Updates on Profit Tax in Russia

Profit Tax

Today we discuss changes in Profit Tax regulations in Russia:

It’s safer to present the surplus separately from shortages

When calculating income tax it is ill-advised to offset surpluses and shortages found during inventory, since

this possibility is not provided for by the Tax Code.

Accounting. Shortages and surpluses can be offset by decision of the head of a company in cases where re-

grading occurs for the same period and is done by the same employee accountable for assets. The shortage

will then not be reflected in the cost, nor the cost of the surplus in income. Transactions are made only in the

analytical accounting:

DEBIT 10 (41, 43) CREDIT 10 (41, 43) shortages

identified are offset against surpluses

Shortages which are not offset have to be included in the costs. Any surplus - in revenues.

Tax accounting. Surpluses have to be included in non-operating income (p. 20 Art. 250 of the Tax Code).

Shortages can be accounted in the costs (item 5 of p. 2, Art. 265 of the Tax Code). Writing off the costs is only

possible in cases where there are guilty persons or in cases where no perpetrators are identified. When it

comes to the sales figures, you don’t have to go to the police for official confirmation. An inventory Act would

be enough. In other cases, such as materials missing in the warehouse, it is safer to get an investigator’s

warrant.

Legislation acts: Letter from Ministry of Finance December, 1 2014 № 03-03-06/1/61228 (p. 5.3, 5.4 of

Methodological instructive regulations, app. by order of the Ministry of Finance of Russia on June,13 1995

№ 49). Letter of Ministry of Finance of Russia from April, 7 2014 № 03-03-10/15517.

It is better to check the expiry date of payables regularly

It has become very risky to not include payables overdue in revenues, with reference to the absence of

the director's order. This will clearly lead to disputes with the inspection and also lead to additional accruals for

income tax.

Payables, for which the limitation period has expired, have to be included in the non-operating income

on the basis of the inventory data, with a written justification and order from the head of the company. But

according to the rules of the Tax Code, the recognition date of income is the last day of the reporting period in

which the limitation period expires (p. 4 of Art. 271 of the Tax Code). Hence, the absence of an order does not

negate the obligation to take into account the company's revenue.

Challenging such an approach would be unfruitful. The judges are of the same opinion: even if a

company has not conducted an inventory, it should not affect the tax accounting of overdue payables

(Resolution of the Presidium of Supreme Court of Arbitration of Russia from June 8, 2010 № 17462/09).

Therefore it is better to check the dates, which the contractor has to follow to meet the obligations under the

contract, to identify debts with expired statute of limitations and take them into account in the declaration of

income tax return for 2014.

Legislation acts: A Letter from Federal Tax Service from December, 8 2014 г. № GD-4-3/25307

The organization has the right to determine the way of tracking expenses for the acquisition

cost of a property, which is non-depreciable, on their own

Organizations can determine the procedure for the recognition of tangible costs independently, claims

provided in sp. 3, p. 1, Art. 254 of the Tax Code - in this subparagraph there are the costs listed for the

purchase of tools, fixtures, equipment, devices, laboratory equipment, special clothing, and other means of

individual and collective protection provided by the legislation of the Russian Federation, and other property

which is not depreciable. Under the previous version of this statement the costs for such property were fully

included in the tangible costs that were put into operation.

From January, 1 2015 the taxpayer can deduct the cost of such property recorded for more than one

reporting period. At the same time it is necessary to take into account the period of use of the property or other

commercially reasonable performance.

Legislation acts: sp. 3, p. 1, Art. 254 of the Tax Code

It is not necessary to include interest in the initial cost of property

The amount of interest on credits and loans obtained for the purchase of fixed assets are not included

in the initial cost of the property. Interest from the calculation of income tax is recorded as non-operating

expenses. This point of view is set out in a letter from the Federal Tax Service, which was sent to local

inspectors.

Legislation acts: A Letter from Federal Tax Service from 23.03.2015 № GD-4-3/4568@).

Income from the sale of the resulting free property can reduce the market value of such

property as of the date of its receipt

From January 1, 2015, organizations can consider non-depreciable property free of charge for tax

accounting purposes, its value fixed at market value, determined on the date of its obtainment. In connection

with these changes there was a dispute resolved, which was associated with a decrease in income from the

sale of other property received free of charge. Such income may be reduced by the amount of income taken

into account for the purpose of income tax with the gratuitous obtainment of property in accordance with p. 8

Article 250 of the Tax Code.

Legislation acts: p. 2 p. 2 Art. 254 of the Tax Code of Russian Federation

The LIFO method is excluded from taxation rules

We remind you that this method is not used in accounting since January 1, 2008 (see the Order of the

Ministry of Finance of Russia from 26.03.2007 N 26n "On Making Amendments to the regulations on

accounting").

Legislation acts: p. 8 Art. 254, sp. 3 p. 1 Art. 268, p. 3 Art. 329 of the Tax Code of the Russian

Federation.

The exemption rules from taxation of income in the form of property, received free of charge

by Russian organizations from subsidiaries, are clarified

On January 1, 2015 sp. 11 p. 1, Art. 251 of the Tax Code was updated. Previously, in accordance with

the 3rd paragraph of this subparagraph, the determination of the tax base for the income the property to be

received free of charge by a Russian organization from a company, which authorized (share) capital (fund)

consisted of more than 50 percent contribution (share) from the receiving organization, was not considered.

Now there is the following clarification: this organization should possess the right of ownership of this

contribution (shares) on the date of transfer of the property. In addition, if such property is turned over by a

foreign company, you’re allowed to ignore the income for tax purposes in this situation, but only when it has a

permanent location in a state which is not included in the list of countries and territories approved by the

Russian Ministry of Finance. Currently, this list is approved by the Order of the Russian Ministry of Finance from

13.11.2007 N 108n.

Legislation acts: sp. 11 p. 1 Art. 251 of the Tax Code of the Russian Federation

The income tax rate, which is, as a general rule, applied to the income of Russian

companies in the form of dividends received from Russian and foreign organizations, has

from January 1st 2015 increased from 9 to 13 percent.

The tax rate on profit at a rate of 13 percent applies if the decision on a dividend payment was made

in 2014, but the actual arrival in the Depository was carried out in 2015. This position of the Russian Finance

Ministry is reflected, in particular, in a Letter from 30.12.2014 N 03-08-05 / 68773.

Legislation acts: sp. 2 p. 3 Art. 284 of the Tax Code of the Russian Federation.

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