The presidium of the Supreme Arbitration Court of the Russian Federation has considered the matter of personal income tax charged on employees' vacation pay.
The arbiters decided that tax agents must withhold personal income tax on the day vacation pay is given to employees, including the cases when vacation pay is deposited to employees' bank accounts (the decree of the Presidium of the Supreme Arbitration Court of the Russian Federation No. 11709/11 dated 07.02.12).
The supreme arbiters explained that Item 2 of Article 223 of the Tax Code of the Russian Federation establishes the special way of determining the date of the actual receipt of compensation for work. This way of determining is due to that wages are paid no less often than twice monthly (Item 6 of Article 136 of the Labor Code of the Russian Federation). At the same time, in compliance with Item 3 of Article 226 of the Tax Code of the Russian Federation, personal income tax is calculated from progressive total, beginning each tax period, according to monthly figures. Therefore, the amount of wages received for any month may not be determined, until the month is over, and tax due may not be calculated when wages are paid for the first half of the month. That is why the legislator determined that the date of the actual receipt of the wage is the last day of the month for which the pay is made.
The situation with vacation pay is different, however. Vacation pay is given no later than three days before the vacation begins (Article 114, Item 9 of Article 136 of the Labor Code of the Russian Federation). This is why when the amount of vacation pay is determined for the purpose of withholding personal income tax, the amount of other income received during the same month does not matter. This is why, even though vacation pay is part of the wage (the supreme arbiters expressly noted that the determination the other way by tax agents was wrong), the date of withholding personal income tax may not be determined according to Item 2 of Article 223 of the Tax Code of the Russian Federation. There is nothing to objectively prevent tax agents from withholding personal income tax from vacation pay as per Item 6 of Article 226 of the Tax Code of the Russian Federation, that is, on the day vacation pay money is received from the bank or transferred to the accounts of employees.
Earlier, the arbiters did not agree on this matter and it could be considered disputable. Now the Supreme Arbitration Court has confirmed the correctness of the position of the Ministry of Finance and the tax people.
