1. Mandatory payments deferrals
For small and medium-sized enterprises which are included in the list of companies operating in the most affected economic sectors as of 1 March 2020 (the list has been issued by the Government), a number of mandatory payments have been deferred.
Six-month deferment is effective for:
Four-month deferment is effective for:
Three-month deferment is effective for:
Moreover, the deadlines for making advance payments regarding transport tax, corporate property tax and land tax have been extended as follows:
Please note that whether a company belongs to one of the most affected economic sectors is determined based on company’s principal activity as registered in the Unified State Register of Legal Entities and the Unified State Register of Individual Entrepreneurs as of 1 March 2020.
A deferment of taxes (or advance payment of taxes) does not entail a deferment for submitting tax returns and calculations.
The Government of the Russian Federation has resolved to extend tax returns and calculations deadlines for all organizations (Decree of the Government of the Russian Federation No. 409 dated 2 April 2020).
Now, companies can file their tax returns, which had to be submitted in March-May 2020, three months later. These include:
In addition, the deadline for filing VAT returns and insurance contributions calculation statement for the first quarter of 2020 has been extended until 15 May 2020.
These amendments do not entail a deferment of taxes (advance tax payments), including when, in accordance with the Tax Code of the Russian Federation, the payment deadline for taxes (advance tax payments) is set to be no later than the filing date of tax returns (calculations).
2. Other accounting and taxation changes
Beginning on 1 April, at the request of an entity subject to asset freezing, the tax authority has been entitled to replace this interim measure with one of the following:
Previously, asset freezing could only be a replaced by a pledge.
Thus, the authorities will no longer calculate the damage based on a percentage ratio as it has been done until now (i.e. more than 25% or 50% of the total amount of taxes and contributions).
To assess the severity of crime related to non-performance of tax agent’s obligations, similar changes have been provisioned.
Furthermore, the authorities have adjusted the rules for assessing damage caused to the budget by insured entity’s non-performance of its obligations to pay injury insurance contributions. A provision on calculating a percentage ratio using the total amount of contributions has also been excluded from the relevant regulations. The only criterion that remains is the amount of unpaid injury insurance contributions exceeding the following amounts for three consecutive financial years:
The government will provide direct subsidies to small and medium-sized businesses from the budget.
In the second and third readings, the State Duma of the Russian Federation has adopted, and the Federation Council has already approved, a bill providing for direct subsidies from the budget for small and medium-sized businesses operating in the sectors affected by Covid-19.
The exact amount for a particular company will be calculated based on the total number of its employees as of 1 April 2020 to provide RUB 12,130 per employee per month. Companies will be able to use these subsidies for any urgent purposes.
President of the Russian Federation has proposed to introduce new tax support measures which are as follows:
Where an enterprise maintains at least 90% of its current staff during the loan period, the principal and respective interest will be written off in full on the maturity date. If a company maintains at least 80% of its staff during the period, half of the principal and interest will be written off.
1. Loan Deferment
Loan deferment is available to small and medium-sized enterprises that operate in an economic sector on the list of industries most affected by the pandemic.
The essence of deferment is that the above entities will be entitled to receive, upon request, a six-month deferment of payments under any loan agreements signed with credit or non-credit financial organizations before 3 April.
2. Force majeure
Force majeure is deemed to be specific events and facts, restrictive or other special measures taken by the state authorities of Russia in connection with the Covid-19 pandemic (quarantine, curfew, restricted working hours for restaurants, parks, etc), rather than the epidemic itself.
At present, the government and the courts of the Russian Federation do not consider ruble exchange rate fluctuations as force majeure.
In our opinion, the Covid-19 epidemic (pandemic) and/or the restrictive measures associated with it, as such, do not create legal consequences for the parties’ obligations in the absence of any negative implications for these parties engaged in a specific transaction.
The fact that the Covid-19 epidemic (pandemic) is recognized as force majeure does not release parties from fulfilling their obligations under a transaction, but relieves the debtor from being subject to the creditor’s recovery of damage caused by such force majeure (including penalties, fines, etc.).
Interest under loan agreements is not deemed to be a sanction and, therefore, loan interest shall continue to be accrued in the amount stipulated by agreement.
The mere existence of force majeure does not mean that an unfulfilled/improperly fulfilled obligation will be recognized by court as lawful and will relieve the debtor from liability for failure to fulfil this obligation if the debtor was actually able to fulfil it.
An absence of a certificate issued by a regional chamber of industry and commerce verifying the occurrence of force majeure does not affect an entity’s ability to refer in court to force majeure circumstances, because proving force majeure as such under transactions carried out in the Russian Federation does not require any special documentary justification.
