Actuality March 26, 2008

   The discussion about the value added tax (VAT) reduction from 2009 is over. The Vice Prime Minister Alexey Kudrin declared that instead of VAT reduction in 2009 the state will reduce the mineral extraction tax (MET). And that will reduce the oil companies’ tax collection by RUR 100 bln. However, the present tax imposition for Gazprom remains, for which the Ministry of Finance planned MET increase. The decision was approved by the president Vladimir Putin; therefore the lobbyists of VAT reduction have already considered it final.

   As it was assumed, the state hesitated about VAT reduction from 18% to 12-13% from 2009. The Ministry of Finance head Alexey Kudrinu convinced Vladimir Putin to postpone decision making till August, 2008, so that to introduce the new tax rate by 2010-2011. The Prime Minister Viktor Zubkov summed up the VAT discussion at the annual collegium of the Ministry of Economic Development and Trade (MEDT). He reported about the order directed to the Ministry of Finance and MEDT to present the government the calculations about the influence of this tax rate reduction on the economy by August, 2008. Alexey Kudrin explained that the Ministry of Finance will be able to "incorporate" the August decision only in the next three-year financial plan for 2010-2012. "2010-2011 can mark the beginning of reduction process", the Minister declared. This confirmed the MEDT head Elvira Nabiullina, who just recently insisted on the innovation introduction from 2009.

   The Ministers’ consent is explained by decisions taken at the meeting with Vladimir Putin, where Alexey Kudrin reported he is not ready to hand down his opinion concerning the MEDT offer to approve the bill draft about the VAT reduction from 2009 during the current spring State Duma session. Vladimir Putin hesitated to take the decision priced at 2% GDP or RUR800 bln (the Ministry of Finance preliminary estimation) without precise calculations and agreed to set aside the issue solution till August. We will remind that Vladimir Putin will already become the Prime Minister by this term and will be responsible for the federal budget to the president Dmitry Medvedev.

Alexey Kudrin unexpectedly offered MET reduction for the oil industry instead of the set aside VAT reduction for all business.

   As the oil companies have often stated the decrease of the industry investment attraction, the Minister has promised to introduce to the government the proposals about the MET formula change at oil extraction. Now the tax is not imposed on first $9 per oil barrel. But the Ministry of Finance proposes to increase this figure by $15. As Mr. Kudrin declared, such adjustment will allow reducing the fiscal load on a company by RUR 100 bln a year. According to the Federal Tax Service (FTS) statistics, in 2007 the companies paid RUR 1,071 trillion for oil extraction as imposed MET. Thus, the Ministry of Finance proposal means almost 10%-percent fiscal load reduction.

   Oil companies were pleased with the MET news. "RUR 100 bln a year is lower, than we expected, but close to our forecasts", declared Gazprom Neft representative Natalya Vilkina. Another large oil company representative marked that lately the industry faced the escalation of capital and operating expenditures on the background of high inflation, ruble consolidation and tax load vigorous growth. According to him, the taxes’ stake in the oil companies’ return has increased from 35% in 2002 up to 60% in 2007, thus the capital companies’ expenditures have grown three times.

   According to Deutsche Bank analysts’ accounts, in terms of MET formula change the oil companies will receive the tax burden reduction in size of $1,3 per extracted barrel. As they estimated, small oil companies and the companies with high operating expenditures and low margin, such as Tatneft, Bashneft, will gain more from the innovation. In the opinion of Capital Investment Company analyst Vitaly Kryukov, the increase of reduction rate will allow the companies to increase the expenditures for geological prospecting and new technologies introduction. Veles Capital Investment Company analysts mark that the companies’ returns will substantially increase in terms of MET reduction. So, Lukoil return by the net profit grows by 0,7-0,8 percent point, Rosneft – by 1,25, TNK-BP – by 1, Gazprom Neft – by 0,85.

