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February 2006 January – February 2006 We are happy to inform our subscribers that we have extended our coverage and can offer you our commentary and views on current legislative issues and developments not only in Russia, but also in the other CIS countries. The main purpose of this journal is to better serve our existing and potential clients providing them with the minute information to help their business in the region. From now a monthly CIS Tax News will replace our Legislative News. We believe that this bulletin will become one of the most valuable sources of information covering the CIS. We welcome your comments and any suggestions you may have to ensure that CIS Tax News Bulletin fully meets your expectations. Table of Content Table of Content TAX NEWS Azerbaijan ___________________________________________________ 4 Belarus _____________________________________________________ 5 Kazakhstan __________________________________________________ 5 Russia ______________________________________________________ 6 Ukraine _____________________________________________________ 6 Uzbekistan __________________________________________________ 7 ARTICLES Tax aspects of secondment arrangements in CIS countries _______________________________________________ 8 Nuran Kerimov(Azerbaijan) , Marina Khliaba (Belarus), George Tavartkiladze (Georgia), Saule Dissenova (Kazakhstan), Yulia Orlova, Yulia Krylova (Russia), Victoria Chornovol, Natalia Rudenko (Ukraine) INTERNATIONAL TAXATION Further favorable tax developments in the Netherlands _____________ 17 Dmitry Gusev, Dick Nijdam COURT PRACTICE Russia _____________________________________________________ 18 Sergei Ketoev Ukraine ____________________________________________________ 20 Dmitry Pavlenko ROUND TABLES AND SEMINARS ____________________________________ 21 DELOITTE CONTACTS IN THE CIS: ____________________________________ 23 Tax News TAX NEWS Azerbaijan New Law on Changes and a taxpayer, which is required to register for Withholding tax on leasing payments Amendments to the Tax Code VAT purposes, conducts business without VAT registration, sanctions will be imposed Payments received under leasing agree- The Parliament of the Azerbaijani in the amount of 50% of the VAT pay- ments, including financial leasing, by Republic has adopted the Law “On able to the budget for the whole period of non-residents from Azerbaijani sources Changes and Amendments to the activity in question. If the taxpayer issues which are not attributable to a permanent Tax Code of the Azerbaijani Republic” invoices without a valid VAT registration or establishment in Azerbaijan, are subject (hereinafter, the “Law”), which is with a cancelled VAT registration, the tax- to 10% withholding tax (previously, the effective from 1 January 2006. The most payer will be subject to financial sanctions withholding tax rate was 4%). significant changes are set out below. amounting to 100% of the tax amount indicated in the invoices. Registration for VAT purposes On-site tax audit Decrease in profits tax rate The rules of voluntary VAT registration According to the amendments introduced have been toughened and it will now be by the Law, the circumstances whereby According to the amendments introduced at the sole discretion of the tax authori- the tax authorities may initiate an to the Tax Code, the profits tax rate has ties whether to register a taxpayer as a unplanned on-site tax audit have been been decreased from 24% to 22%. VAT payer or not. The Law also provides broadened. An unplanned on-site tax for cases when registration for VAT pur- audit may now be performed based on Accelerated depreciation on capital poses may be cancelled, in particular, if any information obtained by the tax investments a taxpayer does not pay a VAT accrued authorites from known sources about amount within three months and does violations of tax law committed by a Accelerated depreciation (doubled depre- not he make the payment within 30 taxpayer registered for VAT purposes. No ciation rates) has been abolished on capi- days of the receipt of written notification definition of “known sources” is provided tal investments for production purposes from the tax authorities. In this case the in the Tax Code. The tax authorities, including leased assets. company will receive a notification within therefore, may rely on any publicly three days. This provision does not cover available source of information. Loss carry forward large taxpayers. Responsibility for violation of tax According to the amendments, a part Amendments with respect to personal legislation of an enterprise’s deductible expenses income tax (PIT) exceeding its income (i.e. losses arising) The Law introduced new provisions with may be carried forward for up to three PIT rates have