The Federal Law dated 25.06.2012 N 94-ФЗ "On Amendments to Part One and Part Two of the Tax Code of the Russian Federation" has introduced some changes in the Tax Code of the Russian Federation as from 1st January 2013.
The changes in the Tax Code of the Russian Federation are aimed at perfecting of special taxation frameworks – the patent taxation system, the taxation as a single tax on imputed earnings for certain activities, the reduced taxation system, the taxation for agriculture.
As from 1 January 2013 a new chapter has been introduced – the patent taxation system that shall replace Article 346.25.1 of the Tax Code of the Russian Federation on application of a reduced taxation system by sole traders on the grounds of a patent.
Another important amendment is the provision for a voluntary nature of the common imputed tax.
Patent taxation system
The patent taxation system shall come into force in accordance with the Tax Code and the laws of the subjects of the Russian Federation and shall be applied for the said subjects of the Russian Federation.
The patent taxation system shall be applied by the sole traders, the transition into this system is voluntary and it can combine with other taxation frameworks.
That is incase a sole trader of certain trading activities shall use the common taxation framework or a reduced taxation framework, he will be entitled to apply the patent taxation framework for other activities that have been transferred to this framework by the laws of a subject of the Russian Federation.
The subjects of the Russian Federation are required mandatorily to use the patent taxation in 47 types of business activities, these mainly being maintenance services, automotive services, as well as retail trading and catering services. And the laws of the subjects of the Russian Federation on introduction of patent taxation must be published before 1st December 2012.
The taxable base for calculation of the tax payable when the patent system is applied, shall be the possible future annual income that will be received by the sole trader, the sizes of which are regulated by the laws of the subjects of the Russian Federation as per the types of the business activities. The minimum size of the possible future annual income that the sole trader may receive shall not be less than 100 000 roubles and the maximum shall not exceed 1 million roubles. Besides, the subjects of the Russian Federation are entitled to increase the maximum of the possible future annual income that will be received by the sole trader.
Sole traders who pay taxes under the patent taxation framework are exempted from the individual income tax, individual property tax and value added tax (as related to the activities carried out under the patent taxation).
The document that confers the right to apply the patent taxation framework is the patent for carrying out one of the types of business activities. A patent is issued to the sole trader by the tax authorities that he is registered with and shall be valid in the subject of the Russian Federation which is mentioned in the patent. In this case, the individual entrepreneur, received a patent in one subject of the Russian Federation shall have the right to obtain a patent in the other subjects of the Russian Federation.
Application for the patent shall be submitted to the tax authority according to the applicant’s registered address within 10 days before the application of the patent taxation commences.
A patent is issued at the choice of the sole trader for the period from one to twelve months inclusive within one calendar year. The validity period of a patent, therefore, can not be extended to the following calendar year.
The fiscal year is the calendar year. In case a patent is issued for the period of not less than one year the fiscal year shall be the period of the validity of the patent.
Tax is calculated at the 6% rate from the possible future annual income that will be received by the sole trader. If a patent is issued for a period of less that the calendar year the tax shall be calculated by dividing the said income by twelve months and multiplying the result by the number of the months in this period of validity of the patent.
The tax is paid by a single payment in case the validity of the patent is under 6 months, and it is paid in two installments if the patent is valid for over 6 months.
The taxable asset is the possible future annual income that will be received by the sole trader according to the respective business activity, as per the laws of the subjects of the Russian Federation.
A sole trade is not permitted to reduce the tax by the amount of mandatory insurance fees for the Pension fund of Russia, the Social Security Funds mandatory fees, those of medical insurance and casualty and professional accidents insurance.
The tax return form on the tax payable when the patent taxation system is applied does not need to be submitted to the tax authorities. The taxpayers on the patent taxation, however, must keep tax records and accounting in order to control the restrictions on income from sale and in the books of income that are kept on each patent received.
When the patent system is applied the sole trader can hire employees, including via agreements of civil legal nature. But an average number of employees within one fiscal period shall not exceed 15 persons on all business activities carried out by the sole trader.
The sole trader shall be deemed to have lost the right to use the patent taxation system and to be under the common taxation framework as from the beginning of the fiscal year for which a patent has been issued provided that:
- from the start of the calendar year the income from the sales in every business activity under the patent system exceed 60 million roubles;
- during the fiscal period the taxpayer have exceeded the required amount of employees – they were over 15 persons;
- a sole trader has not paid the tax due in the existing deadlines.
With effect from 1st January 2013 the Federal Law of 06.12.2011 N 402-ФЗ "On bookkeeping" shall be enacted, according to this law of power of it shall cover the sole traders. And the sole traders are not required to make bookkeeping in case according to the laws of the Russian Federation on taxes and fees, they keep the records of income or income and loss and/or other taxable objects as prescribed by the law . Since the taxpayers of the patents system are obliged to keep the records of income, they are not required to do bookkeeping.
The sole traders in 2013 shall pay insurance fees at reduced rates of 20 %, excluding certain types of activities, such as lease (rent) of residential and non-residential premises, country houses, plots; retail sales and catering services.
