Dear visitors, you are kindly invited to review comments prepared by MinTax Group on certain amendments and additions introduced to the Tax Code by the Law No 257-V dated 28 November 2014 with effect from 1 January 2015.

Article 12. The Fundamental Definitions Used in This Code

Definitions used in the Tax code were amended and supplemented. The amendments changing the wording of the existing definitions of “charitable assistance”, “tax agent” have clarifying nature. To streamline the tax issues of professional mediators, their definition have been introduced in connection with the promotion of in-move tourism, providing for VAT exemption of related sales turnovers; also the definition of “tour operator” has been introduced.

Effective since 1 January 2015.

Article 22. Obligations of the Tax Service Authorities

Clarifying amendments were made regarding the duties of tax authorities on placement of information concerning taxpayers, transactions with whom for other taxpayers may involve risks of reducing deductions for CIT purposes and offset for VAT purposes. In particular, clarifications are related to the actual placement of such information only on the site of the authorized body, the link to which was replaced by a link to the “Internet resource” according to the Law # 257-V. Also, the authorized body is now obliged to post on its Internet site information on taxpayers (tax agents) whose registration was recognized invalid on the basis of an enforceable court decision.

Effective since 1 January 2015.

Article 39. Fulfillment of the Tax Liability in Case of Re-organisation of a Legal Person by way of merger, accession, separation

The Article was supplemented by paragraph 4-1, which sets the procedure for transferring the excess VAT of the legal entity – VAT payer reorganized by separation, to the successor (s). This provision is applied to reorganized legal entities with a controlling block of shares belonging to the National control holding.

 

Effective since 1 January 2015.

Article 46. Statute of Limitation for the Tax Liability and Claim

Paragraph 6 of the Article was supplemented by a clause providing for the extension of the period of limitation for making a refund and (or) offset of the confirmed VAT excess amount provided under Article 600 of the Tax Code, by five years after the end of the tax period in which the accuracy of the excess VAT claimed for refund was confirmed, in particular, based on the results of appealing a tax audit report in accordance with the laws of the RoK, in the case where the VAT excess refund claim was submitted by the taxpayer within the period of limitation provided for in paragraph 2 of Article 46 of the Tax Code.

Effective since 1 January 2013.

Article 58. Separate Tax Accounting

The Article was supplemented by paragraph 1-1, which sets the procedure for the allocation of general expenses for taxpayers maintaining separate tax accounting,in cases where they reduce CIT assessed according to Article 139 of Tax code. Accordingly, paragraph 7 was clarified by a reference to the procedure established by the new paragraph 1-1, so as to avoid a situation where taxpayers maintaining separate tax accounting and reducing the CIT assessed according to Article 139 of Tax code apply provisions of TAP[1] instead of paragraph 1-1 of the Tax code when allocating general expenses.

Prior to the introduction of such amendments and additions to Article 58 of the Tax Code, taxpayers have the right to be guided by provisions of TAP for the purpose of allocating general expenses in the above mentioned situation.

Effective since 1 January 2015.

Article 63. General Provisions § 1. Tax Reports

Clarification was made in sub-paragraph 2) of paragraph 3 of Article 63 of Tax code which sets a definition of regular tax reports. The clarification defines what is deemed to be a regular declaration when importing goods from the Member States of the Customs Union, since the declaration of indirect taxes (Form 520.00) is submitted only if such import takes place during a calendar year, rather than every reporting tax period, as provided for by the Tax Code for the Form 300.00.

Effective since 1 January 2015.

Article 68. The Procedure for Submission of Tax Reports

Some clarifying provisions were added to paragraph 3 specifying that tax reports allowed to be submitted by personal appearance shall be issued on paper.

It is also stipulated that taxpayers are allowed to submit tax reports issued on paper by personal appearance via PSC[2]. Corresponding clarifications related to submission of notifications on the extension of tax reporting submission deadline and tax applications via PSC were introduced in Articles 70, 71 and 76 of the Tax Code.

In respect of submitting reports in an electronic form, it was specified that persons recognized to be inactive in the manner prescribed in paragraphs 2 and 3 of Article 579 of the Tax Code do not have the right to submit tax reports using this method.

Clarification was made to the wording of paragraph 6, which contains clauses regarding the submission of reports after presentation of liquidation tax reporting, also the new version eliminates the clause concerning presentation of liquidation tax reporting on VAT in the event of applying the paragraph 13 of Article 100 of Tax code (regarding the refund of VAT excess upon removal from VAT registration records).