   The gas industry was not disregarded also. Alexey Kudrin reported that the decision about the gas MET increase was set aside by 2010. According to him, "it is concerned with the substantial volume of Gazprom investment programs". We will remind that the report of the Ministry of Finance and MEDT with proposals about the surge in load on the gas industry was "taken into consideration" by Dmitry Medvedev in April, 2007. Later, Gazprom has been proving the government within the whole year that tax burden increase on gas industry is rather untimely. In February, 2008 Viktor Zubkov agreed with this within the governmental meeting. And Vladimir Putin has also agreed within the analogical meeting in Kremlin on March, 24. Gazprom representative Sergey Kupriyanov declared that the taken decision "is economically sound". According to him, the company should invest significant capital into the development of such objects as gas production and transportation so that to provide the Russian consumers. "It is obvious that this issue should be solved not only by means of gas export, but also by means of the internal market profit", said Sergey Kupriyanov.

   However, the representatives of another two industries are not satisfied with the announced decisions unlike oil and gas companies. "The Ministry of Finance stimulates the development of raw material industries of the economy to the detriment of non-primary sector", declared the Delovaya Rossiya (Business Russia) chairman Boris Titov. According to him, it contradicts to the political task of conversion to the innovative development model proposed in the presidential "Strategy 2020". "The processing industries’ profitability is far lower, than the raw material one. So these industries need support," said Delovaya Rossiya head. Boris Titov supposes that the government postponed VAT reduction and would, probably, deceive the businessmen. "It has already happened. Mikhail Fradkov government has taken the principle decision about the rate reduction to 15% from 2009. But it did not implement it."

   The Personnel System Certification Register (PSCR), which amalgamates the oil companies also, comments the raw material preferences rather prudent. "These industry representatives in PSCR have always stood for the tax load reduction. It is also necessary to stimulate them", said the deputy head of the union tax policy committee Sergey Belyakov. According to him, the businessmen expect the Ministry of Finance will not relate the given oil companies’ remissions to the future VAT reduction. He marked that it is crucially important for PSCR that the tax reduction act (even from 2010) has been approved exactly in 2008. "The external economic situation can change later, and the budget state can worse. And that will again spark the discussion about the reduction necessity", Sergey Belyakov marked.

Actuality February 20, 2008

Federal Tax Service (FTS) reported about extraordinarily high growth of tax revenues. In January, 2008 as compared to January, 2007 they grew almost by 70%. The growth dynamics of tax collections repeatedly outstrips the growth rates of economy even adjusted for inflation.

According to FTS data, revenues of taxes and collections to the federal budget grew by 67,8% in January as compared to January, 2007 and totaled RUR 372,7 bln. The main part of tax profits of federal treasury was provided with VAT collection (46%) and tax on mining operations (33%).
The stake of income tax is only 9%, consolidated social tax (CST) – 6%, excise taxes – 3%, other taxes and collections – 3%.

Increase of tax revenues as compared to the last year January for most taxes approximately corresponded to the economy growth and official inflation. So, tax collection on income of organizations grew by 22,1% (by RUR 5,8 bln) as compared to January, 2007. CST revenues to the federal budget increased by 26,3% as compared to January, 2007. As well or so grew insurance contributions to the Pension fund and to the Federal fund of compulsory medical insurance – by 23,8% and for 27,1% more than in January, 2007.

Collections on severance tax grew proportionally to the world prices on energy sources: as compared to January, 2007 severance tax receipts grew 1,6 times. In this year January the federal budget received about RUR 123,4 bln of severance tax, including oil extraction – RUR 113,6 bln, gas extraction – RUR 8,4 bln and extraction of gas condensate from all types of deposits – RUR 0,6 bln.

However, the record on collections’ growth set the value added tax. In January the receipts from "internal" VAT grew 2,1 times as compared to January, 2007 and totaled RUR 173,3 bln. It is impossible to explain such anomalous high collections by inflation or economy growth. At the unchanged rate of VAT in 18% the stake of this tax in GDP does not practically change and totals about 3,6-4,5% of GDP. Accordingly, at the normal work of the tax system VAT collections should increase annually proportionally to growth of GDP and inflation. So, for example, in a three-year budget for 2008-2010 the annual VAT receipts should increase by 12-13%, but not twice in any way. Meantime, already from the last year autumn FTS reported monthly about 1,5 times growth of VAT collections as compared to the same period of the last year.

"Double growth of tax collections says about unstable work of the tax system, at which the period of shortages is followed by the period of the real tax racket, at which taxpayers are forced to pay taxes for future periods or pay the so-called commissions on taxes off", says Mikhail Orlov, the head of expert council of taxation budget committee of the State Duma. According to him, passing to VAT collection on the charges method in 2006 caused shortage on this tax. Because of that, in 2006 tax officers began to wheedle money out of enterprises, compelling them to pay VAT on account of future periods. As a result in January, 2007 VAT collections appeared low, and as compared to this level the current January "jumped" out more than twice.

