On March 11, 2025, the BEPS Academy hosted a round table discussion ‘MNO Belarus-Russia’, at which Anton Kabakov, Partner at Forte Tax & Law, spoke about the approaches that the Russian Federal Tax Service takes to transfer pricing (TP) audits.
The participants discussed key regulatory trends and some practical issues facing companies, including the increased risks and responsibilities associated with related party transactions and the need for companies to self-adjust the tax base to avoid fines and secondary adjustments. The discussion also covered the fact that the Russian Federal Tax Service is shifting its control activities to the stage of a pre-audit analysis.
Anton Kabakov plans to conduct a 4-lecture course on the regulation of transfer pricing (TP) in the near future.
The BEPS Academy is a recognized platform for the exchange of experience and training of specialists in international taxation, and we will be pleased to see you among the audience to discuss TP issues. The course is to take place in April – early May.
If you would like to discuss your case and receive answers to your questions about topical issues, please send an email to Anton Kabakov.
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Ekaterina Beliaeva, Associate at Forte Tax & Law, comments on this issue for the Vecherniy Peterburg newspaper:
- An employee can still substantiate his or her travel expenses even if the employee loses supporting documents;
- If the employer believes that submitted documents do not substantiate the expenses claimed, the employer may withhold the expenses from the employee’s pay;
- The employee, if the employee disagrees with such withholding, may apply to the labor inspectorate or the court.
To read the full article, click here (in Russian).
Read MoreLetter No. 27-01-21/11349 of the Russian Ministry of Finance dated February 10, 2025 was recently published, which is another attempt to clarify the procedure for including dividends in the customs value of goods.
The Russian Ministry of Finance, like the Russian Supreme Court before it, points out that in a situation where goods are imported as part of transactions between members of the same group of companies, and the income (revenue) of a Russian buyer is primarily derived from the sale of imported goods, the decision to pay dividends is solely at the discretion of the foreign group of companies, which creates a risk of manipulation of the customs value.
If the customs authorities find that the payments described as dividends are such only in form, but in essence ensure that the seller, which is a member of the same group of companies with members of the company, receives part of the income (revenue) due to it from the sale of imported goods, such payments will be included in the customs value of the goods pursuant to Article 40(1)(3) of the EAEU Customs Code.
In this new letter, the Russian Ministry of Finance describes the circumstances that the declarant must confirm for the declared customs value of the imported goods to be recognized as valid. The Russian Ministry of Finance states that the declarant is required to confirm that the price actually paid or payable for the goods was formed in the ordinary course of trade—i.e., the goods were purchased under competitive market conditions. Simply put, the importer must show that any person can purchase the goods at the same price and under the same conditions as the importer that pays dividends, but without a shareholder relationship and without the payment of dividends. In practice, this can be quite difficult in a situation where the sale of goods is arranged through the importer’s own network of local subsidiary distributors.
What is interesting about the new clarifications is that in the letter the Russian Ministry of Finance takes the position that dividends should also be included in the customs value of goods:
- if the declarant fails to provide information on the exporter’s pricing methodology; or
- if there is no evidence of the market level of the price, including due to a limited number of buyers of such goods.
In practice, when the customs authorities check for the inclusion of dividends, they often (but not always) disregard the declarant’s arguments that the price of the imported goods corresponds to the market price level.
Therefore, the new clarifications of the Russian Ministry of Finance give hope that in the future, when conducting inspections, the customs authorities will take into account the fact that the price of the imported goods corresponds to the market level and, consequently, there is no manipulation of the price, no understatement of the customs value and no reasons for revising it.
Furthermore, it is the declarant that bears the burden of proving the market level of the price, the method of its formation, taking into account the usual market factors, the submission of transfer pricing documentation, and the calculation of such price elements as the production cost, the markup that covers expenses and provides a market markup for a relevant product, etc. In this regard, it will be crucial to prepare a detailed response to the very first request from the customs authorities.
If you have any questions or you would like to discuss something, please send an email to Julia Talagaeva.
