New measures to support business in the tax area

In this newsletter we will cover new measures to support business that affect the tax area. The measures were introduced in connection with the new coronavirus infection and apply mainly to small and middle enterprises (“SME”). These measures include the following:

1. Entry of information about organizations into the SME Register on favorable terms
2. Forgiveness of taxes for the 2nd quarter of 2020 for SMEs in certain industries
3. Possibility to receive deferred tax payments or installments

Review of changes

1. Entry of information about organizations into the SME Register

The Federal Law[1] provides the opportunity to present the necessary data, such as the average headcount and income data for 2018, until 30 June 2020, for inclusion in the SME Register (“Register”) (for those who were not included in the Register on 10 August 2019 due to failure to provide this data).

This change is connected with the provision by the state of a number of support measures for this category of organizations included in the Register as of 1 March 2020.

It is not yet clear whether the entry in the Register will be made retroactively, which will allow organizations to benefit from the support measures, or whether the changes will be made in the Register only after the actual submission of this information to the Register and these organizations will be deprived of the support measures.

In case of companies with foreign participation, the auditors provide the necessary information for inclusion in the register.[2] Since the law refers to the entities that submit the information themselves, it is likely that more than 49% of companies with foreign participation will not be subject to these rules. They can be included in the Register on general grounds no earlier than 10 August 2020, provided that the auditors submit information about them from 1 to 5 of July.

2. Tax Forgiveness for the 2nd quarter of 2020

The right not to pay certain tax payments will be granted to SMEs from the list of industries[3] affected by coronavirus, individual entrepreneurs, and some non-profit organizations.

This measure will apply to the following tax payments to be paid for the second quarter: income tax, excise duties, water tax, Mineral Extraction Tax, Single Agricultural Tax, Simplified Tax System, unified tax on imputed income, transport tax, property tax, land tax, and trade duty.

Thus, the VAT and personal income tax paid by the tax agent will have to be paid by the organization in a generally established procedure.

An additional measure of support is a zero rate for  social contributions regarding payments in favor of individuals assessed for April-June 2020 for this category of taxpayers.

3. Possibility to receive deferred tax payments or installments

The list of organizations that will be able to apply for this measure on the basis of the Rules for the provision of deferred payment of taxes (installments) and advance payments on taxes and insurance premiums, approved by the Government of the Russian Federation of April 2, 2020 № 409 “On measures to ensure sustainable development of the economy” was expanded.[4]

The measure, introduced by the Resolution of the Government of the Russian Federation No. 699 dated May 16, 2020, covers the following taxes: corporate property tax, land tax and advance payments on such taxes, and personal property tax.

Now, this measure can be used by organizations or individual entrepreneurs who have provided deferred payment of rent under agreements on the lease of immovable property in accordance with the requirements approved by the Government of the Russian Federation on 3 April 2020 № 439 “On establishing requirements to the terms and timing of deferred payment of rent under real estate lease agreements”.

To take advantage of this measure, an organization must meet the following criteria:

1) the code of the taxpayer’s main activity in the Unified State Register of Legal Entities or Unified State Register of Industrial Property as of March 1, 2020, corresponds to code 68.2 “Lease and management of own and leased immovable property”; [5]

2) the taxpayer owns a commercial real estate object on the right of ownership.

4. Apart from these changes, there have been other relieves in tax sphere that should be mentioned (introduced by Federal Law dated June 08, 2020 N 172-FZ “On Amending Part Two of the Tax Code of the Russian Federation”):

• The moratorium on business tax inspections has been extended until 30 June.
• Tax collection measures have also been suspended until 30 June.
• The tax inspectorates have resumed work related to the admission of taxpayers from 15 June 2020, but prior registration is required.

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[1] Federal Law dated June 08, 2020 N 166-FZ “On Amending Certain Legislative Acts of the Russian Federation with the Purpose of Taking Urgent Measures to Ensure Sustainable Development of the Economy and Prevent the Consequences of the Spread of a New Coronavirus Infection”
[2] We have made a detailed review of this Order in the past
[3] The list was approved by Government Decisions No. 409 of April 2 (amended by Resolution of the Government No. 792 of 30 May 2020) and No. 434 of April 3, 2020.
[4] We have made a detailed review of this ordinance in the past
[5] We have made a detailed review of this ordinance in the past