The sole traders paying tax under the patent system are granted the right to make various cash payments and/or payments via credit cards without the use of a cash register in case a purchaser (client) requests a document (a sale receipt or any other document to confirm the receipt of monies for the respective goods (work, services).
The sole traders planning to use the patent taxation system starting from 1st January 2013 must apply for the patent before 20th December 2012. The Tax Code provides for the cases where a sole trader can be refused to issue a patent.
Unified imputed taxation system for certain types of business activities
Chapter 26.3 on Unified imputed taxation system for certain types of business activities has been amended significantly that will take effect as from 1st January 2013.
As from 1st January 2012 the change into the UITS will be voluntary and of notifying character.
Companies and sole traders carrying out their activities that have been transferred under the unified taxation system by the decisions of the representative bodies of the municipal districts, municipalities, legislative (representative) bodies of the governments of Moscow and St. Petersburg as the federal cities must register with the tax authorities by making an application within five days from the day the UITS commences its application.
Certain types of business activities that can qualify for the UITS have been specified.
When defining the restrictions on the number of employees the average listed number is replaced by the average number . In other words, when defining the said restriction individuals that are employed half-time and on the employment agreement shall be counted.
The amendment specifies the procedure for deregistration of taxpayers with UITS when they cease their activities taxable under this tax and transfer to another type of taxation, including due to the breach of the terms of the UITS.
The amendment also specifies the procedure for calculation of the UITS in case of incomplete tax period (quarter) in respect of registration and deregistration of a taxpayer . It is provided that in case registration or deregistration of an entity or a sole trader with the tax authorities as a tax payer of the UITS is made not from the first calendar day of the month the imputed income for this month is calculated on the actual number of days the entity was in existence or the actual registration of the sole trader.
Thus, the law provides the actual number of days of business activities in a month as the payer of the unified tax.
It is provided that in reduction of the unified tax the sick leave days that are covered by the employer shall be taken into consideration.
Simplified taxation system
The maximum income for a company to start using the simplified taxation system as well as the limit of income exceeding which the taxpayers shall lose the right to use this taxation system, remain the same - 45 and 60 million roubles respectively. Besides, the limited for companies to switch to the simplified taxation system (the STS) is annually adjusted at the deflating index set for the following calendar year (for 2013 this index is set at the rate of 1).
There is an established procedure for transferring to the STS, according to which companies and sole traders willing to transfer to the STS from the following calendar year shall inform the tax authorities before 31st December of the calendar year prior to the calendar year when the STS starts. Notification about the change of the taxable object from the next year under the new rules shall be applied for before 31st December of the prior year.
A newly established entity or a newly registered sole trader are entitled to notify about the change into the simplified taxation system within 30 calendar days from the date of registration with tax authorities. In such case the entity are considered to be the taxpayers under the STS from the date they have been registered with the tax authorities mentioned in the tax registration certificate.
Companies or sole traders that have ceased to be taxpayers of the unified imputed tax are entitled to switch to the STS based on notification as from the month the obligation to pay the unified imputed tax had ceased.
In case a company or a sole trader failed to inform the tax authority about the change to the STS within the existing deadlines they shall not be allowed to do so. The procedure for defining income and loss has been specified when calculating the STS, in particular, it has been established that an overestimation of assets in the form of currency values and claims (liabilities), the cost of which is expressed in a foreign currency, including foreign bank accounts, due to the change of the official foreign currency rate to the currency rate of the Russian Federation set by the Central Bank of Russia, for the purposes of Chapter 26.2 of the Tax Code of the Russian Federation, income and loss from the said overestimation are not defined and are not considered.
Taxpayers that apply the STS to the income as an object are entitled to reduce the amount of the unified tax by the amount of payments under the agreement for voluntary individual insurance made for the benefit of the employees. Losses cause by the payment of sick leave shall reduce the tax as to the part paid by the employer and not covered by the fees paid by the employee to the insurance companies.
Taxation system for agriculture
Chapter 26.1 "The system of taxation for agriculture (the unified agricultural tax) (hereinafter the UAT) has been amended.
The existing procedure for notification of the change into the UAT according to which companies and sole traders willing to be under the UAT shall notify the tax authorities located at the registered address of the company or the sole trader before 31st December of the calendar year prior to the calendar year when the transfer into the UAT will take place.
The notification shall contain the details of the share of income from sales of the produced agricultural goods; including the goods of primary processing made from the agricultural raw material of own produce in the general sale.
A newly established entity or a newly registered sole trader are entitled to notify about the change into the unified agriculture taxation system within 30 calendar days from the date of registration with tax authorities.
Companies or sole traders that have failed to notify about the change into the UAT within the established deadline shall not be considered a taxpayer under the UAT.
Taxpayers under the UAT are allowed to continue applying this taxation framework in the following fiscal year in case a newly established entity or a newly registered sole trader who have switched to the UAT in the first taxable period did not have taxable income that are considered for determining the tax rate and in case in the current taxable period they did not breach the limitations set for the UAT.
There have been other clarifications, that is, income can be reduced for the paid taxes and fees, excluding the UAT on the amount due to be returned to the purchaser (client), on the advance payment the income of that period liable to a return shall be reduced.