"It is possible to explain the January VAT growth by two reasons. At first, by unexpectedly low revenues in January, 2007 over the passing to the charges method. And secondly, by the increase of tax basis over the vigorous inflation in January and at the end of 2007", considers the expert of the Economic expert group of Aleksander Suslin.

"Growth of VAT collections in 2007 as compared to 2006 is in the great deal explained by revenues to the budget of about RUR 239 bln that were credited as repayment of Yukos tax indebtedness", an expert supposes. After deduction of these facilities, exceeding of VAT collection totaled only about 30% at par value.

"It is impossible to talk about outstripping growth of VAT collections, as an increase of revenues on this tax is explained by nonrecurring "payments", and also by VAT reaction to the changes of other macroeconomic indices", Suslina considers.

"The growth of tax collections was influenced by the increase of the actual load on VAT, as lately in the tax code increased the list of cases when organizations are forced to restore VAT which was earlier accepted to deduction", adds Andrey Prikhodko, the department head of accounting and tax advisory firm BKR-Intercom-Audit.

In the Ministry of Economic Development and Trade and the Ministry of Finance could not comment the anomalous growth of tax collections. The Ministry of Finance officials register tax collection in relation to the annual task, but not to the past periods, and from such angle the double growth of VAT collections hides behind 2-3% of the planned task. According to the data of the Ministry of Finance, for January, 2008 collection of profits of federal budget totaled RUR 699,12 bln, or 10,5% to the planned assignment for 2008. Also, FTS collections totaled RUR 373,19 bln, or 11,2% to the prospect indices of 2008. "We are not engaged in the analysis of FTS data and reasons of collections growth in relation to the last year", declared the representatives of the Ministry of Finance.

Actuality February 15,2008

   Prime Minister Viktor Zubkov hurries his government. However, it is quite clear, he has been given not so much time to achieve concrete results. But Zubkov has no other way out: the president gave tasks that the Cabinet should execute, though for a short period of time.

   Therefore, prime minister demands from his subordinates to the utmost, creating the most necessary tension. Zubkov actually followed the way of his predecessor Mikhail Fradkov, upholding the alleviation of tax burden. He demanded from the heads of the federal executive body – by all appearances, from the Ministry of Finance – to prepare own suggestions about taxes exemption of companies’ expenses and citizens for education and medical insurance, and also for co-financing of pension accruals and to pass them to the Ministry of Economic Development and Trade within the month.

   "Our priorities and global tasks remain unchanged, but the center of attention of all our activities is a man, he exactly is given the part of the main object for state investing", explained Zubkov.

   Thus, the government hopes to solve the problems of demography, stabilization of population quantity in the nearest years, decline of death rate more than one and a half times, increase of life span up to 75 years by 2020.

   "Russia should become the attractive country for living, to solve these not simple tasks is possible only if Russia develops by the innovative scenario", prime minister said. In fact, tax exemption of social expenses of citizens is the easiest way. It is much more difficult the government to agree about the execution of another task: reduction of value added tax (VAT).

   As it is known, the ex-prime minister has long disputed with the minister of finance Aleksey Kudrin and ex-minister of economic development and trade German Gref about the VAT reduction up to 13%. Thus, the business periodically occupied both position of prime minister or position of his two opponents – Kudrin and Gref, who consider that reduction of this tax is untimely. As a result, the government almost rejected the idea of VAT reduction. But now the topic of VAT reduction already sounded from Kremlin. About this the president said the day before, and that simply "elated" the businessmen. But the vice prime minister, the minister of finance Aleksey Kudrin, in response to this, declared only about the intention to conduct the calculations of influence of VAT reduction on taxes’ collection, business activity and yet invincible inflation. The business was taken aback, in fact the vice prime minister did not designate the terms of reflections completion. Therefore, businessmen decided to make the demand on the government: to reduce the VAT rate up to 10% since 2009. It means, they actually demanded from the Cabinet to execute the presidential instruction. However, the government will have to think it over yet. And to hurry up also.

