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Ulf Schneider Managing Partner RUSSIA CONSULTING Group Gothenburg, 4 th April 2013 Seminar: How to do business with Russia Tax and Accounting Issues in.

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Presentation on theme: "Ulf Schneider Managing Partner RUSSIA CONSULTING Group Gothenburg, 4 th April 2013 Seminar: How to do business with Russia Tax and Accounting Issues in."— Presentation transcript:

1 Ulf Schneider Managing Partner RUSSIA CONSULTING Group Gothenburg, 4 th April 2013 Seminar: How to do business with Russia Tax and Accounting Issues in Russia

2  Tax Legislation  Accounting  Payroll & HR-documentation  IT – ERP for Russian accounting Content 2

3  Tax Legislation  Accounting  Payroll & HR-documentation  IT – ERP for Russian accounting Content 3

4 4 Profit Tax (Corporate Tax) 20% Property Tax (mainly on real estate)max. 2,2% VAT18% / 10% Payroll Tax (flat rate, few exceptions) 13% / 30% (tax resident/ most cases of tax non-resident) Social Taxes 30% / 10% (fully paid by employer) (reduction as of 567.000 Rub p.a.) Tax Rates

5 Development of Taxes - Russia 5 2.Abolition of sales tax of 5%2004 3. Abolition of trade tax of 5%2005 4.Reduction of VAT from 20% to 18% 2005 5.Reduction of social insurance contributions 2005 6.Improvement of loss carryforward 2006/07 1.Introduction of Flat Tax Rate of 13% 2001 7.Decrease of profit tax from 24% to 20%2009 9.Partial rise of social insurance contributions2010/11/12 8.Extension of VAT payment 2009 10.Partial abolition of property tax2013

6  „Bible” is the Tax Code Non-discrimination and repercussions principles Proof by tax authorities  Administrative Regulations Without legal binding force But Tax Authorities usually apply them  Jurisdiction No separate fiscal courts In most cases: taxpayer friendly decisions Basics of Russian Tax Legislation 6

7  Tax Rate 20%  No profit pooling  Tax losses can be carried forward for 10 years however, …  Operational cost generally fully deductible, however, exceptions, e.g.: Authorities question often whether business related Expenses without proper documents (also payroll issue) Profit Tax / CIT 7

8  Comparable with EU System  Import-VAT to customs authorities  reverse charge“-Sysem (VAT-Agent)  Invoice from subsidiary to parent company potentially with Russian VAT, that is not deductible in other countries. VAT 18% / 10% / 0% 8

9  Withholding tax: on interests 0% on royalties 0%  Permanent Establishment in Russia if: More than 12 month in case of construction No special terms in case of non-construction  Withholding tax on dividends: 5%, if direct contribution is at least 100 T USD share capital and amounts to min 30% 5%, if 100% subsidiary of Swedish entity 15% in all other cases Double Tax Treaty Sweden - Russia 9

10  In the beginning or at large investments Frequently input-VAT surplus  Legislation 3 months structured tax audit Thereafter repayment of VAT  Common practice Small amounts are not requested for payout, but carried forward VAT reimbursement 10

11  Work permit can be obtained faster (appr. 1 Month), if: Highly qualified experts Salary in Russia min. 2 Mio. Rouble For 3 years  13% PIT even for tax-nonresidents  Attention ! Salary payment has to be local Payment in Russia controlled quarterly Work Permit 11

12  Manager of Swedish HQ comes for a project to Russia  Subject to PIT only in Sweden, (not in Russia), if: Manager did not spend more than 183 days within 12 months in Russia Salary paid by Swedish legal entity Salary is not charged to a Russian permanent establishment Swedish Manager temporary in Russia 12

13  Tax Legislation  Accounting  Payroll & HR-documentation  IT – ERP for Russian accounting Content 13

14  25 Russian accounting standards  Often similar to IFRS  In practice: Accountants more tax experts  Invoice is not an accounting document Accounting – Special issues 14

