Assistance to drowning business is in the hands of… tax authorities? Or tax measures to support entrepreneurs amid the current pandemic
The coronavirus pandemic is a serious blow to the global economy that will test the resilience of most entrepreneurs. It also justifiably gives rise to the following question: what measures is Russia taking to support entrepreneurs affected by the current slump in demand due to the coronavirus? In this newsletter, we have reviewed the tax measures that are being put in place to support the business community.
On March 16, 2020, Prime Minister Mikhail Mishustin signed an anti-coronavirus decree and also announced urgent measures due to the current situation[1]. Some of these urgent actions are tax measures to support entrepreneurs and can be divided into two main categories:
- Measures applicable to all taxpayers; and
- Measures applicable to specific industries or taxpayer categories.
What measures have already been taken?
The following tax support measures are available to all taxpayers[2] already now:
- No new field tax audits will be scheduled, and those already initiated will be suspended until May 01, 2020;
- Tax authorities will not carry out any tax control activities entailing direct contact with taxpayers (e.g. interviews, inspections, summons, seizures, inventories, etc.) until May 01, 2020;
- Tax authorities will examine tax offense cases through telecommunication and video conferencing channels.
The following measures are also provided for taxpayers from the tourism and air transportation industries:
- Collection of taxes and social insurance contributions deferred until May 01, 2020[3];
- Suspension of issuance of new claims for payment of taxes and social insurance contributions.
The government is looking into extending these measures to other industries affected by the pandemic.
What other measures are planned?
The following measures have also been planned:
- No accrual of penalty interest on tax arrears owed by companies from the tourism and air transportation industries. A federal law needs to be adopted to apply this measure. A bill is being drafted and is yet to be submitted to the State Duma.
We believe that this measure will be applied further down the line to other industries and enterprises greatly affected by the coronavirus pandemic.
Although there are currently no formal prerequisites to apply this measure, the possible extension of deadlines for submitting annual reporting on personal income tax has also been discussed[4]. We would like to note that tax law provides for exemption from liability for a tax offense if such offense arises as a result of a natural disaster or other extraordinary and unavoidable circumstances[5]. Although it is difficult to gauge at the moment whether these rules will apply to the current situation and whether tax authorities will exempt taxpayers from liability for late submission of reporting as a result of restrictions imposed due to the coronavirus, it is in our opinion unlikely that such exemption will be applied to all.
Please feel free to contact us if you would like more detailed advice on the tax measures to support entrepreneurs as well as advice on how to adapt to the current situation.
If you have any questions or would like to discuss the current situation, please write to Anton Kabakov.
Truly yours,
[1] Government Decree N 285 On the Coordination Council to the Russian Government to Combat the Spread of the Coronavirus Infection in the Russian Federation dated March 14, 2020; Decree No. 623r- Approving its Composition dated March 14, 2020
[2] Federal Tax Service Order No. ЕД-7-2/181@ Adopting Urgent Measures to Prevent the Occurrence and Spread of the Coronavirus Infection dated March 20, 2020
[3] There is an exception to this rule. Claims for tax payment and tax collection will still be issued if not sending them to taxpayers by May 01, 2020 constitutes a breach of statutory deadlines for sending those claims. The statutory deadlines are set out in Article 70 and Article 46(3) of the Russian Tax Code.
[4] https://ria.ru/20200323/1569030693.html
[5] Article 111(1(1)) Russian Tax Code