1. Moscow employers will receive the Mayor’s grants for employing the disabled
Starting from 2018, alongside with the subsidies, the employers of disabled persons will also receive the Moscow Mayor’s grants aimed at rewarding the employers implementing good employment practices with respect to disabled persons of groups I and II.The grants will be given to legal entities and individual entrepreneurs with a workforce over 100 persons. The grant amount falls within a range from three to five amounts of insurance contributions for compulsory pension insurance of disabled persons depending on the number of working disabled persons.
To secure a grant, the employer must submit an application and a package of relevant documents to the Department of Labour and Social Protection. Applications can be submitted in the period from 1 March to 15 April. In 2018, the applications will be accepted in the period from 03 to 15 May.
Previously, the employers had no other support except for subsidies for the creation or preservation of jobs for the disabled.
Resolution of the Government of Moscow No. 381-PP dated 28 April 2018 “On Adopting the Procedure for Provision of the Moscow Mayor’s Grants to Employers for Proactive Involvement in the Employment of Disabled Persons”
2. The list of volunteers’ incomes not subject to the personal income tax has been broadened
Starting from 23 April 2018, the grants, bonuses, and awards either in cash and/or in kind for participation in competitions, contests and other activities provided by non-profit organisations to volunteers at the expense of the Russian President’s grants, as well as incomes in the form of reimbursement for travel, meal and accommodation expenses associated with participation in such competitions, contests and activities will be exempt from the personal income tax. These provisions will apply to legal relations starting from 1 January 2018.Since 1 May 2018, the list of tax-exempt incomes has been supplemented with volunteers’ incomes associated with charity activities conducted thereby and received in kind (in the form of a premise assigned for temporary use, organisation of travel and meals, insurance of their life or health, provision of official uniforms and overalls, hardware, and personal protection equipment).
Federal Law No. 98-FZ dated 23 April 2018 “On the Amendments to Part 2 of the Tax Code of the Russian Federation”
3. It will be made possible to include payment for the travel packages of employees and their family members in the payroll expenses
The payroll expenses recognised during the taxation of profit will include the costs of travel services, health resort services and vacation services in the territory of the Russian Federation in accordance with the tourist product sales contract provided to employees, their spouses, parents, children and dependants (until the age of 24, provided that such dependants are full-time students).The amount of deductible expenses is limited to RUB 50,000 per person.
This innovation will apply to tourist product sales contracts made starting from 1 January 2019.
Federal Law No. 113-FZ dated 23 April 2018 “On the Amendments to Articles 255 and 270, Part 2 of the Tax Code of the Russian Federation”
4. Monthly payments to families for the birth (adoption) of the first or second child have been made exempt from the personal income tax
Since 1 January 2018, the monthly payment for the birth (adoption) of the first child and/or monthly payment for the birth (adoption) of the second child in accordance with Federal Law No. 418-FZ dated 28 December 2017 “On Monthly Payments to Families with Children” have been made exempt from the personal income tax.
Federal Law No. 88-FZ dated 23 April 2018 “On the Amendments to Article 217, Part 2 of the Tax Code of the Russian Federation Due to Adoption of the Federal Law “On Monthly Payments to Families with Children”
Explanations of the Ministry of Finance and Federal Tax Service
1. Patent for foreign employeesForeign employees who paid for the patent last year will not have to pay extra If a foreign employee fully paid in 2017 the price of the patent continuing in 2018, there is no need to make any extra payment due to appreciation of the patent in the current year.
Information of the Federal Tax Service dated 4 April 2018. “The Federal Tax Service of the Russian Federation explains whether foreign citizens have to make an extra payment for the patent purchased in the preceding period”, Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-07/17158 dated 19 March 2018
2. How to determine the source of income in the form of compensation for job duties performed by a company employee
When determining the source of income in the form of compensation for the job duties performed by a company employee, what matters is the place where the job duties were performed by such employee.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-05/1746 dated 20 March 2018
3. The date of income in the form of average earnings kept by an employee going to a business trip
According to the Ministry of Finance, the average earnings kept by an employee going to a business trip must be classified as labour compensation for the purposes of the personal income tax.
Therefore, the actual date of the income in the form of average earnings is the last day of the month in which the income was assessed.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-07/23964 dated 9 April 2018
4. Personal Income Tax
When a tax agent is unable to withhold the personal income tax
If when delivering a judgment, the courts do not divide the amounts to be paid to a private individual and to be withheld from a private individual, the corporate tax agent having to pay a court-ordered income to a private individual subject to the personal income tax is unable to withhold the personal income tax from the taxpayer’s said income. Meanwhile, the tax agent must notify the taxpayer and the tax authority at the place of its registration thereof.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-05/16868 dated 19 March 2018.
