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Overview of amendments to the Tax Code of the Russian Federation with respect to individuals

Rates, terms and procedure of tax payment

In 2013, a number of developments in the legislation on taxes and fees relating to individuals were adopted. Thus, one of the latest developments of the past year was the postponement of the term of payment of property tax, vehicle tax and land tax. Until 2014, the term of payment of these taxes for taxpayers who are individuals, could not be established until November 1 following the expired tax period. According to the amendments made the taxes shall be paid not later than October 1 of the year following the expired tax period. Based on the wording of the procedure of entry into force of amendments to the relevant laws, in 2014 the taxes are payable under the old rule, that is not earlier November 1. The payment of such taxes until October 1 will be effective from 2015.

New higher ratios of vehicle tax for cars more expensive than 3 million rubles introduced. The list of vehicles, the average cost of which makes up or exceeds 3 million rubles will be published annually until March 1 on the Internet website of the Ministry of Commerce. The amounts of ratios depend on the age of vehicle and its average cost.


Tax and legal regulation of banking sector

The amendments affected banking sector as well, so, from January 1, 2014 in case of suspension of transactions on the account of taxpayer with a bank, other banks are prohibited to open new accounts for such individual. Prior to the amendments the prohibition of opening a new account covered only the bank, which the blocked account was opened with.

There is currently no procedure for informing banks about blocking particular taxpayer account, but such procedure will be approved by the Federal Tax Service of Russia under agreement with the Bank of Russia.

According to the amendments to the tax legislation, effective from July 1, 2014, banks must report to the tax inspectorate of their location information on opening or closing account, deposit, change of its details not only by legal entities and individual entrepreneurs, but also by individuals who are not individual entrepreneurs. The information shall be sent electronically within three days after such events.

In addition, since July 1, 2014 during the tax inspection of an individual, who is not individual entrepreneur, as well as within the request of documents (information) on a particular transaction outside the scope of the tax inspection the tax inspectorate may request the bank the following information on such individual:

  • certificates on availability of account, deposits;
  • certificates on cash balances of accounts and deposits;
  • statements of transactions on accounts and deposits;
  • certificates on balances of electronic funds;
  • certificates on electronic money transfers.

The tax inspectorate may request from the bank this information only with the consent of the head of the higher tax body or the head (deputy head) of the FTS of Russia, and upon request of the authorized body of a foreign state in cases stipulated by international treaties of the Russian Federation .

Conditions for obtaining property deductions

Since January 1, 2014 new rules governing the ground and procedure for obtaining property deduction for personal income tax by expenses related to the purchase and construction of housing come into force.

Under the new rules, if a taxpayer when purchasing a real estate did not use the entire amount of property deduction of 2 million rubles, he/she may use the balance for the next purchase or construction of another housing. Thus, the limit for the number of objects covered by the possibility of obtaining property deduction, was removed.

The property deduction for expenses on repayment of interest on target loans (credits) was subject to amendment as well. Under the new rules this deduction is available only in respect of one object in an amount of up to 3 million rubles. Prior to the amendments to the Tax Code the amount of the property deduction for the repayment of interest was not limited. The provision on the limit of the amount of deduction for expenses made to repay the interest on loan, covers only the legal relations established after January 1, 2014, so that if the loan for purchase or construction of housing is issued before the entry into force of these amendments, the deduction can be obtained from the calculation of the entire amount of the interest paid.

The new version of the article 220 of the Tax Code of the Russian Federation does not have the provision on the distribution of the property deduction for expenses made for purchase of housing between co-owners when buying real estate in the common share or common joint ownership. If the co-owner of the purchased housing does not exercise his/her right to property deduction, it retains the possibility to obtain a full deduction upon the purchase or construction of another real estate. Thus, each of the co-owners may benefit from a property deduction of 2 million rubles for the purchase of one or several objects.

The legislator introduced an additional possibility to benefit from a property deduction upon the purchase of real estate by parents (guardians, tutors, adoptive and foster parents) at their own expense, under the ownership of their minor children (in wards, under trusteeship, foster and adopted children). When purchasing of real estate under the ownership of minor children using a target loan (credit), parents can also benefit from the property deduction for the expenses made for repayment of interest on such target loans (credits).

