The main changes introduced into Part II of the RF Tax Code The value added tax (VAT) Among important changes, the switchover from the monthly to quarterly schedule for the payment of VAT can be noted. Presently VAT can be paid on a quarterly basis by all taxpayers whose monthly sums of proceeds from sales of goods (or work, or services) during a given quarter before tax are below 2 million roubles. The norm coming into force from 1 January 2008 for all taxpayers, tax agents including, will make it possible to reduce the bulk of submitted documenta tion and enable taxpayers to use the amounts of the tax as their circulating assets.
From 1 January 2007 the special procedure for VAT refunds on export trans actions is abolished: the deductions of VAT on internal and external operations must be reflected in one declaration (Item 6 of Article 164 of the RF TC, requiring that a separate tax declaration with a zero tax rate should be submitted, is abol ished). That is, the sums of the tax to be refunded to exporters will be entered into a RUSSIAN ECONOMY IN trends and outlooks general declaration and thus be accepted for deduction in a declarative procedure.
The procedure for refunding is general, to be applied only if the amount of VAT paid on internal and export transactions is in excess of the total amount of tax as calcu lated by a taxpayer (Item 1 of Article 176 of the RF TC).
A new wording is introduced for Article 176 “Procedure for tax refund”. After a taxpayer has submitted a tax declaration, the tax agency, during an in house tax audit, verifies the justifiable character of the amount of tax declared as due to be refunded. The decision concerning the refunding (in full or in part) of the corre sponding amounts must be made by the tax agency within 7 days after the comple tion of a tax audit, if no violations of legislation on taxes and levies have been found.
If a taxpayer has arrears of VAT or of other federal taxes, or arrears of the cor responding penalties and (or) fines, a tax agency independently sets off the amount of tax to be refunded against the aforesaid arrears. If there are no arrears, the amount of tax to be refunded by decision of a tax agency is returned, on the ba sis of the taxpayer’s application, to the bank account specified in it. Also, on the basis of the taxpayer’s written application, the amounts to be refunded may be set off against future payments of VAT and other federal taxes.
On the next day after the decision concerning a refund was made the tax agency must send to a territorial agency of the Federalого Treasury an order for the refund of the amount of tax, and the territorial agency of the Federalого Treas ury, within 5 days from the day of receiving this order, must refund to the taxpayer the amount of tax, and within the same period to notify the tax agency as to the date of the refund and the amount refunded to the taxpayer. The tax agency must also notify the taxpayer in writing as to its decision concerning a refund, or a setoff of the amount of tax to be refunded, or a refusal to refund it, within 5 days from the day of making the corresponding decision.
The norm stipulated in Article 149 concerning the exemption from the value added tax established for religious organizations was made more precise. At pre sent it is established that the value added tax in the territory of the Russian Federa tion is not to be levied on the realization (or transfer for their own needs) of items used for religious purposes and religious literature produced and realized by reli gious organizations. In this connection, in actual practice this exemption can be taken advantage of by those religious organizations that both produce and realize, on their own, items used for religious purposes and religious literature. From the year 2007 onward VAT will no more be levied not only on the commodities (or work, or services) produced and realized by a religious organization or by the economic societies owned by that religious organization, whose charter fund is constituted only by the contributions made by religious organizations, but also on any transfers of such commodities (or work, or services) between any religious organizations and (or) the economic societies created by them, whose sole founders (or partici pants) are religious organizations (or unions).
Because of the establishment of a new type of state and municipal institutions –autonomous institutions (which are not budget funded), which enjoy greater freedom in respect of the property transferred to them, certain changes have been Annexs introduced into Subitems 5 of Item 2 of Article 146 of the RF TC: VAT will not be lev ied on the reimbursable transfer of fixed assets to any state and municipal institu tions – either budget funded or autonomous.
The personal income tax (PIT) Certain changes have been introduced in Chapter 23 of the RF TC “Personal income tax”, which make more precise the notion of tax levied on a resident of the Russian Federation. For purposes of PIT payment, all physical persons are divided into the tax residents of the Russian Federation and those persons who are not such residents. Different tax rates are applied to the incomes of residents and non residents – 13 % and 30 %, respectively (Items 1 and 3 of Article 224 of the RF TC).