Effective since 1 January 2015.

Article 115. Non-Deductible Costs

Clarifying amendments were made to sub-paragraphs 2) and 3) of the Article. In particular, the non-deductible costs associated with transactions with a taxpayer who is recognised as a false business on the basis of a court sentence that entered into legal force or court decree shall not include the costs of transactions with taxpayers, not specified in the court judgement or decision.

Due to changes in the wording of paragraph 5 of Article 579 of the Tax Code which provides for the publication of information on taxpayers recognized as defunct on the Internet site of the authorized body no later than the date of issuing the order for such recognition (annually, no later than April 30), a clarification was made in sub-paragraph 3) stating that expenses on transactions with a taxpayer recognized as defunct shall not be subject to deduction from the day of issuing the order concerning its recognition as defunct.

Effective since 1 January 2015.

Article 120. Assessment of Depreciation Charges

The Article was supplemented by paragraph 7, which sets the procedure for determining the depreciation rates for the activities of taxpayers, whereby CIT assessed is reduced by 100 percent (organizations engaged in the social sphere, autonomous educational institutions; organizations active in organizing and conducting the international specialized exhibition on the territory of RoK, organizations operating in the SEZ territories), organization implementing an investment priority project and not applying STR[3]; non-resident legal entity performing work, providing services to autonomous educational institutions, provided that conditions of paragraph 1-1 of Article 198 of Tax code are met).

Effective since 1 January 2015.

Article 138. Carry-Forward of Losses in Case of Reorganisation

The Article was supplemented by paragraph 2, which sets the procedure for the carry-forward of losses in connection with the reorganization of a legal entity by acquisition or merger in accordance with the decision of the RoK Government (national companies). In particular, it states that losses of the reorganized legal entity are transferred to the assignee once upon each reorganization and are carried forward by the legal successor in the manner prescribed in Article 137 of the Tax Code.

Effective since 1 January 2015.

Article 139. The Assessment of Amounts of Corporate Income Tax

Some clarifying provisions were introduced to the procedure for the assessment of CIT in connection with the fact that dividends paid by a legal entity, which reduces CIT assessed in accordance with Article 139 of the Tax Code by 100% (amendments to Article 99 of the Tax Code) are eliminated from dividends reducing AAI[4], and the fact that income in the form of the above dividends is referred to income subject to CIT withheld at the source of payment (amendments to Article 143 of the Tax Code). The circle of persons which perform the reduction of CIT assessed in accordance with Article 139 of Tax code by 100%, for the purposes of this amendment, shall include organizations carrying out operations in the territory of SEZ, as well as autonomous educational institutions.

 

Effective since 1 January 2015.

Article 230. Definition of Taxable Import

The Article was supplemented by paragraph 1-2, which sets a number of conditions, either of which, if met, leads to the recognition of taxable turnover by the branch (representative office) of a non-resident legal entity.

Effective since 1 January 2009.

Article 237. Date of Commission of Sales Turnovers

A number of clarifying amendments was introduced to Article 237 of the Tax code, in particular:

1) to avoid multiple interpretations of the date of commission of a sales turnover of works and services, the last sentence of paragraph 1-1 of the article which establishes the second type of document serving a basis for determining the date of the sales turnover, states that the date of signing such a document shall be used to determine the date of commission of a sales turnover of work and services only if there is no act of acceptance of services rendered or work performed;

2) a separate paragraph 2-3 was added to incorporate provisions on determining the date of commission of the sales turnover when assets are granted (transferred) to temporary use and possession in case that a certificate of acceptance of work performed, services provided during a month was not signed until the end of that calendar month, but the payment for this month was made, the date of commission of a sales turnover of works and services shall be the last day of such calendar month;

3) the Article is supplemented by sub-paragraphs 11) and 12), establishing the procedure for determining the dates of commission of the sales turnover, respectively, based on a corrected invoice and an additional invoice.

Effective since 1 January 2015.

Article 256. Value-Added Tax To Be Offset

A number of amendments and additions was introduced. Thus, paragraph 2 of the Article is supplemented with a new sub-paragraph 8-1), which sets conditions for referring VAT to offset on the basis of an electronic travel document issued in rail transport, specifying the identification number and the number of the certificate of VAT registration of the carrier-taxpayer.