According to the taxation aspects research conducted by the Ernst & Young Company, the tax reform continues in Russia. It is directed on regulation of transfer pricing and companies’ tax treatment. However many companies are not satisfied with the taxation reform carrying out rates. They are disappointed with the tax authorities’ inconsistency in the tax laws application and interpretation.

In 2007 Ernst & Young Company conducted a taxation aspects research among 58 Russian and international companies that run their business in Russia.

“Our research has revealed some interesting tendencies and has come to the next conclusion. The amount of the companies that have marked positive changes in the tax bodies’ relations, has increased from 22 % up to 32 % for the last year”, pointed out Rice Jenkins, the partner of Ernst & Young Company services of the taxation and rights sphere department (that conducted this research). “This quite positive estimation has been given in spite of many taxation aspects trials in Russia”, added he.

According to the survey, in 2007 only 12 % of interviewees declared that they had been undergone many times to exit tax checks in comparison with 40 % in 2005. 84 % of interviewees had tax controversies (82 % treated them in court). Among the cases came down to court, 89 % were won by the interviewees. According to the Ernest & Young experts, these facts show “the considerable judicial authority support to the taxpayers”. The majority of tax controversies (63 %) have been settled during the time, not exceeding one year.

At the same time the majority of interviewees consider that the existing tax treatment has a negative influence on the investment climate. So, 63 % of interviewees consider the Russian taxation system influence as “negative” and “extremely negative”; while the part of neutral and positive estimations has decreased from 54 % up to 37 %.

The interviewees consider the tax laws to be the sphere where the most significant changes are required. They would like the tax reforms to provide the tax laws ordering and decrease of ambiguous interpretation of laws, conflicts and legislation blanks. The majority of interviewees (72 %) managed to receive a compensation of value added tax (VAT) at the rate of 90 % and more. They also pointed out the necessity of VAT compensation acceleration terms.

At the same time, according to the research, 90 % of the 31 % interviewed (that have the export VAT compensation right) meant the sums much more than $1mln. The research has also shown, that the average VAT compensation delay term makes up two months that is much less in comparison with the last year results (7,6 months). So informs Ernst & Young.

Ernst & Young is the leading international company on rendering of professional services in the audit, tax consultation spheres and also in deal consulting services. In the company work about 114 thousand employees in 140 countries all over the world.

In spite of Cyprus being in the list, it is still very attractive for the Russian business.

The Ministry of Finance has published the list of offshores, registration in which will not allow the companies to transfer tax-free dividends to Russia. According to the experts’ opinion, there is no importance in the regular black list publication. Close to the state large companies, as a rule, do not use doubtful tax jurisdictions as they have a dividend privilege.

The order of the Ministry of Finance “About ratification of the states and the territories list confering a preferential tax treatment and (or) not providing disclosure and produce the information on conducting financial operations” was registered by the Ministry of Justice on December, 3, 2007 and on December, 7 it was published on the official department web site.

Occurrence of the 41 offshores’ list is caused by amendments’ coming into effect to the tax code since January, 1, 2008. It establishes zero rate of the profit dividends tax received by the companies from other companies capital contribution (i.e. from subsidiaries). Till now these incomes were taxed at the rate of 9%, if the dividends were paid by a foreign company then the rate was 15%. Owing to Vladimir Putin’s initiative such tax profit dividents release was given to taxpayers. He also charged to create a good atmosphere for companies’ placement in Russia.

The government and the State Duma, having discharged this order, determine the list of the terms for receiving such benefits. The company should possess an authorized capital stock share of the company paying dividends at the cost of minimum RUR500 mln (more than $20 mln.) in order to receive such tax release. Besides, this company should not be registered in an offshore. Such territory list was defined by the Ministry of Finance and it was published in the order on December, 7. Two criteria were used while making this list. They were unaccordance of the information on financial operations by the countries and application of the profit tax rate with a minimum of one third lower than a Russian one (24 %).

Making the list, the Ministry of Finance has made a mistake at least twice. At first, the officials have forgotten to include such obvious offshores with zero taxation as Seychelles and Barbados in it. However, this omission has no huge practical value. Mainly huge, affiliated to the state companies will be able to take an advantage of this privilege because of the share possession requirement of RUR500 mln in the authorized capital. And these companies will scarcely use unpopular offshores.