In accordance with Item 2 of Article 11 of the RF TC, tax residents are under stood as those physical persons who have actually spent no less than 183 days in one calendar year in the territory of the RF. Thus, the status of a tax resident is ac quired by a physical person in respect of each calendar year, and until the expiry of the period of 183 days from the beginning of a calendar year a physical person (in cluding Russian citizens permanently residing in the RF) is not a tax resident.
Now, from 1 January 2007 onward, a tax resident will be recognized as a physical person who has actually spent no less than 183 calendar days in the RF during 12 successive months. In this connection, the period of a physical person being in the RF is not disrupted by his or her exit from the RF territory for a short period (less than six months) for purposes of medical treatment or education. It is suggested that certain categories of persons, namely the Russian military serving abroad, as well as the employees of bodies of state authority and bodies of local self government dispatched to work abroad, beyond the limits of RF territory, should be recognized as RF tax residents no matter what the actual length of time has been spent by them in the territory of the Russian Federation.
Some workers, instead of a standard tax deduction in the amount of 400 rou bles (Subitem 3 of Item 1 of Article 218 of the RF TC), enjoy the right to a monthly PIC deduction in the amount of 500 roubles (Subitem 2 of Item 1 of Article 218 of the RF TC). These are, e. g., veterans of World War 2; persons disabled from child hood and disabled persons of Groups I and II; citizens demobilized from the armed forces, who have served in the Republic of Afghanistan. In contrast to the deduc tion of 400 roubles, granted only after the annual income is below 20,000 roubles, the deduction of 500 roubles is granted on a monthly basis independently of the size of a worker’s income. From 1 January 2007 the right to a standard tax deduc tion of 500 roubles will also be enjoyed by those citizens who have participated in combat actions in the territory of the Russian Federation.
From 1 January 2007 onward the maximum size of a social deduction from the tax, granted to a taxpayer in connection with his or her expenses on education or medical treatment, will be increased from 38,000 to 50,000 roubles (Subitems and 3 of Item 1 of Article 219 of the RF TC)3. In accordance with Subitem 3 of Item If an application for a deduction is filed in 2007 in respect of the year 2006 and earlier tax periods, the maximum amount of deduction will be 38,000 roubles.
RUSSIAN ECONOMY IN trends and outlooks of Articles 219 of the RF TC, the social tax deduction will also cover the sums of in surance premiums paid under the contracts of voluntary personal insurance envis aging the payment of insurance companies only for medical services.
It is established that from 1 January 2007 the property deduction from the tax, envisaged in Article 220 of Part II of the RF TC, will be granted to a taxpayer in an event of sale or purchase not only of an apartment or a house, but also a room.
From 1 January 2007 it is envisaged that PIC should not be levied on the sums of parent capital established in the amount of 250,000 roubles (Item 34 of Article 217 of the RF TC). In this connection no social or property deductions are granted when parent (or family) capital is spent on education and (or) construction (or ac quisition) of a residential building, apartment or share (shares) therein.
Excises Traditionally, the rates of excises on the majority of excisable goods have been raised (Item 1 of Article 193 of the RF TC ). Thus, from January 2007 the rate of excise on ethyl alcohol is increased from 21 roubles 50 kopecks to 23 roubles kopecks, the rate of excise on beer with per cent volume of ethyl alcohol from 0.% to 8.6 % inclusive – from 1 roubles 91 kopecks до 2 roubles 07 kopecks per liter, and with per cent volume of ethyl alcohol over 8.6 % – from 6 roubles 85 kopecks to 7 roubles 45 kopecks per liter.
The rate of excise remained the same for champagnes and sparkling, carbon ated and prickling wines; the rate for natural wines has not been changed, either;
the same rate will be applied to natural beverages with per cent volume of ethyl al cohol not higher than 6 %, produced from wine materials without the addition of ethyl alcohol. For all the other types of spirituous liquors a general rate is estab lished of 162 roubles per liter of absolute ethyl alcohol contained in excisable commodities. The rates of excises on oil products have also remained unchanged.
