19 March 2020
Taxation and the pandemic

The spread of coronavuirus (COVID-19), as well as the introduction of a broad range of restrictive measures to contain it, will have a negative impact on many sectors of the Russian economy. How will this situation affect taxpayers' obligations in relation to making mandatory payments to the budget? Further considering the restrictive measures and the fact that most employees will start working remotely,  will there be a change to the overall interaction between taxpayers and tax authorities?

Unfortunately, most measures in support of taxpayers during the pandemic are under development. We continue to monitor relevant news and will update you as soon as changes take place.

We have prepared answers to the most pressing questions that concern taxpayers based on information currently available.

1. Will there be tax control checks during the pandemic?

By order of the Prime Minister, field tax audits will be suspended until May 1, 2020, with the exception of unscheduled inspections, the basis of which is harm to life, the health of citizens, occurrence of emergency situations of natural and man-made nature.

2. Will the deadlines for filing tax reports be affected (including CFC notifications)?

At present, no changes have been made to the provisions of the Tax Code on the deadlines for submission of tax reporting. On its official website, the Federal Tax Service of Russia advises taxpayers to make the most of interactive services such as a personal account of the taxpayer. However, according to media reports, the Federal Tax Service of Russia is discussing possible postponement of the declaration of personal income tax (April 30, 2020) to minimize potential crowding. However, official information on this issue as of March 19, 2020 is missing.

We also note that on March 20, 2020 the deadline for submitting notifications on CFC notifications. At the moment, this period has not been postponed. The position of the Federal Tax Service of Russia on this issue is not known.

However, we draw attention to the fact that extraordinary and insurmountable circumstances are considered to be mitigating circumstances in case a person commits tax offenses. Hence, each situation should be considered on a case by case basis taking into account all circumstances.

3. What supportive measures are planned for the most vulnerable sectors of the economy?

  • On March 18, 2020 the Federal Tax Service of Russia was instructed to ensure the granting of a deferment (tax break) on the payment of taxes and insurance premiums, the due date of which falls on the period until May 1, 2020, in respect of taxpayers related to the tourism and air travel.

The list of such organizations in the Federal Tax Service of Russia will be provided by industry authorized authorities. There is no need to contact the tax authorities.

  • In respect of tax debt arising from a claim for payment of tax and where collection of tax is no earlier than May 1, 2020 penalties will not be charged. The relevant bill is planned to be submitted to the Government by March 20, 2020.
  • For taxpayers related to the tourism and air travel industries, a special grounds for deferral of taxes, fees, insurance premiums. It is planned that obtaining a deferral will be carried out without interest and through a simplified procedure. Information on the support of taxpayers of other sectors of the economy at the present moment is missing.
  • A three-month grace period has been announced for small and medium-sized businesses to pay insurance premiums.

4. Is it possible to provide installment / deferral of tax payments in connection with a pandemic for enterprises of other industries?

The tax code of the Russian Federation already provides for the provision of installments or deferrals to taxpayers whose position does not allow tax to be paid on time.

Reasons for which installments / deferment can be granted, include “causing taxpayer damage as a result of natural disaster, technological disaster or other force majeure circumstances ", as well as "threat that the payer will become insolvent (bankrupt) in the event of  lump-sum payment of tax. "

If referring  to force majeure circumstances (including pandemic), the taxpayer will need to show the effect of force majeure circumstances, as well as assess the damage caused.

However, it appears claiming installment / deferment on such a basis may be difficult for enterprises that have generally experienced negative consequences as a result in reduction of customer traffic, etc. For example, if these measures lead to the non-performance of obligations by the counterparties, claiming installments / deferrals on this basis may be difficult.

It is potentially possible to receive installment / deferment payments for other reasons mentioned in the tax code of the Russian Federation (for example, the threat of bankruptcy). However, in this case, the amount of debt will be charged interest.

In any case, the assessment of the possibility of using deferred / installment payment of mandatory payments should be made depending on specific factual circumstances, as well as consideration of  the nature of the restrictive measures in force.

practice areas

Key contacts

Olga
Morozova

Moscow

Sergey
Kalinin

Moscow, Limassol

 

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