As many other countries, Russia is working on a package of measures to soften the economic impact of coronavirus pandemic. Earlier in March the Russian Government disclosed plans to allocate RUB 300 billion (USD 3,5 billion) to support Russian citizens and the Russian economy. On March 25, 2020 President Putin made an official announcement and clarified some of the measures to support businesses. Below we list those measures with our comments.
Most of the measures specifically concern small and medium enterprises (SME), as well as micro-enterprises (ME). The terms “small and medium enterprises” and “micro-enterprises” are defined by the Russian legislation based on revenue, number of employees and equity participation (charter capital) of other organizations where all the required conditions should be met.
Based on equity participation in SME and ME:
- Up to 100% equity participation of organizations of SME and ME type of businesses;
- Up to 49% equity participation of other type of legal entities, including foreign legal entities;
- Up to 25% equity participation of the state or non-profit organizations.
Based on revenue and number of employees in SME and ME:
- Revenue for ME should not exceed RUB 120 million, and the number of employees — 15 people;
- Revenue for small enterprises should not exceed RUB 800 million, and the number of employees — 100 people;
- Revenue for medium-sized enterprises should not exceed RUB 2 billion, and the number of employees — 250 people.
A deferral for payment of taxes other than VAT for small and medium-sized businesses for 6 months, and for micro-enterprises – payment of social contributions in addition
Under this ruling, in case of delay, the tax authorities will not send claims for payment of taxes and will not be charge penalties or undertake any other measures against non-paying companies allowed by the Russian Tax Code. That initiative should go through legal procedures and finally be adopted as an amendment to the Russian Tax Code. The exact way of its application should be disclosed in the Russian Tax Code.
A 6-month prolongation of loans for mostly suffered medium-sized businesses and micro-enterprises because of coronavirus pandemic
The practical application of this initiative will require additional procedures and criteria to be worked out by the Russian Government on this subject.
The rate of social contributions will be reduced from 30% to 15%, levied on salaries above minimum wage, for medium-sized businesses and micro-enterprises
In Russia the decreasing scale of social contributions with 30% maximum rate is applied. Based on the initiative 15% flat tax rate may be imposed for SME and ME replacing the old system. Implementation of this measure will require amendments to the Russian Tax Code.
The 6-month moratorium will be imposed on creditor applications for bankruptcy of companies and collection of debts
We believe this initiative will be additionally worked out by the Russian Government and consequent amendments should be done to the Russian legislation.
The tax rate on dividends and interests paid to foreign business owners will be 15%
The rate of 15% is established by Russian legislation and applies if there is no Double tax treaty (DTT) signed with the country to which the income is paid. Under the terms of such DTTs with the majority of countries, depending on various conditions, the tax rates of 0%, 5% or 10% are usually applied and withheld by the Russian company on the payment. The change announced by the President will require changes to the existing DTTs. At the same time, it was noted that if foreign countries do not cooperate with Russia, Russia will unilaterally withdraw from the consequent DTT. It is still unclear to which countries and consequent DTTs this initiative will be applied.