The new paragraphs 3-4, 7 and 8 contain clarifying amendments in respect of:

1) date of referring VAT to offset for work, services provided for in paragraphs 2 and 2-3 of Article 237 of the Tax code;

2) details which are not required to be indicated in the invoice issued in an electronic form: place of location (residence) of the recipient and the full name of the physical person – recipient);

3) referring VAT to offset once on the earliest grounds, if there are several grounds for offsetting VAT amounts payable for received goods, works and services.

Effective since 1 January 2015, except for the new paragraph 7, which came into effect since 1 July 2014.

Article 257. Value-Added Tax Not To Be Offset

By analogy with the amendments to sub-paragraph 2) of Article 115 of the Tax Code, a clarification was made in sub-paragraph 1) of paragraph 3 of Article 257 of the Tax Code which states that VAT amounts not to be offset on operations with the taxpayer recognized as a false enterprise on the basis of a judgement or court decision which has taken effect shall not include VAT amounts taken as offset on transactions with taxpayers not mentioned in the court judgement or decision. Effective since 1 January 2015. 

Article 263. Invoices

There are many amendments introduced to the Article, most of which are related to the introduction of invoices issued in an electronic form.

At that, the deadlines for issuing invoices are extended:

– from 5 calendar days to 7 calendar days for the invoices issued on paper;

– from 7 calendar days to 15 calendar days for the invoices issued electronically.

The same extension of deadlines for issuing invoices is prescribed for the sales of printed periodicals and other mass media products, including those posted on an Internet resource.

The wording of paragraph 14 was clarified in connection with supplementing the Article with paragraphs 14-1, 14-2, 14-3, which set requirements to corrected invoices, the date of their issue on paper and in an electronic form, the extended list of proofs of receiving such invoice by a recipient of goods, work, services.

In connection with the changes in Article 256 of the Tax Code in respect of the grounds for offsetting VAT when carrying passengers by rail, amendments were made in paragraphs 15, 16 and 16-1.

Effective since 1 January 2015, except for amendments made in paragraphs 5,7,8,11 and 12 which came into effect from 1 July 2014. 

The clarifying paragraph 11 put into effect since January 1, 2014 states that the date of a sales turnover on the corrected invoice shall be determined according to the date indicated in the canceled invoice. It leads to impossibility to replace an invoice for correction of a misstated invoice date. At that, the date of committing a sales turnover should not be indicated in an invoice issued on paper, this requirement for indication of a date was introduced by the Law 257-V for electronic invoices.

 

Article 265. Issue of Additional Invoices

The Article was modified by adding some editorial amendments, as well as amendments which set the deadlines for issuing additional invoices and the list of proofs of receiving such invoices by a recipient of goods, work, services.

Effective since 1 January 2015.

Article 272. Refund of Value-Added Tax

The Article was supplemented by paragraph 3-1, which determines the cases, terms, conditions and procedure for the refund to the taxpayer of the excess VAT which has emerged on goods, works and services purchased by the taxpayer in connection with the construction of buildings and industrial facilities, first commissioned in the territory of RoK.

Effective since 1 January 2015.

Article 273. Refund of Excess Value-Added Tax

Amendments made in the article provide for a possibility to extend the deadline for the refund of excess VAT by the tax authorities, if the VAT return with a claim for refund of excess VAT was submitted earlier than the deadline set by the Tax Code for presenting the claim for refund of excess VAT. It is also clarified that a tax audit report confirming the authenticity of amount of VAT claimed for refund shall be the grounds for a refund of excess VAT taking into account the results of its appeal (when appealed by the taxpayer).

Effective since 1 January 2015.

Article 274. The Simple Procedure for Refund of Excess Value-Added Tax

The list of persons entitled to the use of a simplified procedure for refund of excess VAT shall not include a person for which an in-house control has not revealed any discrepancies between the data presented in this person’s VAT reports and VAT reports of its direct suppliers and buyers.

Effective since 1 January 2015.

Article 276-4. Definition of the turnover on sales of goods, works, services and taxable import in the Customs Union

The Article was supplemented by paragraph 4, which sets the procedures and conditions for the exclusion from taxable imports of the goods temporarily imported into the territory of the RoK from the territory of the Member States of the Customs Union and the goods re-imported into the territory of the RoK from the territory of the Member States of the Customs Union, which were previously temporarily exported to the territory of the Member States of the Customs Union, as well as the procedures and conditions for charging VAT in cases when temporarily imported goods are sold in the territory of the RoK.