To prove the occurrence of force majeure affecting international transactions, it is necessary to obtain a certificate issued by the Chamber of Commerce and Industry of Russia.
Whether the coronavirus epidemic and/or the restrictive measures associated with it are deemed to be force majeure will be determined by court in each specific case and will depend on specific circumstances of each transaction.
To comply with the force majeure occurrence procedures, the debtor shall take all reasonable measures to reduce the damage caused to the creditor due to force majeure, as well as notify the creditor that such circumstances have occurred and, if the debtor fails to do this, to compensate the creditor for the damage caused thereby.
3. Rent Holiday
The Order of the Government of the Russian Federation No. 670-r issued on 19 March 2020 gave companies an opportunity to obtain a deferment when renting federal property. The government recommended regions and municipalities to implement a similar measure.
Where a company rents property owned by a federal subject of the Russian Federation or a municipality, the tenant has to clarify with the lessor whether it is possible to defer payment and how to do it.
Note: A law has come into force that obliges lessors with any kind of real property ownership to grant payment deferral in 2020 in those regions that declared a high alert or emergency situation.
Recommendations on rental holidays, namely, deferment period and other terms, have been set forth in the Decree of the Government of the Russian Federation No. 670-r dated 19 March 2020.
Note: If a tenant was unable to use the respective property due to a high alert or emergency declared by a federal subject of the Russian Federation, the tenant is eligible to reduce rental payments.
The grace period is from the date the high alert or emergency is declared until 1 October 2020.
This period can be divided into two stages:
- period of high alert or emergency. A tenant shall not pay anything, except for utilities and/or property maintenance payments if they are included in the rent and the lessor has not been exempted from them;
- period from the end of high alert or emergency until 1 October 2020. A tenant shall pay 50% of the rent.
The lessor and tenant shall document the period and terms of repayment of the debt accrued during the deferment period via a supplementary deferral agreement.
The following requirements are mandatory to the above:
- debt repayment shall commence on or after 1 January 2021;
- payments shall be made in equal instalments not more than once a month;
- a single payment shall not exceed half the monthly rent under the agreement.
Note: Currently, the state authorities and the courts of the Russian Federation do not deem ruble exchange rate fluctuations to be force majeure and, therefore, exchange rate changes per se neither ensure any rental benefits nor allow for exemption from late fees or past due penalties.
4. Bankruptcy During the Moratorium Period
A six-month ban has been introduced for creditors on filing bankruptcy petitions against legal entities and individuals operating in the affected economic sectors, as well as against systemically important organizations, strategic enterprises, strategic joint stock companies, and strategic organizations.
To find out whether your company is subject to a bankruptcy moratorium, use the special web source created by the Federal Tax Service: https://service.nalog.ru/covid/
Until 1 May, the Federal Tax Service, state corporations and federal state authorities are prohibited from filing bankruptcy applications against any debtors.
More details about the moratorium:
- The moratorium can be extended via a decree of the Government of the Russian Federation if the grounds for the moratorium have not disappeared.
- Any creditor’s bankruptcy petition against a company subject to the moratorium filed both during the moratorium period and before the date thereof but not yet accepted by the arbitration (commercial) court will be returned.
- Any creditor’s notification included in the Unified Federal Register of Bankruptcy Information (EFRSB) as of the moratorium introduction date regarding the creditor’s intention to file a bankruptcy petition against a company subject to the moratorium does not enable such a creditor to submit the bankruptcy petition to the court during the moratorium period. Moreover, from the moratorium commencement date, the information contained in such a notice becomes null and void. It is expected that the creditor should file such a notice again after the moratorium has ended.
A company under the moratorium is subject to the requirements similar to the monitoring procedure, during the moratorium period:
With respect to bankruptcy proceedings initiated against the debtors subject to this moratorium within three months after the moratorium is terminated:
Thus, during the moratorium period, it becomes impossible to carry out bankruptcy action in relation to companies subject to the moratorium, while certain restrictions are imposed on such companies. In addition, upon termination of the moratorium, special rules will be applied to the bankruptcy terms and procedures with respect to such companies.
5. Exemption from Administrative Fines for Currency Violations
The restrictive measures of foreign countries caused by the spread of the coronavirus disease may serve as a basis for exemption from fines caused by violation of currency repatriation requirements. The Ministry of Finance has given the respective clarification in its Information Letter “Informing participants of foreign economic activity in connection with the spread of the new coronavirus disease (COVID 2019) on the necessary actions to relieve residents from administrative sanctions in the case where their foreign counterparties (non-residents) fail to meet the goods delivery (payment) terms under foreign trade agreements (contracts) ) concluded between residents and non-residents, or non-return of advance payments to residents by non-residents”.