21.01.2005 - Starting 2005 a lot of changes to the tax legislation entered in force. Below we make an overview of the most remarkable events.
Budget Codes for tax payments
The Ministry of Taxes and Levies issued a letter No 10-4-03/5626 clarifying that despite of the year the tax relates payment should be made using the new system of Budget Classification (new KBK)
Starting 2005 Advertising tax and Duty for use of name of ?Russia? are eliminated.
New Chapters to the Tax Code
New Chapters of the Tax Code were introduced starting 2005:
Contributions for use of bio-resources (25.1), Water tax (25.2.), Stamp duty (25.3.), Land tax (31).
Sale of land plots was eliminated from VATable operations, and sale of dwelling premises, transfer of share in a condominium within sale of apartments are relived from VAT.
VAT rate on cost of advertisement in periodicals has increased to 18%.
Corporate income tax
Rate for dividends payable to Russian legal entities by Russian legal entities increased to 9%.
Tax is no longer paid to local budgets. The distribution from 1 January 2005 should be: 6.5% to the Federal Budget and 17.5% to the Regional Budget. In respect of advance payments for the first quarter 2005 the tax authorities issued a letter of 16.12.04 No 02-0-10/01/7 saying that the advance payment to the Federal Budget should be made in the same amount as in the fourth quarter 2004, and, thus payment to the Regional Budget should include the fourth quarter amounts to the Regional and Local Budgets.
New article 294.1 has been introduced to regulate taxation of insurance companies participating in the obligatory medical insurance.
Further to the recent changes in provision of sick leave allowances, the legislators included points 48.1 and 48.2 into Article 264 to allow deduction of expenses related to the first two days sick leave payment by employers and premiums under the relevant insurance agreements.
Individual income tax
Rates for residents:
9% for dividend income of residents
13% for material gain from employer loans purposed for purchase of dwelling.
Rouble deposit non-taxable interest increased to refinancing rate (13%)
Deductions and exemptions
Standard deductions for children increased to 600 rubles and the income threshold for application of standard deductions increased to 40,000 rubles.
Exemption related to purchase of dwelling may be claimed through tax agents rather than tax authorities. However, documents should first be approved by the tax authorities.
Term of ownership for immovable property for the purposes of total relieve of sale proceeds decreased to 3 years.
Unified Social Tax
The maximum rate for employers decreased to 26% and is applicable to annual income up to 280,000. In respect of highly paid employees the rate decrease has not influenced the overall tax burden.
Remarkable Court cases
19 January 2005 the Supreme Arbitrary declared invalid the opinion of the tax authorities regarding limitation of business trip daily allowance to 100 rubles. The decision was made to Gazprom appleal.