Another novelty in the calculation of the property deduction is provision to individual of the possibility to specify more than one tax agent that paid the PIT for the tax period. For example, if a citizen at the same time was in labor or civil law relationship with several tax agents, he/she is entitled to benefit from a tax deduction in the amount paid by all tax agents, rather then one, as it was provided by the previous version of the Tax Code.

According to the State Duma Committee on Budget and Tax, the declaration submitted by an individual is a written statement of taxpayer about the subjects of taxation, income received and expenses made and on other data, which are the basis for the calculation and payment of tax. This statement is taken into account in the new version of the Tax Code in the regulation of the procedure of benefiting from property deductions. Since January 1, 2014 no submission by individual of a separate application for property deductions for purchased real estate and repayment of interest on loan related to such purchase is required.

Tax and Legal Regulation of the Securities Market

At the end of 2012 the Tax Code of the Russian Federation was supplemented by an article regulating the features of taxation of income from federal government equity securities, as well as other equity securities with mandatory centralized custody issued (given) by Russian entities paid to foreign entities acting on behalf of third parties.

The essence of the developments is that when calculating the tax on income from such securities, tax agents must have information about individuals exercising rights under the securities of the Russian entity, or for the benefit of whom the trustee manager exercises the rights attached to the securities of the Russian entity. In the absence of such information, the tax agent shall calculate the tax at a rate of 30 percent. Foreign entities operating in the interests of third parties shall provide information about individuals who own securities.

During the past year this article was subject to amendment. The procedure of calculation and payment of tax, which takes effect in 2014, was adjusted. As a whole, the main principle remains the same: where information is available the tax is withheld at the rate established for this type of income. If information is not available, the rate of 30 percent is used, which now is provided in a separate paragraph of the Tax Code of the Russian Federation.

Exemption is provided for certain income received in the form of dividends on shares of Russian entities the taxation of which is carried out at a reduced tax rate compared to the tax rate set out by the Code or the international treaty of the Russian Federation, and the application of this reduced rate depends on the compliance with the conditions set out by the regulatory and legal act or international treaty.

The rate of 30 percent will not apply in the following cases:

  • the income from such securities is not subject to taxation in accordance with the Tax Code of the Russian Federation or the international treaty of the Russian Federation;
  • such income is subject to taxation at a rate of 0 per cent;
  • in accordance with the Tax Code of the Russian Federation the tax agent does not calculate and withhold tax on such income.

The information about individuals who exercise rights attached to securities shall be provided to tax agent by foreign nominee holder, foreign authorized holder or person for whom the depository opened a custody account of depository programs.

Terms for provision of such information are established. Depending on the type of securities information is provided:

  • for securities with mandatory centralized custody - no later than five working days from the date on which the depositary exercising mandatory centralized custody of securities disclosed information about the transfer to its depositors of their entitlements on securities;
  • for shares of Russian entities - not later than seven working days from the date on which, in accordance with the decision of the entity, persons entitled to dividends are identified.

Previously, the term for provision of information was determined by the following wording: not later than three working days from the date on which the depositary exercising mandatory centralized custody of securities disclosed information on the transfer to its depositors of their entitlements on securities.

Under the new rules the tax agent shall pay the amount of the calculated tax to the budget on the thirtieth working day after the date of its calculation.

Before that term expires tax agent can be provided clarified summarized information required for the calculation of PIT. In this case, tax agent shall recalculate the amount of tax calculated and independently make the payment or the refund of the previously withheld amount of tax. If the clarified summarized information is provided to the tax agent in less than five working days before the expiry of the thirty day period, tax agent may not perform such recalculation.

Forms in which the summarized information is provided are established. This may be one or several of the following forms (at the choice of tax agent):

  • a paper document signed by the authorized person of the foreign entity;
  • an electronic document with encrypted certified digital signature or encrypted non-certified digital signature in accordance with the Federal Law of April 06, 2011 No. 63-FZ "On digital signature", without providing paper document;
  • an electronic document transmitted using a system of international financial telecommunications SWIFT, without providing paper document.

Information to be provided to tax agents for calculation, withholding and payment of tax:

1) Upon payment of income on securities held on the custody account of a foreign nominee holder (the account can be opened to a foreign entity, which, in accordance with the laws of the state, in which it is established, shall be entitled to register and transfer the rights to securities):

A. Summarized information about individuals exercising rights attached to securities;

B. Summarized information about individuals for whose benefit the trustee manager exercises the rights attached to securities of Russian entity, provided that such trustee manager does not act in the interests of a foreign investment fund (investment company) which, in accordance with the personal law of such fund (company) refers to the collective investment schemes.