According to the predictions, the investments will be transfered mainly to absent in the list Luxembourg, Holland, Austria and Great Britain soon. However, as the experts mark, presence in the list of Cyprus will not influence upon its attractiveness among Russian business. After all, the Ministry of Finance does not create any barriers in using of former tax planning schemes with the participation of the Cyprian companies and in applying quite favourable agreement about double taxation avoidance with this country.

Besides, the restriction in use of Cyprus for dividends payment can be easily avoid. For example, the Cyprian company according to the existing agreements between two countries will pay dividends the Dutch one without the tax. The Dutch company, in turn, will transfer the money to Russia where the money will be included in the applying of the zero rate. However, the experts warn, that after occurrence of the plenum decision of the Supreme Arbitration Court # 53 dated 2006 (it is about the unreasonable tax benefit of the tax payer). It will be, probably, necessary to prove the court, that the Dutch company enter a chain of firms has not been directed to evade law established restrictions.

The changes in the tax residence determination order of individual persons dated January, 1, 2007 aroused a great number of questions among taxpayers.

It is necessary to explain tax residence determination peculiarities for the calculation of tax on individual persons’ income after generalization of the Russian Ministry of Finance letter.

Let’s remind, that tax residents are individual persons who actually stay in the Russian Federation not less than 183 days within 12 months without a break. The period of individual person stay in Russian Federation (RF) is not broken for the period of his leaving the territory of the country for short-term (less than six months) medical treatment or study (paragraph 2).

The status of the taxpayer (resident or non-resident) is not based on the citizenship of the individual person or any other conditions, such as birthplace, place of permanent living etc. A foreign citizen or a person without any citizenship can have RF tax resident status. And, on the contrary, RF citizen can’t have tax resident status of RF or lose it during the tax period.

So, RF citizen loses the tax resident status, if he spends most time abroad within the last 12 months (more than 183 calendar days). It can be foreign business trips or simply job transfers either constant or temporary to the offices abroad etc.

Individual person has actually to stay on the RF territory not less than 183 days within 12 months without a break in order to receive the tax resident status. Days reckoning does not stop with the end of the next tax period (calendar year).

For example, the organization has concluded a labor contract with the foreign citizen, who is on RF territory since September, 1, 2006. 183 calendar days run out on March, 2, 2007 if the taxpayer does not leave RF territory since September, 1, 2006. Hence, he receives the tax resident status of RF since March, 2, 2007.

The period of stay in RF is estimated by summing up all calendar days when the individual person has been in RF within 12 months without a break. Total amount and duration of every trip abroad don’t matter for the tax determination status of the individual person in RF. At the same time, the periods of individual person stay abroad don’t influence upon the taxpayer status, regardless of the aim, as they are not directly specified in the section 207 of RF tax code, excluding the cases of leaving abroad for short-term (less than six months) medical treatment or study (the letters of the Russian Ministry of Finance № 03-04-06-01/268 dated July, 26, 2007, 2007 № 03-04-06-01/258 dated July, 23, № 03-04-06-01/210 dated July, 4, 2007, № 03-04-06-01/189 dated June, 15, 2007). For example, the days of business trips abroad, trips abroad on family circumstances are excluded from the period of stay on RF territory.

Since January, 1, 2007 it is forbidden to give a taxpayer the tax resident status of RF ahead of time (before the ending of 183 calendar days of an actual stay on the RF territory), even including the cases of having long-term labor contract with the Russian organization, providing the work duration not less than 183 days in the current tax period (the letters of the Russian Ministry of Finance № 03-04-06-01/207 dated July, 3, 2007, № 03-04-06-01/200 dated June, 25, 2007, № 03-04-06-01/185 dated June, 13, 2007).

The organization, the tax agent, should determine the tax status of the individual person based on actual, documentary fixed time of his stay in RF. Determination of the tax status is made by the tax agent monthly based on the 12-months period previous to the date of the income reception of the individual person (including the one begun in one tax period (calendar year) and lasting in another tax period (calendar year). At the same time, the final decision about the individual person tax status during the tax period can be made only on December, 31. If the individual person pays the taxes on his own according to the section 228 of RF tax code than his tax status is determined one time according to the results of the tax period (the letters of the Russian Ministry of Finance № 03-04-06-01/179 dated June, 8, 2007, № 03-04-06-01/177 dated June, 7, 2007, № 03-04-06-01/132 dated April, 27, 2007, № 03-04-06-01/119 dated April, 16, 2007, № 03-04-06-01/75 dated March, 19, 2007, № 03-04-07-01/30 dated March, 16, 2007).

