New Trade Levy in Moscow: Who Pays and How?
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Tax Flash Report by PwC experts New trade levy in Moscow: who pays and how? December 2014 / Issue No. 47 In brief In November, we discussed in Tax Flash Report No. 38 the introduction of a new local tax - trade levy - to the Russian Tax Code. It will be charged in Moscow starting from 1 July 2015. It is expected that it will be charged in St Petersburg starting from 2016. On 17 December, the Moscow State Duma adopted a law setting out trade levy rates and benefits (http://depr.mos.ru/legislation/normative-legal-acts-of-moscow/1479701/). The Moscow authorities have not introduced maximum tax rates (permissible under the Tax Code) and, instead, set out differentiated rates for three areas of the city. For example, a store with a retail area of 1,000 sq. metres located in the city's Central Administrative District will pay RUB 430,000 annually. In detail Who will NOT pay trade levy in Moscow? In Moscow, the following activities will not be subject to the new trade levy: retail using vending machines; sales at weekend bazaars, special and regional bazaars; sales through stationary or non-stationary distribution networks located in retail markets; peddling retail in buildings, structures and premises under the management of autonomous, budgetary and public institutions. Federal mail service, autonomous, budgetary and public institutions (regardless of their activity) are also exempt from this levy. What rates did the Moscow authorities set? The levy rates are differentiated for three areas (taxpayers engaged in retail operations in the Central Administrative District will pay the most, while those operating outside of the MKAD Ring Road will pay the least): (1) Central Administrative District; (2) Regions and settlements located in the Zelenograd, Troitsk and Novomoskovskiy Administrative Districts of Moscow, as well as in the Molzhaninovskiy North Administrative District of Moscow, the North of the North-Eastern Administrative District of Moscow, the East, Novokosino and Kosino-Ukhtomskiy of the Eastern Administrative District of Moscow, Northern Butuvo and Southern Butovo of the South-Western www.pwc.com Administrative District of Moscow, and Mitino and Kurkino of the North-Western Administrative District of Moscow; (3) Regions located in the Northern (except for Molzhaninovskiy), North-Eastern (except for North), Eastern (except for East, Novokosino and Kosino-Ukhtomskiy), South-Eastern (except for Nekrasovka), Southern, South-Western (except for Northern Butovo and Southern Butovo), Western (except for Solntsevo, Novo- Peredelkino and Vnukovo) and North-Western (except for Mitino and Kurkino) Administrative Districts of Moscow. Levy rates (by type of activity): Trade through a stationary distribution network with no sales areas (except for gas stations) and non- stationary distribution network (except for delivery and peddling retail): Area Levy on facility (quarterly) Levy on facility (annually) (1) RUB 81,000 RUB 324,000 (2) RUB 28,350 RUB 113,400 (3) RUB 40,500 RUB 162,000 Delivery and peddling retail1 Area Levy on facility (quarterly) Levy on facility (annually) All RUB 40,500 RUB 162,000 Trade through a stationary retail network with retail space of up to 50 sq. metres Area Levy on facility (quarterly) Levy on facility (annually) (1) RUB 60,000 RUB 240,000 (2) RUB 21,000 RUB 84,000 (3) RUB 30,000 RUB 120,000 Trade through a stationary retail network with retail space of over 50 sq. metres Area Levy per sq. metre of retail Levy per sq. metre of retail space (quarterly) space (annually) (1) RUB 1,200 for the first 50 RUB 4,800 for the first 50 metres (i.e. RUB 60,000), metres (i.e. RUB 240,000), then RUB 50 for each metre then RUB 200 for each metre* (2) RUB 420 for the first 50 RUB 1,680 for the first 50 metres (i.e. RUB 21,000), then metres (i.e. RUB 84,000), RUB 50 for each metre then RUB 200 for each metre (3) RUB 600 for the first 50 RUB 2,400 for the first 50 metres (i.e. RUB 30,000), metres (i.e. RUB 120,000), then RUB 50 for each metre then RUB 200 for each metres * For example, in the Central Administrative District, for retail space of 1,000 sq. metres, the annual tax comes to: RUB 240,000 + (1,000 sq. metres - 50 sq. metres)*RUB 200 = RUB 430,000 Organisation of retail markets - RUB 50 per sq. metre of retail market space (quarterly) 1 Under Article 346.43 of the Russian Tax Code, delivery retail is retail activity not performed through a stationary retail network, but using specially equipped retail vehicles, along with mobile equipment specifically used in conjunction with such a vehicle. This type of activity includes retail using cars, mobile stores, mobile shops, carts, trailers and mobile vending machines. Peddling retail is retail activity performed not through a stationary retail network, but through direct contact between a seller and buyer in organisations, on transport, at home or on the street. This type of activity includes direct selling, using a cart, baskets and pushcarts. The city's new law also states that Moscow's executive authorities, which are obliged to develop and implement economic and tax policy, have the authority to gather, process and submit to the tax authorities information regarding an object of trade levy, as well as maintain and confirm the completeness and accuracy of such information. In other words, the Mayor's Office will assist the authorities in administering the new tax. What does this mean for you? Moscow taxpayers already can calculate how much tax they will pay in 2015 (to do this, divide the above annual amount in half). Please note that total trade levy is deducted from profits tax, PIT or tax paid under a simplified taxation regime (depending on the type of income tax paid by a taxpayer). It is also important to note that tax will not be charged on warehouse sales and online sales in Moscow. Contacts We would be happy to answer your questions. TLS Financial Services Energy, Utilities and Mining Legal Services Ekaterina Lazorina (EU&M) Yana Zoloeva Partner, TLS Leader, PwC Russia Denis Gorin Legal Practice Leader [email protected] [email protected] [email protected] Vladimir Burov Artem Petrukhin Maxim Kandyba [email protected] [email protected] [email protected] Ekaterina Malygina Yana Proskurina TLS Consumer and Industrial [email protected] [email protected] Products and Services (CIPS) David John Stefano Tonetti Tax, Accounting Managing Partner, TLS, [email protected] and Reporting Services Central and Eastern Europe david.с[email protected] Mergers & Acquisitions Kirill Nikitin [email protected] Tax Services Enrika Schevchenko [email protected] Galina Naumenko Ekaterina Ryabova [email protected] [email protected] Irina Martakova [email protected] Ekaterina Koropova [email protected] International Tax Structuring Services Natalia Kozlova [email protected] Indirect Tax and Customs Services Natalia Kuznetsova [email protected] Natalia Sherbakova (St Petersburg) Vladimir Konstantinov [email protected] [email protected] Mikhail Filinov [email protected] TLS Communications, Technology, Human Resources and Entertainment and Media (TICE) International Assignment Services Transfer Pricing Services Natalia Vozianova Karina Khudenko Svetlana Stroykova [email protected] [email protected] [email protected] Andrei Kolchin Private Company Services [email protected] Alina Lavrentieva [email protected] © 2014 All rights reserved. PwC and PricewaterhouseCoopers refer to PricewaterhouseCoopers Russia B.V. or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity. The information contained in this flash report does not constitute professional advice. PwC is not responsible for any damages that may be incurred by any parties if their actions or failure to act were based on their reading of this flash report. For assistance with specific questions, we advise that you contact a PwC professional in the relevant line of service. .