The Russian President’s address to the nation

Today on March 25, 2020, in his official speech regarding the spread of COVID-19 in Russia, Vladimir Putin announced several measures:

  • The period from March 30 until April 3, 2020 is nationwide declared a period of holidays in which the employees will continue to receive their salaries. Exemptions are being made for certain essential organizations and their employees. (It is equivalent to public holidays. Due to the additional holidays, the complexity of payroll calcualtion for March and April needs to be considered. )
  • The referendum for voting on the intended amendments of the Constitution will be postponed to a later  date.
  • Until the end of 2020, state allowance for sick leaves will be calculated, based on the amount of at least one monthly minimum wage.
  • Maximum state unemployment allowance will be increased up to the minimal monthly wage.

 

In order to protect small and medium sized businesses, such businesses will be granted moratoria for the next six months regarding:

  • Obligations to repay bank credits,
  • Obligations to pay taxes, VAT excepted, (micro businesses are also granted a moratorium for the payment of social contributions to the social funds),
  • Creditors’ applications for bankruptcy and for enforcing debts.

 

The following amendments regarding taxation should be implemented:

  • The rates of social contributions will be decreased by half from 30% to 15%,
  • Withholding tax on dividends paid to foreign companies will be 15%. Although the wording is ambiguous this seems to apply only to companies in so called offshore jurisdictions which are often used for tax evasion schemes. Double treaty taxation with foreign countries are to be changed accordingly. If a partner country does not agree, Russia will quit the relevant double taxation treaty.
  • The income of physical persons gained from bank deposits and debt securities will be subject to personal income tax at a rate of 13% if the amount of the investment exceeds 1 million rubles.

Official governmental acts to implement all the announced measures have not been published yet.

More information and further explanation will follow soon.

First statements our clients and partners to this announcement:

Stefan Teuchert, BMW

We expected this, especially considering what is already happening in Europe. As a company we are prepared, even though it is not convenient at all.

Johan Vanderplaetse, Schneider Electric

We are satisfied with most of the announced measures. We are analyzing the consequences and expect further steps also from the Moscow Mayor.

Ivan Volkov,  Sinclair Pharma

Basically, we approve of government decisions. The only point that causes misunderstandings is the announced non-working week. It makes little sense to us to suspend work while continuing to pay wages. Labor productivity will decrease, which will be at the expense of employers.

Contact us

Alex Stolarsky
Partner, Rechtsanwalt, Legal & Compliance, Moscow
+7 / 495 / 956 55 57
Dr. Thomas Mundry
Partner, Legal, Tax & Interim Management, Moscow
+7 / 495 / 956 55 57

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