Baker & McKenzie : Tax policy in 2009

In 2009 tax policy in Russia was dictated, for the most part, by the economic crisis that has hit Russia like the rest of world.

In late 2008 a number of important anti-crisis amendments to the Tax Code were adopted with the aim of reducing the tax burden on business. Among the most significant changes were reduction of the corporate income tax rate from 24% to 20%, increase of the maximum interest rates that can be deducted from taxable income, and the increase of the lump-sum depreciation allowance from 10% to 30%.

VAT can now be paid in instalments within 3 months of the reporting quarter and the tax can be deducted from advances; the period for providing documents to confirm export of goods has been extended; and the requirement to pay VAT in a separate payment for barter transactions has been abolished. Finally, it has become possible for the tax authorities to authorise the partial reimbursement of VAT claimed under a given tax declaration in the amount properly confirmed by supporting documents.

However the underlying tendency has been towards more stringent administration and collection of taxes; the tax authorities have been more active in tracing typical tax avoidance schemes. The concept of unjustified tax benefits has been further developed by court practice. Also, from 2009 a pre-court appellation of a decision on tax audit to a higher tax authority has become obligatory, which made it necessary to go through the pre-trial appeal process before it was possible to challenge a tax decision in court. The intention was to lighten the burden of the arbitrazh courts, yet in reality the tax authorities are not ready for the additional workload and the new procedure significantly increases the time needed to overrule an incorrect decision.

For 2010 several important amendments to the taxation of financial market transactions have come into effect. The changes aim to fill gaps and clear ambiguities in taxing REPO, derivatives, stock lending, and hedging transactions. Individuals can now carry forward losses on securities transactions to future tax periods. Overall, these changes should make the Russian financial market more attractive to corporate as well as individual investors.

At this very moment a long expected bill on transfer pricing has been submitted by the government to the State Duma. It is expected that the transfer pricing bill, together with the bill on a consolidated taxpayer, will become law by the end of 2010. New rules on transfer pricing are likely to be the most important change in the taxation of medium and large businesses and will require serious preparation in 2010.

Author: Roman Bilyk, associate Baker & McKenzie