What's New With Russian Taxation and Laws?

10 February 2015
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Olga Cherkasova
Taxation and Legal Expert at Olga Cherkasova
TL: What advice would you give clients on dealing with the complex indirect taxation regulations in Russia, particularly VAT requirements?
OC: VAT in Russia is as complex as in any other country applying it. VAT rules in most areas are very similar to those in Europe. But, of course, there is specificity and the client should just think of and review in advance the VATability of operations, possibilities of input VAT offset, to avoid additional tax expenses. Documentation and correct completion of documentation are vital for the proper VAT accounting and reporting, much more important than in Europe, so clients should not be reluctant about documentation.
TL: At the moment, digital currencies such as the controversial bitcoin are illegal in Russia, but in recent news it was reported that Russia is reconsidering its bitcoin ban. What is your opinion on digital currencies, and do you think they should be an acceptable form of payment in all countries? If so, how would they be taxed?
OC: I am not a specialist in the financial market and would not like to make any forecasts regarding future of bitcoin as this would not be professional from my side. However, I read that, currently, the situation with bitcoin is not optimistic. Taxation of operations using bitcoins will likely be similar to taxation of operations in foreign currency, if bitcoin is eventually accepted as currency.
TL: The controversy surrounding the Russian deoffshorization legislation, which subjects Russian-controlled international companies to Russian tax regulations, is currently a hot topic. How has it impacted your field, and what future outcomes do you predict? 
OC: The first problem Russian companies and individuals came across with is how to notify on their offshore structures. The law is new and the authorities are currently not fully ready to proceed. Probably in three to six months the situation will be more clear.
The second issue for the accountants and tax consultants will be regular collection of documents confirming income of the offshore companies and we should be ready to changing in the reporting forms, supporting documentation. Lots of practical issues and consequent expenses of our clients will arise soon.
But, in case the tax authorities really and seriously implement the control, most of owners of offshore companies will close them as there will be no benefit in them.
TL: What advice would you give clients that have Russian-controlled foreign companies on how to deal with the deoffshorization rules?
OC: Follow them and search for other tax optimization methods inside own production and in Russia. The implementation of the rules shows natural development of the Russian fiscal system. One time it must happen. All countries with a developed fiscal system have quite strict rules and control for offshore operations of their residents. Russia will not stand aside.