The period of a foreigner stay on RF territory can be proved by a mark in the passport about the border crossing, visa, migration card (it is filled at the entry into RF and is given back at the exit), marks in the passport about a temporary registration in a place of residence. When the appropriate marks are absent any documents, showing the actual stay of the foreigners on RF territory and the exact number of days, are accepted as a proof. Such documents are time sheets (or references based on them), sheets of salary accounting and payment with an actual time of work, hotel stay references and any other documents that a taxpayer and a tax agent have (the letter of the Russian Ministry of Finance № 03-04-06-01/170 dated May, 31, 2007).

There is an opinion that the individual persons’ tax status is determined either according to RF tax code or according to the intergovernmental agreements in order to avoid the double taxation that is in priority to the national legislation. According to these agreements, the individual person’s tax status is determined not only by his stay on the territory of a foreign state, but also by citizenship, presence of constant habitation, registration place, etc.

So, the Russian organizations representative office employees abroad remain the tax residents of RF, regardless of time of their actual stay out the state. This conclusion is wrong. Applying the standards of the agreements to avoid double taxation it is worth taking into consideration the following aspects. RF regulations of the international contracts (agreements) with foreign states about double taxation avoidance, establishing reference criteria of individual persons to the resident status of one of the agreed states, are applied only in cases when any individual person is determined as tax resident accordingly to the internal legislation of each agreed state simultaneously in these both states; in other words, in cases of double residence. As the individual person stay on RF territory less than 183 days during 12 months without a break, according to the paragraph 2, section 207 of RF tax code are not determined as RF tax residents, so, the double residence problem of the individual person doesn’t occur. Clearly, there is no need to apply these agreements to avoid double taxation (the letter of the Russian Ministry of Finance № 03-05-01-04/254 dated August, 31, 2006).

Services of program development for electronic computers, computers and databases, rendered by Russian organization to the foreign partner, are not acknowledged as the object of VAT imposition in Russian Federation (RF). About this informs the Ministry of Finance in the letter of September, 12, 2007 # 03-07-08/255.

Financiers specified that if a buyer does not carry out activity on the territory of Russia, then the place of realization of works (services) for the purpose of VAT assessment according to paragraph (1) (4) and paragraph (1.1) (4) of section (148) of tax code of RF is not acknowledged by the territory of Russia.
The representatives of main financial department reminded that the list of documents, confirming the place of works’ realization (provision of services), is set by the norms of paragraph (4) of section (148) of tax code. They, in particular, include the corresponding contract and other documents, that, naturally, must be designed properly.

Foreign citizens and persons without citizenship who got in the organs of internal affairs permission for the inhabitancy or stay permit the RF, or foreign citizens, temporally arriving on territory of the RF, registered in accordance with established procedure at the place of residence on territory of the RF and being on January, 1 of calendar year in the labour relationships with organizations, including branches and representative offices of foreign organizations carrying out the activity on territory of the RF, foreseeing duration of work in the RF in a current calendar year over 183 days, are considered to be the tax residents of the RF at the beginning of current period. The payers of profits tax got from sources in the RF are those foreign natural persons (foreign citizens and persons without citizenship) who get profits of implementation of labours or other duties, accomplishing of other actions on territory of the Russian Federation. Thus, if a foreign natural person gets a profit of work in the Moscow representative office of foreign firm, such natural person is the payer of profits tax for natural persons in the Russian Federation, if it does not contrary to the terms of agreement in force about avoidance of double taxation.

The profits from sources outside the RF are such profits, which are got by natural persons for implementation of works, providing of services being abroad. Taxation of such profits got by foreign natural persons is regulated first of all by regulations of international agreements about avoidance of double taxation. Under the item 232 of tax code of the RF the taxes actually paid by a taxpayer being the tax resident of the RF, outside the RF in accordance with the legislation of other states from the profits got outside the RF, are counted when paying tax in the RF, if it is foreseen by the corresponding agreement about avoidance of double taxation.