Read MoreOn February 12, 2025, Julia Talagaeva and Robert Gurdyumov, Senior Associates at Forte Tax & Law, participated in the annual Tax Conference hosted by the German-Russian Chamber of Commerce (AHK Russland). The event was held on the occasion of the 30th anniversary of the Chamber in Russia and brought together leading tax experts, including Russian tax authorities, law firms, and businesses.
The conference discussed key changes in tax legislation, tax administration issues, and relevant aspects of currency control in cross-border transactions. Robert Gurdyumov, Senior Associate at Forte Tax & Law, spoke about one of the topical issues—VAT taxation for entities using the simplified tax system and the principles of building relationships with such counterparties. Robert offered practical recommendations on how to mitigate tax risks when working with counterparties that use the simplified tax system in 2025.
The participation of our specialists in such an important event demonstrates the high level of expertise of Forte Tax & Law in the field of tax law and the firm’s desire to keep abreast of the latest changes in legislation. We would be pleased to share our experience and help our clients understand all the intricacies of tax regulation.
If you would like to receive recommendations from Julia Talagaeva and Robert Gurdyumov in person, please contact them for advice.
Article by Robert Gurdyumov
Starting from January 1, 2025, companies and sole proprietorships using the simplified tax system (STS) become VAT payers. This means that working with suppliers using the STS will require more attention to tax issues and documents.
Who must pay VAT under the STS?
According to the new rules, everyone who uses the STS automatically becomes a VAT payer[1]. However, there is one exception: if annual income does not exceed RUB 60 million, there is no need to pay VAT. But this does not apply to the importation of goods or agency VAT. This exemption cannot be waived[2].
What VAT rates apply?
If a supplier using the STS must pay VAT, the supplier may apply:
- The general VAT rates: 20%, 10% or 0%; or
- The special rates: 5%, 7% or 0% for certain transactions.
Important: If a supplier chooses a special rate, the supplier must apply it for 12 quarters (3 years). It is possible to stop using special rates only if there is a change in the income threshold: if it falls below RUB 60 million or exceeds RUB 450 million.
What do you need to know about documents?
A supplier using the STS that pays VAT is required to issue invoices with VAT shown separately, keep records of VAT (purchase and sales ledgers), and file VAT returns with tax authorities.
A buyer will be able to deduct VAT only if an invoice is issued correctly. That is why it is crucial that a supplier is compliance with all tax law requirements.
How to agree the price with the supplier?
Starting from 2025, the price of goods or services must include VAT. This means that the contract must clearly state what VAT rate the supplier will apply and how the price will change if the VAT rate changes or the supplier becomes exempt from VAT.
Failure to do so may result in disputes. For example, if the price goes up due to VAT, and the buyer refuses to pay more, this can be considered a default. Conversely, if the price goes down, the supplier may insist on maintaining the same amount, which will result in the buyer overpaying.
What to add to the contract?
To avoid risks and disagreements, it is recommended to include the following clauses in the contract:
- A provision on the revision of the price in the event of a change in the VAT rate or VAT exemption.
- The supplier’s obligation to notify the buyer of a change in the VAT payer’s status or the tax rate.
- The supplier’s obligation to correctly issue invoices and make changes to them if they are issued with errors.
- A tax clause that will obligate the supplier to be liable for the buyer’s possible losses if the VAT is not deductible due to errors in the documents.
What to pay attention to when working with a supplier using the STS?
Starting from 2025, suppliers using the STS will need to be treated as carefully as those who work under the general tax system. This means that it is important to check that the supplier is bona fide, has personnel and assets, and is able to fulfill its obligations.
Particular attention should be paid to cases when the supplier applies general VAT rates (10% or 20%). If the supplier applies special rates, but issues an invoice with a general VAT rate, a VAT deduction claim will be rejected.
It is recommended to review all contracts with suppliers using the STS. If they do not contain any VAT terms, you need to make changes: Clarify how the price will be determined, including VAT, and add the supplier’s obligations that will reduce the risks for the buyer.
Conclusion
Starting from 2025, working with suppliers that apply the STS will require more attention to tax issues and documents. To avoid problems, it is important to prepare in advance: revise the contracts, clarify the terms for VAT, and make sure that the supplier is in compliance with all legal requirements.