2) Upon the payment of income from securities held on custody account of depository programs (the account is opened for Russian equity securities the rights to which are certified by securities of foreign issuers (depositary receipts)

A. Summarized information about persons exercising rights to securities of a foreign issuer certifying the rights to securities of a Russian entity;

B. Summarized information about persons for whose benefit the trustee manager exercises the rights attached to securities of a foreign issuer certifying the rights attached to securities of a Russian entity, provided that such trustee does not act in the interests of a foreign investment fund (investment company), which in accordance with the personal law of such fund (company) refers to collective investment schemes.

3) Upon the payment of income from securities held on custody account of a foreign authorized holder (the account can be opened to a foreign entity, which in accordance with the law of the state where it is established, is entitled to exercise on its own behalf and on behalf of other persons any actions with securities not belonging to it, as well as to exercise rights to them) is not open for a foreign investment fund (investment company) which, in accordance with the personal law of such fund (company) refers to collective investment schemes, the amount of tax is calculated and withheld by tax agent on the basis of summarized information about the persons for whose benefit such foreign authorized holder carries out securities trust management, in respect of income on which the entity is recognized as a tax agent.

The summarized information shall contain the following data:

  • in respect of persons referred to in the subparagraph A the of paragraph 1 and the subparagraph A of the paragraph A, - information on the number of securities referred to in the paragraph 1 of this article, and the number of securities of a foreign issuer certifying the rights attached to securities of the relevant Russian entity, the rights to which are exercised by these persons on the date specified by the decision on the payment of income from securities;
  • in respect of persons referred to in the subparagraph B of the paragraph 1, the subparagraph B of the paragraphs 2 and 3, information on the number of securities of the Russian entity referred to in the paragraph 1 of this article, and the number of securities of a foreign issuer certifying the rights in respect of securities of the relevant Russian entity, the rights to which as of the date determined by the decision of the payment of income from securities are exercised by the trustee manager for the benefit of such persons .

The information on the number of securities is provided indicating the states, tax residents of which such individuals exercising rights to securities are.

Depending on the availability or absence of this information, the tax is withheld at the following rates:


The Tax Code of the Russian Federation was supplemented by an article that defines the types of documents that can be requested by tax inspectorate during the audit of correctness of calculation and payment by tax agent of the tax on income from government securities, municipal securities and equity securities issued by Russian entities if such income is paid to foreign entities acting on behalf of third parties.

Upon audit the inspectorate may request the following documents:

  • copies of identity documents of the individual who exercised rights attached to securities of a Russian entity as of the date specified by the decision of such entity on the payment of income from securities;
  • other documents confirming the correctness of the calculation and payment of PIT, including those that serve as proof of the reliability of information provided by foreign entities operating in the interests of third parties;
  • copies of identity documents of individual for whose benefit the trustee manager executed on the date specified by the decision of a Russian entity on payment of income from securities, right attached to securities law of such Russian entity (securities of foreign company certifying the rights attached to shares of the Russian entity);
  • copies and original documents confirming the implementation by an individual on the date specified by the decision of a Russian entity on payment of income from securities, rights attached to securities of such Russian company (the foreign company securities certifying the rights attached to shares of the Russian entity), as well as documents that serve as proof of tax residence of such person;
  • copies and original documents confirming the exercise by trustee manager on the date specified by the decision of the Russian entity on payment of income from securities, rights attached to securities of such Russian entity for the benefit of an individual, as well as documents that serve as proof of tax residence of such person.

The request to submit the documents is submitted under the common procedure. If the agent does not have the required documents, it shall submit the corresponding request in the interests of third parties of a foreign entity, to which the income from securities of Russian entities was paid.

The required documents must be submitted to the tax body not later than three months from the date of receipt of the request by the agent. Upon refusal of the foreign entity to submit the necessary documents requested by the tax body such tax agent shall not be obliged to calculate and pay the PIT not withheld by it. No tax penalties shall apply against tax agent.

Documents may be requested by tax bodies from authorized body of a foreign state in the cases stipulated by international treaties of the Russian Federation.

Thus, the amendments to the legislation are aimed at creating a transparent securities market. This trend is international in nature and is one of the requirements of the World Trade Organization, the member of which the Russian Federation has recently become.