For conducting of tax a taxpayer must present in a domiciliary tax inspection the official record of the received profits and about payment of the tax outside the RF by him, confirmed by the tax organ of the corresponding foreign state. Confirmation can be represented both before payment of tax and during one year after the end of that tax period on results of which a taxpayer has pretensions of taking account. In accordance with paragraph 5 part 3 of the item 208 of tax code of the RF the profits got from the sources located outside the RF are in particular profits got from sale of shares or other securities outside the Russian Federation. The profit got by a natural person from the security-related operations is subject to taxation in the order foreseen in the item 2141. In case if natural person at the sale of actions through the third person (broker) gets a profit as a difference between the sums on the personal account got from realization of securities, and charges on their acquisition, realization and (including the reimbursable expenses of the professional participant of equity market), this profit must be completely included in a tax base. If part of shares is realized, and the profit got from their realization only defrays expenses for their acquisition, realization and depositing, the tax base for this type of profit is absent. According to the item 228 of tax code of the RF taxpayers being the residents of the Russian Federation and having got such type of profit from sources outside the Russian Federation are under an obligation to give the tax return to a tax organ at the place of the account in time to April, 30 of the year after the past tax period.

Taxation of profits of foreign natural persons is done either at the source of payment of profit or on the basis of the tax return given in a tax organ. Foreign natural persons carrying out entrepreneurial activity are to be registed with confermention of the ITN (Individual Taxpayer Identification Number) at the place of commorancy and at the place of realization of business in territorial tax inspections. Declaration on a tax on the profits of the stated natural persons is presented to a tax organ at the place of account of natural person not later than on April, 30 of year following the past tax period. In the case if the foreign natural person stops his activity and departs territory of the Russian Federation during a calendar year tax return about the profits actually got during the period of his staying in a current tax period on territory of the Russian Federation must be presented not later than one month prior to his departure outside this territory.
In a term to April, 30 of year following after current declarations are under an obligation to present: physical persons, who got recompense from natural persons who are not tax agents, on the basis of agreements of civil legal character (profits by agreements of hiring or contracts of tenancy of any property, from the sale of any property);. Participation of physical person in the tax relations through the representative consists only in presentation of interests of physical person in the relationships with tax organs and does not release this person from independent execution of incumbent duties of taxpayer on him by the legislation about taxes-and-duties.

If the tax return is sent by mail the day of its presentation is the date of sending of the certified mail with the inventory of enclosure. A tax organ has no right to refuse to accept the declaration and has to put a mark about its acceptance and date of presentation on the copy of tax return on request of taxpayer. Persons who don’t have to represent the tax return have a right to present it in a domiciliary tax organ. According to the item 218-221 of tax code of the RF the tax return can be given in the following cases: if during a tax period a taxpayer did not get standard tax deductions or they were given in a less size than the item 218 of tax code of the RF foresees; for the receipt of social tax deductions; for the receipt of property tax deductions; for the receipt of professional tax deductions. A taxpayer gets standard, social, property and professional tax deductions at the presenting the tax return at the end of tax period on the basis of his written statement, and also documents confirming the right of taxpayer to these deductions. On results of paper verification of the tax return given with the purpose of receipt of tax deductions, the excessive paid tax is given back by a tax organ to the taxpayer during one month from the day of presenting of corresponding written statement by him.

In the tax return a natural person is under an obligation to specify the profits got from all sources of payment. For its turn tax organs has no right to require the including into the tax return information not connected with the calculation and payment of taxes from the taxpayer (5 of the item 80 of tax code of the RF). With consummation of the chapter 23 of tax code of the RF the order of forming of tax base of foreign natural persons has been changed. Since January, 1, 2001 the profits of foreign natural person in accordance with paragraph 1 of the item 210 of tax code of the RF do not diminish for the sums of deductions to the funds of obligatory social insurance and provision of pensions. The sums of compensative payments for indemnity of charges for renting of apartment and use of car in official aims, if such are foreseen by a labour contract (paragraph 3 of the item 217 of tax code of the RF) are taxed as the profits of natural persons in corpore. The profits of foreign citizens and persons without citizenship who are to be taxed in the Russian Federation, are taxed according to the rates set by the item 224 of tax code of the RF, if other ones are not foreseen by the international agreements of the RF or former USSR.
Profits of foreign citizens who are tax residents of the RF and who are in the tax period in the labour relationships with organizations are taxed as the profits of natural persons since January, 2001 on the basis and on the rates set for the tax residents of Russia. According to the item 224 of tax code of the RF the profits of the named category of persons are to be taxed as profits at interest of 13% with the grant of the tax deductions foreseen by Code. In the case of pre-term cancellation of labour contract by a foreign citizen and his departure outside the RF before expiration of 183-day term of being in a tax period organization must produce the re-calculation of tax on the rate 30%. The celebration of urgent labour contract on a term less than 183 days is not confirmation of status of tax resident of the RF of foreign natural person on territory of Russia. In this case tax from the profits of such foreign natural person must be deducted by a tax agent on the rate 30%. Under the change of tax status a taxpayer has the right to appeal to the tax organ for the re-calculation of tax.