If you have any questions or need assistance in assessing your tax risks, please contact Anton Kabakov or Robert Gurdyumov. We will help you understand all the intricacies and prepare yourself for the changes.
[1] Articles 143, 346.11 of the Russian Tax Code as amended by Federal Law No. 176-FZ dated July 12, 2024 On the Introduction of Amendments to Parts I and II of the Russian Tax Code, Certain Legislative Acts of the Russian Federation, and the Invalidation of Certain Provisions of Legislative Acts of the Russian Federation. [2] Letter No. 03-07-11/96800 of the Russian Ministry of Finance dated October 7, 2024, Letter No. 03-07-11/95245 of the Russian Ministry of Finance dated October 2, 2024. Read MoreOn January 21 and 29, 2025, the Russian State Duma passed in the first reading draft laws clarifying the rules for exercising a preemptive right to purchase an interest in a limited liability company (the “Draft Laws”) .
Read MoreThe Russian Constitutional Court heard a case[1] of an employee who had been dismissed from his principal place of work due to redundancy. The employer paid the employee a severance allowance, but refused to pay the employee’s average monthly earnings for the period of finding a new job [2]. The employer believed that the employee was a dual job holder and, therefore, such an employee was not entitled to a guarantee in the form of payment of his average monthly earnings. The courts sided with the employer in a dispute with the employee.
However, the Russian Constitutional Court ruled that such a reading of the law was inconsistent with the Constitution. Upon dismissal from the principal place of work, an employee loses part of the total labor income (which may be significant). This leads to the need to find a new job. Moreover, dismissal from the principal place of work does not transform a dual job employment contract into a principal one. Therefore, taking into account these factors, it is impossible to deprive dual job holders of guarantees in the form of payment of average monthly earnings for the period of finding a new job.
Thus, the Russian Constitutional Court held that the failure to pay average monthly earnings to a dual job holder upon dismissal from the principal place of work due to liquidation or downsizing/redundancy is contrary to the Constitution. This means that the employer is obligated to pay such an employee average monthly earnings for the period of finding a new job, even if the employee has another paid job with another employer.
What are the implications of this ruling for employers and employees?
First, until changes are made to applicable Russian laws, the employer will be obligated to follow the position of the Russian Constitutional Court. Second, an employee may apply to the employer asking for the payment of the employee’s average monthly earnings, if such earnings have not been paid. And the employer will be obligated to pay them. Third, there is a high risk that valid decisions on similar disputes between employees and employers will be overturned. These are decisions that contradict the position of the Russian Constitutional Court.
The Forte Tax & Law team will be pleased to advise you on labor law issues and the resolution of labor disputes.
If you have any questions or you would like to discuss something, please send an email to Julia Talagaeva or Ekaterina Beliaeva.
[1] Ruling No. 54-П of the Russian Constitutional Court dated November 22, 2024 In the case of the verification of the constitutionality of parts two and three of Article 318 of the Russian Labor Code in connection with the complaint filed by citizen V. V. Sergeev. [2] Average monthly earnings can be paid for up to six months. Read MoreOn January 18, 2025, the Russian Ministry of Finance announced that a double tax treaty with the UAE had been initialed—i.e., the text of the double tax treaty with the UAE has been finalized.
Withholding tax on dividends, interest, and royalties under this treaty are proposed to be 10%. Moreover, according to Deputy Finance Minister Alexey Sazanov, who participated in the initialing, the treaty will have “sufficiently standard” terms. The parties plan to sign the treaty soon and will make every effort to ensure that it enters into force on January 1, 2026.
Read MoreFrom March 1 to April 30, 2025, members of limited liability companies must approve the annual results for 2024 at a general meeting, with participants required to attend in person or through authorized representatives. While remote voting for annual meetings has been allowed in recent years, this practice will be limited starting March 1, 2025. Instead, companies will be able to hold hybrid meetings, where both in-person and remote participation is allowed, provided the company’s charter or unanimous participant decision allows it. It is recommended to amend the charter in advance if necessary and ensure the company has an internal document outlining the procedure for remote voting.
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