112 19 Ireland Mason Hayes & Curran: John Gulliver & Robert Henson 117 20 Italy Legance: Marco Graziani & Claudia Gregori 124 F&F Studio Design 21 Japan Nagashima Ohno & Tsunematsu: Yuko Miyazaki & Kenji Horiuchi 134 GLG Cover Image Source 22 Kosovo Boga & Associates: Alketa Uruçi & Andi Pacani 143 23 Liechtenstein Batliner Gasser: Dr. Christian Presoly & Benedikt Koenig 147 24 Lithuania Juridicon Law Firm: Laimonas Marcinkevičius & Ingrida Steponavičienė 154 25 Luxembourg MNKS: Raquel Guevara & Remi Slama 163 26 Macedonia Debarliev, Dameski and Kelesoska: Dragan Dameski & Elena Nikodinovska 170 27 Malta Avanzia Taxand Limited: Walter Cutajar & Mary Anne Inguanez 175 28 Mexico Calderón, González y Carvajal, S.C.: Alejandro Calderón Aguilera & Arturo Carvajal Trillo 182 29 Nigeria Ikeyi & Arifayan: Nduka Ikeyi & Taofeek Shittu 188 30 Norway Advokatfirma Ræder DA: Rolf H. Nicolaissen & Sigurd G. Tuntland 194 31 Peru CASAHIERRO Abogados: Percy Castle & Fabrizio Fernandez-Dávila 200 32 Poland Gide Loyrette Nouel: Maciej Grela & Ewa Żbikowska 206 33 Russia Lidings: Stepan Guzey, PhD 212 34 Rwanda Lex Chambers Ltd: Isaac Mockey Bizumuremyi 216 Editors Suzie Kidd Group Consulting Editor Richard Firth Published by Global Legal Group Ltd. 59 Tanner Street London SE1 3PL, UK Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 Email: firstname.lastname@example.org URL: www.glgroup.co.uk GLG Cover Design iStockphoto Printed by Information Press Ltd November 2013 Copyright © 2013 Global Legal Group Ltd. All rights reserved No photocopying ISBN 978-1-908070-78-4 ISSN 1743-3371 Strategic Partners Continued Overleaf Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720 Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. www.ICLG.co.uk
The International Comparative Legal Guide to: Corporate Tax 2014 Country Question and Answer Chapters: 35 South Africa Glyn Marais Incorporated: Richard William Douglas Glyn & Richard Charles Wilson 220 36 Spain Uría Menéndez: Rafael Fuster & Alonso Ramallo 226 37 Sri Lanka Nithya Partners: Naomal Goonewardena & Sheranka Madanayake 233 38 Sweden Kilpatrick Townsend & Stockton Advokat KB: David Björne 239 39 Switzerland Lenz & Staehelin: Heini Rüdisühli & Jean-Blaise Eckert 246 40 Turkey Pekin & Pekin: Fırat Yalçın & Mehmet Onur Çeliker 255 41 Ukraine B.C. Toms & Co: Bate C. Toms 263 42 United Kingdom Slaughter and May: Zoe Andrews & William Watson 272 43 USA Paul, Weiss, Rifkind, Wharton & Garrison LLP: Jeff Samuels & Brad Okun 279 EDITORIAL Welcome to the tenth edition of The International Comparative Legal Guide to: Corporate Tax. This guide provides the international practitioner and in-house counsel with a comprehensive worldwide legal analysis of the laws and regulations of corporate tax. It is divided into two main sections: One general chapter. This chapter discusses what makes the difference between acceptable tax mitigation and unacceptable tax avoidance. Country question and answer chapters. These provide a broad overview of common issues in corporate tax laws and regulations in 42 jurisdictions. All chapters are written by leading corporate tax lawyers and industry specialists and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editor William Watson of Slaughter and May for his invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.co.uk. Alan Falach LL.M. Group Consulting Editor Global Legal Group Alan.Falach@glgroup.co.uk
Chapter 33 Russia Lidings 1 Tax Treaties and Residence 1.1 How many income tax treaties are currently in force in Russia? There are 80 (eighty) treaties on the avoidance of double taxation in Russia currently in force with various countries, including the UK, the USA, Japan, China, Singapore and others. The latest of them was concluded between the Russian Federation and Malta on the 24th of April 2013. Stepan Guzey, PhD 2 Transaction Taxes 2.1 Are there any documentary taxes in Russia? Yes. For example, in accordance with the Tax Code, state duties are deemed as documentary taxes. 2.2 Do you have Value Added Tax (or a similar tax)? If so, at what rate or rates? Yes, they follow the OECD. The tax system in the Russian Federation includes Value Added Tax (VAT) at three rates: 0%; 10%; and 18%. Each rate corresponds to different types of taxable items and/or respective trade procedures. 1.3 2.3 1.2 Do they generally follow the OECD or another model? Do treaties have to be incorporated into domestic law before they take effect? Is VAT (or any similar tax) charged on all transactions or are there any relevant exclusions? In accordance with Russian domestic law, treaties on aspects of taxes which change acting tax legislation are subject to be incorporated through ratification. In general, all transactions are VAT taxable (such as the transfer of the right of ownership, execution of works, rendering of services, transfer of goods, and execution of works and rendering of services for self-interest purposes). 