Effective since 1 January 2015.

Article 276-7. Determining amounts of taxable turnovers in case of export of goods

Paragraph 2 which sets the procedure for determining the amount of taxable turnover of goods exported under leasing agreements is amended by some clarifications in correspondence with provisions of paragraph 3 of Article 276-10 of the Tax code.

In addition, the Article was supplemented by paragraph 4 which sets the cases and timing for making adjustments of the amount of taxable turnover in case of export of goods.

Effective since 1 January 2015.

Article 276-8. Determining amounts of taxable import

The procedure for determining the amount of taxable imports of goods which are products of processing of customer-supplied raw materials (tolling) was clarified.

In addition, the article was supplemented by paragraph 8, which establishes the possibility of adjusting the amount of taxable imports when the price for imported goods is changed towards increasing by the participants of the agreement (contract) .

Effective since 1 January 2015. 

Article 276-11. Confirmation of Export of Goods

Changes in sub-paragraph 2) of paragraph 1 specify that an application for the import of goods and payment of indirect taxes may be submitted in hard copy as an original or as a copy, also a list of applications may be submitted on paper or in electronic form.

In addition, paragraph 3 is supplemented by paragraph 7-1, which establishes the cases and the possibility to present, instead of the cargo declaration on paper or in electronic form, the cargo declaration in the form of an electronic document, for which information systems of tax authorities contains a notification of the customs bodies about the actual exportation of goods.

Effective since 1 January 2015.

Article 276-15. Turnovers and import exempt from VAT within the Customs Union

In order to streamline the VAT exemption of goods imported under warranty service, sub-paragraph 2) of paragraph 2 is supplemented by a paragraph which establishes a list of documents confirming the import of goods under the warranty service.

Effective since 1 January 2015.

Article 276-18. Special considerations in defining of VAT payers in case of import of goods

According to the new paragraph 4-1, if an RoK taxpayer acquires goods previously imported into the territory of the RoK by the commissioner, attorney (operator) who is a taxpayer of the RoK, under the commission agreement (contract) with the taxpayer of another member state of the Customs Union, on which indirect taxes have not been paid, obligations to pay VAT on imports shall be assigned to the RoK taxpayer – owner of the goods or the commissioner, attorney (operator) who imported the goods.

Effective since 1 January 2015.

Article 276-20. The procedure for the assessment and payment of VAT in case of import of goods within the Customs Union

In connection with the separation of provisions concerning the procedure for assessment and payment of VAT on imports and exports of goods, Article 276-20 of the Tax Code was amended to exclude the provisions on the export of goods, namely, old version of paragraph 2 effective until the end of this year. At the same time, amendments made in the Article cover some other provisions relating to:

1) submission of the declaration of indirect taxes (Form 320.00) and the application for the import of goods and payment of indirect taxes (Form 328.00), not only on paper but also in an electronic form;

2) sub-paragraph 4) of paragraph 3 is supplemented by a sentence which specifies that if an invoice is not issued under the laws of a Member State of the Customs Union or the goods are purchased from a taxpayer of a non-member state of the Customs Union, a different document shall be presented to confirm the value of imported goods;

3) the new paragraph 3-1 contains a list of persons who are required to submit a declaration on indirect taxes on imported goods on paper and in electronic form, the application (applications) for the import of goods and payment of indirect taxes in paper form (four copies) and in electronic form;

4) the new paragraph 3-2 determines which documents are not to be presented in the case when the declaration of indirect taxes on imported goods and application (applications) for the import of goods and payment of indirect taxes are submitted only in an electronic form;

5) an additional sentence of paragraph 4 sets deadlines for payment of VAT on imports, in the event that the price for imported goods is changed towards an increase in accordance with paragraph 8 of Article 276-8 of the Tax Code;

6) paragraph 7 was supplemented by clauses which establish deadlines and type of tax authorities’ confirmation of VAT payment, depending on the form of submission of an application for the import of goods and payment of indirect taxes:

• within 10 working days from receipt of the application issued on paper by putting an appropriate mark on such application;
• within 10 working days of receipt of the application in an electronic form by sending a notice to the taxpayer;

7) new paragraphs 8 – 10 determine:

• the timing and form of a reasoned refusal to confirm the import of goods and payment of indirect taxes (10 working days from the date of receipt of the application, on paper, if the application was submitted on the same carrier, in electronic form, if the application was submitted in the same form);
• deadline for the taxpayer’s submission of an application with eliminated violations in the case of receiving a reasoned refusal (15 calendar days);
• documents confirming the increase in the price of imported goods, namely: agreement (contract) concerning the price change, an additional invoice which contains the changed value of the taxable import and VAT (in cases when issuing an invoice is provided for by the legislation of the Member State of the Customs Union), and (or) any other document confirming the change in the price of imported goods.