A zero excise tax rate will be applied, as before, to beer with per cent volume of ethyl alcohol of up to 0.5 % and on passenger cars with engine capacity of up to 90 hp.
Previously, alcohol containing products with metal spray cans – perfumes, cosmetics and household chemicals – were not recognized as excisable goods (paragraphs 7 and 8 of Subitem 2 of Item 1 of Article 181 of the RF TC). From January 2007 onward these products will become excisable, but the rate of excise will be zero (Item of 1 of Article 193 of the RF TC).
The rate of excise on passenger cars with engine capacity of above 90 hp and below 150 hp has been raised from 16 roubles 50 kopecks to 18 roubles per hp, and on passenger cars and motorcycles with engine capacity of above 150 hp – from 167 to 181 roubles per hp.
The rates of excises on tobacco products have been also raised, but this de serves a special comment. The rates of excises on cigarettes have been raised on the average by 30 %: on filter tipped cigarettes the fixed part of the rate is in creased from 78 to 100 roubles per 1000 pieces, on cigarettes without filter and cigarettes with cardboard mouthpieces – from 35 to 45 roubles per 1000 pieces.
Annexs The minimum general rate of excise on filter tipped cigarettes is 115 roubles per 1000 pieces, on cigarettes without filter and cigarettes with cardboard mouth pieces – 60 roubles per 1000 pieces. The most significant change is that the ad valorem part of the rate on cigarettes and cigarettes with cardboard mouthpieces will not amount to 5 % of their estimated value. That is, now the ad valorem (per cent) part of the rate on cigarettes and cigarettes with cardboard mouthpieces is established on the basis of the estimated value of a commodity, calculated by the maximum retail price and not by the disbursing price, as it was done previously. In this connection, a taxpayer must notify the tax agency concerning the maximum retail prices of each item name of tobacco products. Presently two forms for such a notification are established for the maximum retail prices of tobacco products manufactured in Russia and for the maximum retail prices of tobacco products im ported into Russia.
The rules for determining the estimated value of cigarettes and cigarettes with cardboard mouthpieces are established by new Article 187.1 of the RF TC. A tax payer must independently determine the maximum retail price of one package of cigarettes of each brand. Tobacco products cannot be sold to consumers at a price higher than the established maximum retail price. The notification should be submitted no later than 10 days prior to the beginning of the month during which the prices indicated in it are going to be applied. The maximum retail price declared in a notification must be applied for no less than one calendar month. After the ex piry of one month a taxpayer can change the price by submitting a new notification.
The information concerning maximum retail prices, as well as the information on the month and year in which a product was manufactured, must be indicated on each package of tobacco products. The production and import of filter tipped cigarettes without the provision of this information will be forbidden from 1 January 2007, and their retail sale – from 1 January 2008. For cigarettes without filter and cigarettes with cardboard mouthpieces, any production and import without the in dication of information on a package will be forbidden from 1 July 2007, retail sale – from 1 July 2008 In the period between 1 January through 1 July 2007 the esti mated value of cigarettes without filter and cigarettes with cardboard mouthpieces will be determined on the basis of the maximum retail price stated in a notification.
Noticeable changes have been made in the levying of excises on oil products.
The payers of excises will now be recognized as persons carrying out the realiza tion of oil products produced by them. The persons engaged in wholesale, whole sale and retail, or retail sale of oil products will no more be treated as payers of ex cises. Article 179.1 of the RF TC, where the issue of certificates for carrying out transactions in oil products was envisaged, had been abolished. Also abolished are Subitems 2 4 of Item 1 of Article 182 of the RF TC, establishing the instances of the payment of excises on oil products: at the moment of the entry in the books of oil products produced on their own by persons without a certificate; at the moment of the receipt in the territory of the RF of oil products by an organization or an individ ual entrepreneur holding a certificate.
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