1.4 At the same time, under arts. 145, 145.1, 149 and 150 of the Tax Code, some transactions are directly excluded from VAT taxation i.e. the sale of specific types of goods (i.e. medical devices and drugs, basic consumer goods), property leases to foreign entities (in accordance with a special list approved by the Ministry of Finance), exclusion from VAT taxation of specific types of taxpayers, etc. Do they generally incorporate anti-treaty shopping rules (or “limitation on benefits” articles)? No, but Russia has started a DTT amendments campaign aimed at including “limitation on benefits” articles. 1.5 Are treaties overridden by any rules of domestic law (whether existing when the treaty takes effect or introduced subsequently)? 2.4 Is it always fully recoverable by all businesses? If not, what are the relevant restrictions? Generally no, but court practice allows for DTT provisions to be overridden when they breach public order or the sovereign interests of the state. VAT in Russia is a recoverable tax, with respective restrictions deriving from the use of special tax regimes by taxpayers. 1.6 2.5 What is the test in domestic law for determining corporate residence? Are there any other transaction taxes? No, there are no other transaction taxes. A company is deemed to be a tax resident of the respective state if it has been duly and lawfully established under the state’s corporate laws. 2.6 Are there any other indirect taxes of which we should be aware? Excise duties and customs duties are forms of indirect taxation in Russia. 212 WWW.ICLG.CO.UK ICLG TO: CORPORATE TAX 2014 © Published and reproduced with kind permission by Global Legal Group Ltd, London
Lidings 3.1 Is any withholding tax imposed on dividends paid by a locally resident company to a non-resident? Yes, dividend payments from residents to non-residents are taxable at a 15% flat rate. An exemption from this rule derives from DTT and taxpayers could benefit from a 5% to 10% reduction in tax rates. 3.2 Would there be any withholding tax on royalties paid by a local company to a non-resident? Income from the use of the Russian Federation in the rights of intellectual property (royalties) are included in the list of taxable incomes at the source. The tax rate is 20%. This rate can be adjusted by a DTT between Russia and the country of a nonresident company incorporation, which varies from 0% to 15%. “controlled” transactions by the tax authorities in the case that the terms of transactions greatly differ from common market practice. 4 Tax on Business Operations: General 4.1 The headline rate of tax on corporate profits is 20%. 4.2 Would there be any withholding tax on interest paid by a local company to a non-resident? The standard tax rate for interest payments is 20%, but this can be reduced by DTT. Reduced rates vary from 0% to 15%. 3.4 Would relief for interest so paid be restricted by reference to “thin capitalisation” rules? Under recent court practice, interest payments that formally could be excluded from taxation must, in fact, be taxed with the respective reference to “thin capitalisation” rules, but only in cases when the DTT does not directly stipulate so-called unlimited relief. 3.5 If so, is there a “safe harbour” by reference to which tax relief is assured? When the DTT directly stipulates unlimited relief, the taxpayer could benefit from a zero tax rate on interest payments. 3.6 Would any such rules extend to debt advanced by a third party but guaranteed by a parent company? No, they would not. 3.7 4.4 If the tax base is accounting profit subject to adjustments, what are the main adjustments? Tax and accounting adjustments are not the same, so one must refer to the Tax Code rules regarding appropriate tax adjustments of the tax base. An example of accounting adjustment of the corporate tax base is depreciation, which is calculated under accounting profit rules. 