Despite the promises of Russian President Vladimir Putin and the Russian Parliament not to increase the tax burden for businesses in 2015, Russian businesses will have to pay more tax (directly or indirectly) than ever before.
From 01/01/2015 tax on dividends has increased from 9% to 13%. Furthermore the owners of Russian businesses, who own the shareholdings in the Russian companies through the medium of offshore companies will have to pay 20% tax on any profits from such offshore company. It means that the schemes akin to issuing dividends in Cyprus under a 5% tax burden and avoiding paying any taxes in Russia, due to Cyprus Double Taxation Treaty, will never work again.
Russian property tax has changed as well. The owners of commercial property in Russia will have to pay a property tax not from the nominal price of the property, but from the cadastrial (market) price. As a result the property tax for any commercial property in Russia will increase in two and even three times, which will have a great impact on the price of rent and start up costs of any business.
Another tax innovation in Russia is the introduction of “Trading Fees” for businesses registered in Moscow and Saint Petersburg. Such fiscal measure poses a real challenge for small businesses, the revenues of which are relatively low. For example, individual entrepreneurs’ pension and social funds payments have doubled in 2014, and introduction of extra annual payment of “trading fee” (around £1,000), may bring them down, especially in the light of current economic meltdown, resulting from Western sanctions and weak ruble.
Criminal prosecution for tax evasion
Prior to October 2014, criminal investigation of any tax crime could only be started on the basis of the results of tax inspection and special request from Russian Federal Tax Service. Since October 2014 any investigation of tax crime can be started directly by the investigators without the authority from Federal Tax Service, which should derive from the results of tax inspection.
Summing up, in the light of great degree of speculation around investment in Russia, it is worth noting that current economic crisis had a great impact on the Russian tax regime. As a result foreign investors tempted to buy Russian stock, property and other assets at an undervalue, taking advantage of Russian inflation and weak ruble, should be very cautious and consider all risks their investment entails.