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Newsletter August—September 2018
Dear Readers, in the new edition of our newsletters, we have compiled an overview of recent changes in the field of labor, administrative and tax law.
If you have more questions don't hesitate to contact the experts of our company.
In this issue:
1. The tax authority extended once again the duration of an on-site inspection – is it lawful?
2. Property tax: save-up opportunities according to the Ministry of Finance
3. Measures and restraints securing the tax payment – is an effective contest possible?
1. The tax authority extended once again the duration of an on-site inspection – is it lawful? foreigners in the territory of Russia
In contrast to off-site tax inspections, which are carried out at the tax authorities' office, on-site inspections occur directly at the location of the company and might be quite burdensome for the business.

The duration of an on-site tax inspection may not exceed two months (art. 89.6 of Tax Code of Russia), but may be prolonged to as much as 4 months (in exceptional cases – up to 6 months) according to the law. The substantial prerequisites as well as the procedures for prolongations may be set out by a regulation of the Federal Tax Authority of Russia.

As of 01.08.2018 the Federal Tax Authority of Russia posted on its official website the information in this regard. This post relates to a complaint of the taxpayer, who objected against a repeated extension of the on-site inspection on the same grounds (great volume of documents subject to checking). The Federal Tax Authority of Russia sees the conduct of the tax inspectorate as in conformity with applicable law.

Consequently, the duration of an on-site tax inspection may reach six months.
Source: Information of the Federal Tax Authority of Russia <On the lawfulness of a repeated extension of an on-site inspection even if grounded upon the same circumstances>
2. Property tax: save-up opportunities according to the Ministry of Finance
The non-residential property items, such as trade, office buildings and appartments, industrial facilities etc., are subject to property tax. The property tax is calculated based either on the cadastral value, or the balance sheet value.

The cadastral value is assessed by a qualified expert and shall reflect the market value of the property, while the balance sheet value is the acquisition costs less cumulative amortization.

The list of commercial property for which the property tax is calculated based on the cadastral value is promulgated at the level of a constituent entity of the Russian Federation. The items not enlisted shall be taxed based on their respective balance sheet value.

A commonplace opinion says that if a certain property item is not on the list, than the taxation based on cadastral value is not available for the taxpayer even in case the above items are added on the list which is promulgated in the next tax period. The Ministry of Finance took the same view as the Supreme Court of Russia (Appellate Decision of the Supreme Court of Russia dd. 20.02.2017 N 32-АПГ16-14), according to which the tax may be calculated based on the cadastral value retrospectively, i.e. for the tax period for which the non-updated version of the list was in effect. So, the taxpayer may lawfully benefit from this opportunity.
Source: Letter of the Ministry of Finance dd. 17.07.2018 N 03-05-04-01/49877
3. Measures and restraints securing the tax payment – is an effective contest possible?
Tax authorities are authorized to apply special measures and restraints to taxpayers who violated their tax obligations (art. 101.10 of Tax Code of Russia). In order to secure the payment of tax a restraint on alienation (as well as on pledge) may be imposed by the tax authority in relation to certain assets of the taxpayer (art. 101.10.1 of Tax Code of Russia). In this case, the assets may be sold or otherwise alienated only upon consent of the tax authority.

The resorting to such restrictive measures has to be justified. In the Decision of the Commercial Court of Volgoviatskiy district dd. 23.07.2018 in the case N А43-31940/2017, as well as in the decisions of lower courts in the above case the exemplary grounds for applying a restrictive measure are enumerated:

  • dividing of property of the enterprise by transferring it to affiliated entities;
  • major additional tax assessments, incl. rates and penalties (around 12 million rubles in the above case);
  • increase of indebtedness;
  • applying for tax deductions on the grounds of a documentation rendered by counterparties who act in bad faith.
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