4.5 Are there any tax grouping rules? Do these allow for relief in Russia for losses of overseas subsidiaries? In Russia, there is a structure of a consolidated group of taxpayers. It is implemented to minimise tax. Also, the primary responsibility for the calculation and payment of corporate income tax, the payment of fines and penalties, as well as reporting to the tax authorities the appropriate tax return per person belongs to the responsible party of the consolidated group of taxpayers. Nevertheless, these rules do not allow relief for losses of foreign subsidiaries. Are there any other restrictions on tax relief for interest payments by a local company to a non-resident? No, there are no other restrictions. Is there any withholding tax on property rental payments made to non-residents? If a non-resident pays taxes in Russia, these rental payments can be deducted from the total revenue and reduce the tax on corporate profits. 3.9 Is the tax base accounting profit subject to adjustments, or something else? As a general rule, the corporate income tax base is not the same as accounting profit. The Tax Code stipulates special rules for corporate income tax base calculation and also defines revenue and expenses and establishes what cannot be classified as expenses. 4.6 3.8 When is that tax generally payable? The tax period is the calendar year but taxpayers are obliged to make an advance payment during reporting periods over 3, 6 and 9 months of the year. At the end of the tax period, taxpayers adjust payments by making additional payments or by claiming overpayments back. 4.3 3.3 What is the headline rate of tax on corporate profits? Russia 3 Cross-border Payments Russia Does Russia have transfer pricing rules? Yes, Russia has introduced new transfer pricing rules since the 1st of January 2012. However there is no clear practice at this time and a potential risk of this is a recalculation of taxes under such Is tax imposed at a different rate upon distributed, as opposed to retained, profits? There is no difference in the tax rate, which is generally 20%. However, a subject of the Russian Federation can reduce this tax rate to 16.5%. 4.7 Are companies subject to any other national taxes (excluding those dealt with in “Transaction Taxes”) - e.g. tax on the occupation of property? Other national taxes are of a special character and are not applied by default to companies; among them are excise duties, state duty, subsoil extraction tax, water tax, and duties for the use of natural biological resources. ICLG TO: CORPORATE TAX 2014 © Published and reproduced with kind permission by Global Legal Group Ltd, London WWW.ICLG.CO.UK 213
Lidings 4.8 Are there any local taxes not dealt with in answers to other questions? Russia There are other local taxes among which the most important are corporate property tax, transport tax, land tax and gambling tax. Russia corporate profit tax is levied according to the general rule: the tax is based on the total revenue of the branch minus the total expenses of the branch. 6.4 Would such a branch be subject to a branch profits tax (or other tax limited to branches of non-resident companies)? 5 Capital Gains 5.1 Is there a special set of rules for taxing capital gains and losses? Corporate profit tax rules do cover the taxation of capital gains and losses. Mentioned rules apply to the profit-making assets of the investor. The capital gain appears when the assets are sold at a higher price in comparison to the one at which they were acquired. Also, if those assets earn interest, that will also be considered a capital gain. 5.2 If so, is the rate of tax imposed upon capital gains different from the rate imposed upon business profits? In Russia there is no special branch profits tax. The branch would be taxed under the general rules based on the branch’s activities in Russia. 6.5 Would a branch benefit from double tax relief in its jurisdiction? No, it would not benefit. 6.6 Would any withholding tax or other similar tax be imposed as the result of a remittance of profits by the branch? The branch shall pay all taxes before remittance of profits to the company abroad. No, general rules apply. 7 Overseas Profits 5.3 Is there a participation exemption for capital gains? There are some exemptions from the general rule, for example the shares and quoted shares in high-technology Russian companies acquired after the 1st of January 2011 and held for more than 5 years are exempted from capital gains. 5.4 Is there any special relief for reinvestment? 7.1 Under the general rule of art. 311 of the Tax Code, Russia taxes global income but taxes paid by an overseas branch are credited in an amount no larger than tax to be paid in Russia. 7.2 No, there is no special relief for reinvestment. 5.5 Does Russia impose withholding tax on the proceeds of selling a direct or indirect interest in local assets/shares? No, this is not imposed in Russia. 6 Local Branch or Subsidiary? 