In this case specification of tax status is made on the totality of days of staying in the RF of foreign natural person. The period of commorancy on territory of Russia of foreign citizen is determined taking into account the marks of admission control in his foreign passport. If the proper marks are absent, as proof of staying on territory of Russia any documents certifying the actual amount of days of staying in the RF can be adopted, in particular certificate about registration at the place of staying in the RF or certificates about the profits got in a tax period.

Thus, foreign citizens are the tax residents of a Russian Federation, being in a tax period in the labour relationships with organizations (or tax agents) which deducted from them a tax on profits on a rate 30%, have the right to appeal to the tax organ for the re-calculation of tax. According with the item 232 of tax code of the RF only for registration of accounting of the tax paid abroad, a natural person must present confirmation of tax organ of the corresponding foreign state. When presenting by a foreign natural person (taxpayer) in the tax organs of the Russian Federation of any documents given out abroad it’s necessary only to translate such documents into Russian. Natural persons doesn’t have to present certificate of profits N 2- TRNP (tax return of natural person) or other document confirmating the sum of the got profit together with the tax return. The general sum of tax, calculated from the tax return is to be paid by a taxpayer to July, 15 of year, following the current, on the basis of the tax notification sent to him by a tax organ not later than 30 days prior to the term of payment. Tax notification can be given to the natural person (to his legal or empowered representative) personally on receipt or in another way, confirmating the date of the receipt. In the case if physical persons evade the receipt of tax notification, this notification is sent by mail by the certified mail.

Tax notification is considered to be received on the expiry of six days from the date of sending of the certified mail. The article 45 of tax code of the RF gives the right to fulfil the duties of paying taxes in foreign currency to natural persons, both Russian and foreign. For these aims the Central administrative board of federal treasury of Treasury Department of Russia established the account in Outtradebank, on which one should transfer foreign currency which are to enter the federal budget. The code does not limit a right of citizens in the choice of method of fulfiling of such payments or the choice of credit establishment. The order of enrolment of taxes-and-duties in foreign currency to the accounts of the income calculation of federal budget was ratified by the joint order of Treasury Department of Russia and Tax Department of Russia on 19.05.2000 N 52 -n and N BG-3-09/211, in accordance with which payments in foreign currency are reflected on the accounts of taxpayers according to the date of entering in the accounts of the Central administrative board of federal treasury of Treasury Department of Russia – date of process of currency.

In other words, the date of discharge of tax (in the case of payment in foreign currency) will be considered the date of entering in the account of the Central administrative board of federal treasury of Treasury Department of Russia (established in Foreign commerce bank) of cash assets. The liability to tax is considered to be done from the moment of producing the charge for tax payment to the bank. According to the paragraph 2 article 11 of tax code of the RF under the concept “bank” are ment banks and other credit organizations that have the license of the Central bank of the RF. The moment of discharge of tax duty from account in a foreign bank will be considered to be the date of entering of cash assets in foreign currency in the accounts of budget in the Russian Federation.

In the case of non-payment or delayed payment of tax on profits of natural persons the amount of arrears is feed for every day of delinquency since the day following the day of payment of tax established by taxes-and-duties law. In the case of the fact of non-payment of tax on the profits of natural persons in terms fixed by the legislation taxpayers are called to account foreseen by the item 122 of tax code of the RF. According to the item 57 of tax code of the RF change of the fixed term of the tax payment is allowed on the basis of the Code. According to the item 63 of tax code of the RF the body which is responsible for the decision-making about the change of term of payment of tax on the profits of natural persons is Treasury Department of Russia.