15 Russian Accounting asks for various “strange” documents such as:  Invoice-Faktura  Acceptance protocol  Sales / Purchase ledger  Business trip log An invoice in itself is only an „invitation to pay“ – it does not constitute an accounting document Outcome in reality: 1.Much more bookings (due to suspense accounts) 2.Much more complex documentation (also due to quarterly reporting duty) 3.This significantly influences the number of employees, personnel expenses and controlling requirements. Russian accounting documents 15

16 Unusual bookings 16  Payments for rendered services often only booked as prepayments  Revenue first booked with VAT, gross, later in P&L taken out.  Stationary capitalized, then based on special documents amortized  Petrol to be capitalized and written off in line with real usage

17  Tax Legislation  Accounting  Payroll & HR-documentation  IT – ERP for Russian accounting Content 17

18  Important Documents Working time sheets as basis for monthly payroll calculation Internal orders („Prikaz“) required when Hiring, Retirement, Business Trips, Vacation of employees Labor book with complete tracking of entire employment history of each employee HR Administration 18

19  Salaries to be paid at least 2 times per month  Vacation minimum 28 calendar days  Vacation salary as average of the last 12 month Payroll accounting 19

20  Tax Legislation  Accounting  Payroll & HR-documentation  IT – ERP for Russian accounting Content 20

21  95% of all entities use 1C as accounting program  Meets all local legal and tax requirements  Ready-to-use in base version  Permanent update and support according to the changes in local requirements  Low Cost  Wide range of integration possibilities with all common used applications What is 1C? 21

22  Bookings in closed periods are possible  Bookings can be deleted (instead of storno with new entry)  Source codes can be easily affected by external programming  Quite some IT-work required to implement common Western reporting practice Weaknesses of 1C 22

23 Interface 1C - SAP 23 Russian Accounting Standards IFRS Postings Interface

24  Second Chart of Accounts (Mapping)  Transfer of all transactions from RAS  Mangement of different closing dates according to RAS and IFRS  Provisions only in IFRS  Reports according to IFRS (balance, P&L, cashflow) Options with ITAN 24

25  Accounting Outsourcing  Tax Consulting  IT Services / ERP  Interim Management  Office Sublease  Recruiting  Outstaffing  Visa and Work Permit Thank you for your Attention! 25 Ulf Schneider Managing Partner +7 / 495 / 956 55 57 SchneiderU@russia-consulting.eu

26 Our Offices www.russia-consulting.eu Moscow Ulf Schneider, Lars Flottrong, Mike Allen ul. Bakhrushina 32/1 115054 Moscow, Russia T +7 / 495 / 956 55 57 info@russia-consulting.eu Hamburg Ulf Schneider Alstertor 15 20095 Hamburg, Germany T +49 / (0)40 / 226 33 760 info@germany-consulting.de St. Petersburg Andreas Bitzi Finlyandskiy pr. 4a 194044 St. Petersburg, Russia T +7 / 812 / 458 58 00 info@russia-consulting.eu Kiev Sven Henniger vul. Shovkovychna 42-44 01601 Kiev, Ukraine T +38 / 044 / 490 55 28 info@ukraine-consulting.eu Minsk Polina Meleshko ul. Surganova 29 220012 Minsk, Belarus T +375 / 17 / 290 25 57 info@belarus-consulting.eu Almaty Kirill Afanasyev ul. Zheltoksan 111 A 050000 Almaty, Kazakhstan T +7 / 727 / 333 44 48 info@kazakhstan-consulting.eu Aktau Kirill Afanasyev Mangistauskaya oblast, District 14, building 61 130000 Aktau, Kazakhstan T +7 / 7292 / 470038 info@kazakhstan-consulting.eu Warsaw Piotr Linke Al. Jerozolimskie 81 02-001 Warsaw, Poland T +48 / 22 / 695 03 10 info@poland-consulting.com


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