6.1 What taxes (e.g. capital duty) would be imposed upon the formation of a subsidiary? A subsidiary is a separate legal entity and is personally liable for its own taxation. The mother company is not taxable by special taxes upon the formation of a subsidiary. 6.2 Are there any other significant taxes or fees that would be incurred by a locally formed subsidiary but not by a branch of a non-resident company? As a separate legal entity, a subsidiary formed under Russian law will be obliged to pay all national and local taxes deriving from its activities in Russia and abroad. 6.3 How would the taxable profits of a local branch be determined in its jurisdiction? Does Russia tax profits earned in overseas branches? Is tax imposed on the receipt of dividends by a local company from a non-resident company? Yes. The taxation of dividends is based on the application of tax rates of 9% (general rule) and 0% (particular cases). 7.3 Does Russia have “controlled foreign company” rules and, if so, when do these apply? No, Russia does not have “controlled foreign company” rules. 8 Taxation of Real Estate 8.1 Are non-residents taxed on the disposal of real estate in Russia? Foreign companies are recognised as real estate tax payers in Russia when they own land and real estate without exemptions. 8.2 Does Russia impose tax on the transfer of an indirect interest in real estate located in Russia and, if so, what constitutes an indirect interest? All transactions involving real estate where the property is transferred shall be taxed, and the same goes for cases where real estate is “packed” and sold, for example indirectly as an LLC stocks transaction. VAT shall be charged in the same way as for Russian companies and 214 WWW.ICLG.CO.UK ICLG TO: CORPORATE TAX 2014 © Published and reproduced with kind permission by Global Legal Group Ltd, London
Lidings Does Russia have a special tax regime for Real Estate Investment Trusts (REITs) or their equivalent? No, Russia does not have a special tax regime for Real Estate Investment Trusts (REITs). 9.2 Is there a requirement to make special disclosure of avoidance schemes? If a company is subject to transfer pricing control then it is obliged to make appropriate disclosures. Russia 8.3 Russia 9 Anti-avoidance 9.1 Does Russia have a general anti-avoidance or anti-abuse rule? Yes, transfer pricing and thin capitalisation rules are regarded as general anti-avoidance rules in Russia. Stepan Guzey, PhD Lidings Naberezhnaya Tower Block C Presnenskaya nab. 10 Moscow, 123317 Russia Tel: Fax: Email: URL: +7 495 989 44 10 +7 495 989 44 20 SGuzey@lidings.com www.lidings.com Partner, Head of Tax and Customs Practice Stepan Guzey, PhD chairs the Tax and Customs Practice Group at Lidings’ Moscow office. His practice focuses on tax consulting in regard to common business activities, assets and share capital deals with emphasis on tax treaties, cross-border taxation, transfer pricing and some EC tax law issues. With over ten years of experience he has acted as legal adviser on a wide variety of projects involving corporate financing and integrated support of investment projects. His experience includes consulting on corporate and individual finance and taxation matters and representing clients in tax disputes. As a certified tax adviser and an expert in Russian tax and customs law, Stepan has represented clients in complex projects including trade and export finance, corporate restructuring, project finance and PPP, and advised on tax aspects of M&A and regulatory matters across a wide range of industry sectors. Lidings is a leading independent national law firm with a broad base of clientele in Russia and the CIS. The firm advises its predominantly international clients from its two offices in Moscow and St. Petersburg. Since its launch in the mid-2000s, the firm has achieved impressive growth and built a noteworthy reputation. Lidings has followed a consistent strategy of growth to become a high quality provider of legal services with a clear focus to advise, almost exclusively, international businesses active in Russia and the CIS. It has also been successful in establishing sector expertise in certain industries where global investors play an important part, such as Pharmaceutical and Life Sciences, Automotive, Energy and Aviation. The firm’s significant footprint, accompanied by a growing degree of brand reputation in the domestic markets, has been recognised by a series of awards from independent global market analysts like The Legal 500 EMEA, Chambers and Partners, ILFR1000 and Martindale-Hubbell. ICLG TO: CORPORATE TAX 2014 © Published and reproduced with kind permission by Global Legal Group Ltd, London WWW.ICLG.CO.UK 215
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