Windfall tax for major companies to be introduced in Russia

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Daily Monitoring of the Legislation

Monitoring of the Federal Legislation dated 25.08.2006

Ruling of the Constitutional Court of the Russian Federation No. 162-O of June 13, 2006 on the Refusal to Accept for Consideration the Appeal of Citizen S.V.Baranova against Violation of Her Constitutional Rights by Item 28 of the Regulation on the Subsidies Provided to Pay for the Housing and Communal Services



Challenges the constitutionality of Item 28 of the Regulation on the subsidies provided to pay for the housing and communal services endorsed by the Decision of the Government of the Russian Federation No. 444 of August 30, 2004. According to the applicant, the introduced procedure of calculation of the aggregate family incomes of the recipient of the subsidy, when the spouse incomes are taken into account regardless of whether or not they live separately, is in violation of her constitutional rights.

In spite of the fact that the challenged Regulation has lost its force, and since the actual rules of providing subsidies to pay for the housing and communal services endorsed by the Decision of the Government of the Russian Federation No. 761 of December 14, 2005 contain the norm similar to the challenged one, the Constitutional Court of the Russian Federation, while refusing to accept the appeal for consideration, explained the following.

The main legal fact bringing about the mutual rights and duties of spouses is the state registration of their marriage in the bodies of registration of civil status, rather than the fact of living together. The essence of these rights and duties must be determined proceeding from the principle that family relations must be built on the basis of mutual aid and responsibility of all its members. If applied to relations of spouses, the mentioned principle is made more specific in the provisions of the Family Code of the Russian Federation imposing on them the duty to render aid to each other, including the material one (Item 3 of Article 31 and Item 1 of Article 89). Therefore, the introduced procedure of calculation of the aggregate family incomes of the recipient of the subsidy to pay for the housing and communal services taking into account the special legal status of spouses may not be regarded as violating the rights of citizens guaranteed by the Constitution of the Russian Federation.

Letter of the Department of the Tax and Customs Tariff Policy of the Ministry of Finance of the Russian Federation No. 03-11-02/180 of August 17, 2006



Provides explanations on the procedure of application of the simplified system of taxation to requests of the tax bodies.

Since a new legal entity emerges at the creation of the legal entity (changing of the organisational and legal form), it is subject to the procedure of switchover to the simplified system of taxation envisaged for the newly created organisations. In this case, the newly emerging legal entity may choose another object of taxation.

As to the procedure of inclusion by taxpayers applying the simplified system of taxation in expenses the costs of commodities purchased for further sale, it is explained that in the determination of the taxable base for the tax pertaining to the application of the simplified system of taxation, expenses shall include the cost of purchased commodities paid by suppliers, sold and paid by the buyers.

Letter of the Department of the Tax and Customs Tariff Policy of the Ministry of Finance of the Russian Federation No. 03-03-04/2/194 of August 18, 2006



Provides explanations on the taxation procedure for the profit tax from organisations in cases of transfer of securities on the gratuitous basis.

In the cases of transfer of property on the gratuitous basis, the taxpayer does not get any economic benefit. Therefore, there appears to be no income with him for profit taxation purposes. Expenses in the form of the cost of the property handed over on the gratuitous basis are not taken into account as taxpayer expenses either.

In the cases of donation of securities, there appears to be no income in the form of the market cost of securities handed over on the gratuitous basis for profit taxation purpose with the donor organisation. The duty to include the mentioned income in incomes for determination of the taxable base for the profit tax emerges with the recipient organisation.

Letter of the Department of the Tax and Customs Tariff Policy of the Ministry of Finance of the Russian Federation No. 03-03-04/2/193 of August 16, 2006



Amounts of insurance reimbursement received by the insurant bank under the contract of voluntary insurance of risks of failure to return the credits are not listed in the incomes exempted from profit taxation envisaged in the Tax Code, therefore, such insurance reimbursement is included in incomes. In this case, amounts of debts handed over (transferred to the insurer by virtue of the law) are not included in expenses for profit taxation purposes with the bank.

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