Is the indexation of the amounts to be collected under the court decision subject to the personal income tax?
If under the court decision, a private individual was paid any income exempt from the personal income tax indexed in accordance with Article 208 of the Civil Procedure Code of the Russian Federation, the indexation of such incomes are not subject to tax either.
The indexation of any taxable income will also be subject to the personal income tax in due course.
Furthermore, the tax officials highlighted that the late fees (penalties) paid to a private individual meet the economic benefit criteria mentioned above and constitute private individual’s income subject to the personal income tax.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-05/1813 dated 22 March 2018.
A case when the reimbursement for travel expenses incurred by members of the board of directors is not subject to the personal income tax
The only payments to members of the board of directors or any similar governance body (supervisory board, management board) not subject to tax are payments associated with their participation in the meeting of such body.
Therefore, if the trips by members of the company’s board of directors are classified as trips to participate in the meeting of the company’s governance body, then the payments made as reimbursement for their relevant travel costs are exempt from tax.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-06/21700 dated 4 April 2018
On exemption from the personal income tax for participation in loyalty programmes
Private individuals’ incomes earned under a loyalty programme will be exempt from the personal income tax in case of joining the programmes on public offer terms. The acceptance period must be at least 30 days. Furthermore, no early offer revocation option is supposed to be provided. Meanwhile, the incomes must not be paid to persons in employment relations with the company or in exchange for the goods (works, services) delivered by the taxpayer or financial aid.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-06/22165 dated 5 April 2018
Peculiarities of assessing and paying the personal income tax from the incomes in the form of dividends, the ultimate beneficiaries of which are Russian private individuals holding the company shares through consecutive shareholdings in foreign companies
A Russian company paying dividends, the ultimate beneficiaries of which are Russian private individuals holding the company shares through consecutive shareholdings in foreign companies, will serve as the tax agent with regard to the income received by the Russian resident actually receiving the income.
Letter of the Federal Tax Service No. BS-4-11/7460@ dated 19 April 2018
Personal income tax in case of prizes earned by private individuals
The amount of the prize determines who will pay the tax – the prize winner or the tax agent who must assess the tax for each of the incomes separately:
- if the amount of the prize is equal to or above RUB 15,000, the personal income tax must be assessed, withheld and paid by the lottery companies or agents, as well as organisers of gambling in bookmaker’s offices and betting houses;
- if the amount of the prize is below RUB 15,000, the winner must assess and pay the personal income tax on its own and submit 3-NDFL declaration in the next tax period;
- if the amount of the prize is below RUB 4,000, no personal income tax will be due.
5. Tax credits
Personal income tax credit for a parent taking care of a disabled child of group IIIA parent taking care of a disabled child of group III with a lifelong disability who is a full-time student under 24 years of age is entitled to a standard tax credit of RUB 1,400 per month provided that the year-to-date total income does not exceed RUB 350,000.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-05/17541 dated 21 March 2018
Social tax credit for the personal income tax in the amount of the child’s education expense
A social tax credit for the child’s education will be provided if the educational institution has a relevant licence or any other certificate proving its status of an educational institution and the taxpayer presents documentary proof of its actual educational expenses.
Letter of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation No. 03-04-05/20921 dated 2 April 2018
Social tax credit for the personal income tax in the amount of insurance contributions under insurance agreements
A taxpayer is entitled to the following social tax credits:
- in the amount of pension contributions paid thereby during the tax period under a non-state pension agreement (agreements) made by the taxpayer with a non-state pension fund for its own benefit and/or for the benefit of family members and/or close relatives in accordance with the Family Code of the Russian Federation, as well as for the benefit of disabled children under guardianship (tutelage);
- in the amount of insurance contributions paid thereby during the tax period under a voluntary pension agreement (agreements) made by the taxpayer with an insurance company for its own benefit and/or for the benefit of its spouse (including a widow or widower), parents (including adoptive parents), and disabled children (including adopted children under guardianship (tutelage);
- in the amount of additional insurance contributions paid thereby during the tax period for the funded component of the retirement pension in accordance with the Federal Law “On Additional Insurance Contributions for the Funded Component of a Retirement Pension and State Support for the Accumulation of Pension Assets”.
A company is entitled to establish any procedure for its employees to file tax credit requests at its own discretion.
Letter of the Federal Tax Service No. BS-4-11/6947@ dated 11 April 2018
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