Taxation

AuthorInternational Law Group

On August 5, 2000, the President of the Russian Federation, Vladimir Putin, signed into law four chapters of Part Two of the Russian Federation Tax Code and Federal Law No. 118-FZ "On the Implementation of Part Two of the Russian Federation Tax Code and Amendments to Certain Federal Laws on Taxation" (hereinafter "the implementation law"). The changes affect VAT, Excise Taxes, Personal Income Tax, and Unified Social Tax. The official gazette "Rossijskaya Gazeta" published the amendments on August 10, 2000. The majority of the amendments enter into force on January 1, 2001.

The changes include:

- VAT (Chapter 21 of the Tax Code): The VAT rates and general structure remain, but other provisions will affect most businesses in Russia. (1) The laws change the "place of service" rules that determine whether a transaction occurred in Russia for VAT purposes. (2) CIS countries are treated the same way as all other foreign countries. (3) The new provisions repeal VAT exemptions such as for license fees for the use of intellectual property and narrow the exemption for pharmaceuticals.

- Personal Income Tax (Chapter 23): The amendment repeals the progressive tax rates and introduces a 13% flat tax rate which applies to almost all categories of income for Russian tax residents. The new provisions tax dividends and any other...

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