Effective since 1 January 2015.

Article 276-21. The procedure for the assessment and payment of VAT in case of export of goods within the Customs Union

In connection with the separation of provisions on the procedure for calculation and payment of VAT on imports and exports of goods, Article 276-21 of the Tax Code is set out in the new wording, which incorporates a number of new provisions concerning, among others, cancellation of a requirement to submit applications for import of goods and payment of indirect taxes on paper if it was submitted in an electronic form, as well as sending a notice of receipt of the application in an electronic form.

Effective since 1 January 2015.

Article 276-22. Revocation of application for importation of goods and payment of indirect taxes in case of import of goods in the Customs Union

The new wording of paragraphs 2 and 3 provides, inter alia, for the following:

1) the right of a taxpayer to revoke  the application for the import of goods and payment of indirect taxes  in the case specified in paragraph 2-1 of Article 276-23 of the Tax Code – the complete return of goods because of inadequate quality and (or) configuration after the end of the month in which such goods were imported;

2) possibility to revoke the application for the import of goods and payment of indirect taxes by way of removal from the central node of the system for receiving and processing of tax reports on applications submitted on imported goods, which were entirely returned due to inadequate quality and (or) configuration.

Effective since 1 January 2015.

Article 276-23. The procedure for adjustment of VAT amounts paid in case of import of goods

Amendments in the Article imply the following:

1) clarification that return of the goods may be complete or partial. Accordingly, when the goods are returned after the end of the month in which such goods were imported, actions of the taxpayer in case of partial and complete return are separated;

2) paragraph 3 defines the documents confirming full and (or) a partial return of goods imported into the territory of the RoK from the territory of the Member States of the Customs Union, because of inadequate quality and (or) packaging, as well as establishes the obligation of a taxpayer to present their paper copies to the tax authority, together with the documents specified in sub-paragraphs 2) – 8) of paragraph 3 of Article 276-20 of the Tax Code.

Effective since 1 January 2015.

Article 301. Tax Base

The new wording of the Article contains provisions which determine:

1) what is understood to mean export in the event of exporting items outside the borders of the Customs Union and into the Customs Union. It is also clarified that export includes sales on the territory of another Member State of the Customs Union of tolling products previously exported for processing from the territory of the RoK to the territory of a Member State of the Customs Union;

2) how to calculate the volume of crude oil, gas condensate for the assessment of the rental tax on export, depending on where they are sold:

• if sold outside the Customs Union – as the volume of crude oil, gas condensate, indicated in column 35 “Gross Weight, kg” of the complete freight declaration used for the calculation of customs duties and other charges levied by the customs authorities or other customs purposes in accordance with the customs legislation of the Customs Union and (or) the customs legislation of the RoK;
• if sold to the territory of another Member State of the Customs Union – as the volume of crude oil, gas condensate stated in the act of the goods delivery to the transport organization in the territory of the RoK at the starting point of the export supply route of such crude oil, gas condensate.

Effective since 1 January 2015.

Article 304. The Tax Period

The new edition of the Article includes the second paragraph which prescribes how the tax period is to be determined if the date of issuance of a temporary and full freight declaration fall on different tax periods. In particular, it is stipulated that the obligation to pay the rental tax on export occur in the tax period, which corresponds to the period of time specified in the temporary and full freight declaration, during which the supply of crude oil, gas condensate is carried out under the customs procedure of export in accordance with the customs legislation of the Customs Union and (or) the customs legislation of the RoK. Actually, such period of time should be indicated under number 7 in column 31 of the freight declaration.

Effective since 1 January 2015.

Article 367. Tax Rates

Article 367 of the Tax Code is supplemented by paragraph 2-2 according to which the date of importation of cars imported into the territory of the RoK shall be the date of their initial state registration.

Effective since 1 January 2015.