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. Last Updated: 07/27/2016

THE TAX ADVISER: New Tax Code Gives Advantage to Payers




Dear Tax Adviser,


I've heard that a new tax code has been passed. Is this true? If so, would you please outline some of its more significant features.


Actually, only the first part of the tax code was adopted in July, and it comes into effect Jan. 1, 1999. This portion of the code addresses general and administrative procedures and also introduces important features into the Russian tax system. You may be interested to know, for example, that the first chapter quite clearly states: "All unremovable doubts, contradictions and ambiguities of legislative acts relevant to taxes and/or fees shall be interpreted in favor of taxpayers [payers of fees]."


The new tax code also introduces the concept of transfer-pricing, largely ignored by Russia's current tax laws. In general, the local tax authorities should accept the price of goods as stated by the parties to the transaction. However, the code provides for three instances in which the tax authorities are entitled to verify the prices used: 1) if the agreement was concluded between related parties, 2) in the case of barter transactions, or 3) if the contract price varies by more than 30 percent of the market price for identical merchandise. In these instances the code empowers the authorities to apply the market price for tax purposes.


For those of you with frozen bank accounts, of particular relevance is the fact that the code states: "Tax obligation shall be considered fulfilled by the taxpayer from the moment an order to pay the tax in question is presented to the bank, provided that the money balance of the taxpayer's account is sufficient to make the payment." Presumably, therefore, if you are not able to use your frozen funds for any other purpose, you may be able to use them to pay your tax obligations.


More importantly, the code differs from previous Russian tax legislation by providing for the presumption of innocence until proven otherwise in a court of law. The burden to prove guilt specifically rests with the Tax Inspectorate. Moreover, it is the obligation of the tax authorities to explain the application of Russian tax law, to maintain confidentiality of information and to treat taxpayers with "honor and dignity."


In short, I believe that this portion of the code represents an improvement over the law it replaces. Unfortunately, the remainder of Russia's tax code seems to have been put to the side as a result of the current economic crisis, and is unlikely to go into effect by the beginning of next year.