been substantially changed: respect to financial sanctions for violations years and offset against those years’ prof- the non-taxable income threshold has of the tax law. Specifically, in the event that its without limitation. been abolished and new income tax rates are introduced. In particular, monthly income up to new AZM 1,000 (or old AZM 5,000,000¹) is to be taxable at a rate of 14%. Income exceeding new AZM 1,000 is subject to taxation at a rate of 35%. Despite the fact that the non-tax- able threshold has been abolished, income of 30 conditional financial units is exempt (new AZM 33 or old AZM 165,000) where monthly income is not more than 200 conditional financial units (new AZM 220 or old AZM 1,100,000, which amounts to approximately USD 240). Taxation of income received the same time exempt from personal Employers have also been granted the in connection with employment income tax. These payments are also right to remit personal income tax of the exempt from mandatory social contribu- employees to the budget no later than on According to the amended provisions tions under the Law “On Changes and the 20th of the following month, instead of the Tax Code, “insurance fees paid Amendments to the Social Insurance Law of withholding it at the moment of salary by an employer” are now considered of the Azerbaijan Republic” which came payment. the income of employees, but are at into effect from 1 January 2006. Belarus Personal income tax considered to be tax residents and must Law “On the Budget” pay personal income tax on their world- On 9 December 2005, the Law of the wide income (i.e. income received from On 1 December 2005, the Law of the Republic of Belarus “On the Introduction sources in Belarus and abroad). Individuals Republic of Belarus “On the Budget of the of Amendments to the Law of the Republic who are not tax residents will have to pay Republic of Belarus for 2006” was adop- of Belarus ‘On Personal Income Tax’” was personal income tax only on income recei- ted. In accordance with the Law, the duty passed. It introduced amendments to tax ved in Belarus. Under the previous version paid to The Government Fund for the residency relating to personal income tax. of the law, Belarusian citizens had to pay Support of Manufacturers of Agricultural According to the amendments, individuals for personal income tax on their world- Goods and Foodstuffs as well as Agrarian who are physically present in the Republic wide income, irrespective of the length of Science has been decreased by 0.9%, of Belarus for more than 183 days are stay abroad. and now amounts to 3%. Kazakhstan Taxation on payments made with international taxation. In particular, of supply, would be considered Kazakh- to a resident of a low-tax jurisdiction they expand the types of non-resident source income, subject to taxation in Kazakh-source income that should be Kazakhstan. On December 23, 2005 new subject to taxation in Kazakhstan. Any amendments were introduced to the Tax payments from Kazakhstan to a low-tax Code which came into effect on January jurisdiction resident for rendering any 1, 2006. These amendments mainly deal type of services, irrespective of their place 1 According to the Decree of the President of Azerbaijan dated 7 February 2005 Manats are reba- sed starting from 1 January 2006. 5,000 old Manats are equal to 1 new Manat. New AZM 1,000 is appr- oximately USD 1,090 5 Tax News Russia UST rates • industrial zones located in the • negligence in choosing a contractor, Elabuzhskii area of the Republic of Federal Law No. 158-FZ of 6 December Tatarstan and in the Gryazinskii area of • the payment for goods with monetary 2005 has been officially published. The the Lipetsk region; funds of suspect origin. law stipulates that the UST rate relating to the Social Insurance Fund will be lowered • technical-innovative zones located from 3.2% to 2.9%, and the UST rate in Tomsk, Dubna (Moscow region), relating to the Compulsory Medical Moscow and St. Petersburg. Insurance Fund will be increased from 0.8% to 1.1%. Also, UST rates have Recognizing a taxpayer as non-bona been established for taxpayers which are fide residents of special economic zones (the tax is transferred to the Federal Budget At the conference “Fraudulent under a regressive scale containing transactions. Recognizing transactions three rates — 14%, 5.6% and 2%). The as void. Recognizing a taxpayer as non- Federal Law came into effect on 9 January bona fide,” representatives of the Federal 2006. Tax Service announced that a taxpayer will be considered as non-bona fide if any Special economic zones of the following is discovered: According to RF Government Resolutions • “the non-observance of a balance No. 779, 780, 781, 782, 783, and 784 between public and personal interests”, of
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