Features of income taxation for foreign organizations
Foreign companies, which within the framework of tax legislation are equated to Russian ones, are required to adhere to all the norms of Chapter.
25 of the Tax Code of the Russian Federation (hereinafter referred to as the Tax Code) on the calculation and payment of income tax, like Russian tax payers. Foreign organizations that have income from sources in the Russian Federation and conduct their business activities through permanent representative offices are recognized as tax payers in the Russian Federation (Clause 1, Article 246 of the Tax Code). Moreover, if such companies do not operate through official representative offices in Russia, but have income from sources in the Russian Federation, then they are subject to taxation in accordance with Art. 309 NK.
Since 2015, a new term has appeared in Russian tax legislation - controlled foreign organizations. Changes to codified tax legislation related to the emergence of a new subject of taxation were introduced by the Federal Law “On Amendments to Parts I and II of the Tax Code of the Russian Federation” dated November 24, 2014 No. 376-FZ. The law was adopted as part of the state program for deoffshorization of business. The specifics of taxation of profits of controlled foreign companies are taken into account in Art. 309.1 NK.
ConsultantPlus experts have developed step-by-step instructions on the specifics of taxing the profits of a controlled foreign company:
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Withholding tax from the income of a company registered abroad
Income of foreign companies from sources in Russia that do not operate through permanent representative offices in the Russian Federation is determined in accordance with Art. 309 NK. Profit tax on such income is withheld by the Russian company, which pays the income received by the counterparty (clause 1 of Article 310 of the Tax Code).
In this case, it is important whether an international tax treaty has been concluded between the Russian Federation and the country where this foreign company is registered. A reference to the priority of the norms of an international agreement is contained in Art. 7 NK.
In order for the tax agent to apply special rules in accordance with the international treaty concluded by the Russian Federation to avoid double taxation, a company registered abroad must provide him with information about the place of its registration, translated into Russian. All such special rules are prescribed in Art. 312 NK.
Tax agent
Income tax on the income of a foreign organization is calculated, withheld and transferred to the budget system of the Russian Federation by the tax agent at special rates (depending on the type of income). The tax agent “connects” if the income is paid (clause 4 of article 286, clause 1, 1.1 of article 309 of the Tax Code of the Russian Federation):
- a foreign organization that does not have a permanent representative office in the Russian Federation;
- a foreign organization that has a permanent representative office in the Russian Federation, but the income paid is not related to the activities of this representative office.
Tax agents calculate, withhold and transfer to the budget tax on the income of a foreign organization each time income is paid to it (Clause 1, Article 310 of the Tax Code of the Russian Federation).
The tax agent must transfer the withheld tax no later than the day following the day of payment of income (clauses 6, 7, article 6.1, clauses 2, 4, article 287, clause 1, article 310 of the Tax Code of the Russian Federation).
The list of income of a foreign organization subject to income tax at the source of payment - the tax agent - is established by paragraph 1 of Article 309 of the Tax Code of the Russian Federation. This list is open. Income taxable to the tax agent includes, in particular:
- dividends;
- income from the sale of real estate in the Russian Federation;
- income from leasing or subleasing property used on the territory of the Russian Federation;
- income from international transportation.
By Order of the Federal Tax Service of Russia dated March 2, 2016 No. ММВ-
7-3/ [email protected] approved the tax calculation form on the amounts of income paid to foreign organizations and taxes withheld, the procedure for filling it out, as well as the format for submitting it in electronic form (hereinafter referred to as the Calculation). This form must be completed by tax agents.
The calculation is submitted to the tax authority at the location of the organization (tax agent) no later than 28 calendar days after the end of the reporting period for all cases of payment of income to a foreign company and withholding of income tax.
Information on the income of foreign organizations that are exempt from income tax is also reflected in the Calculation for the period in which the tax agent paid these incomes. The document confirming the right to preferential taxation is indicated in line 160 of subsection 3.2 of section 3 of the Calculation.
Controlled foreign entities
A new chapter 3.4 in the Tax Code is devoted to foreign companies that are controlled by a Russian owner/owners. As already mentioned, the changes being made to Russian tax legislation regarding controlled foreign companies are related to deoffshorization.
Thus, from now on, all Russian owners are required to notify about the presence of companies that generate income abroad, and from 2021, to pay taxes on income received abroad. Moreover, depending on the reputation of the country in which this business is located, it will be possible to avoid double taxation or reduce the tax burden, or pay tax on all income entirely in Russia.
See also:
- “What are controlled foreign companies?”;
- “Notification of controlled transactions - sample completion.”
Which foreign companies are controlled?
An organization registered abroad is considered controlled if it is not registered in the Russian Federation as a resident, provided that the person from Russia who controls its activities is a tax resident in the Russian Federation (Article 25.13 of the Tax Code). A legal entity that has a certain share of participation in a controlled foreign organization is required to pay income tax at the rates generally established in Russia.
At the same time, the legal entity’s share of participation in a controlled foreign organization must be more than 25 or more than 10% if the total share of all resident owners from Russia exceeds 50% (clause 3 of Article 25.13 of the Tax Code).
The income of controlled foreign companies is exempt from taxation only under the conditions specified in paragraph 7 of Art. 25.13 NK. At the same time, it is important to provide all documents confirming the right to benefits and translated into Russian to the territorial Federal Tax Service (Clause 9, Article 25.13 of the Tax Code).
How to confirm your tax status
The status of a tax resident, regardless of the basis on which it arose (under an international treaty or according to the location of management bodies), allows a foreign enterprise to apply reduced tax rates and other tax benefits. In addition, it allows you to avoid double taxation if a corresponding agreement has been concluded between the Russian Federation and the country of origin of the company. In any case, this will require confirmation of the tax residence of the foreign company.
Such confirmation must be in documentary form. Russian tax legislation does not prescribe clear criteria and requirements for such a document. Depending on the legislation of different countries, it may have different names, features of form, content, and so on. Its main function is official confirmation that a particular company meets the requirements of a particular state in terms of tax residency.
If this is a document from a foreign state with which the Russian Federation has an agreement, such a document must be certified by the relevant fiscal authority and translated into Russian.
In Russia, a residence certificate is issued in the form KND 1120008, approved. by order of the Federal Tax Service No. ММВ-7-17/ dated 07.11.2017. To receive it, you must send an application in the form established by the order to the Interregional Inspectorate of the Federal Tax Service for centralized data processing or order it through an electronic service. Detailed information on the procedure for obtaining such confirmation can be found on the Federal Tax Service website.
Tax calculation procedure
The tax base for calculating income tax is the income of a controlled foreign company, confirmed by its financial statements and, if any, an auditor’s report. All these documents must be translated into Russian. They are provided along with the tax return of the legal entity controlling them.
The auditor's report is usually required to be prepared together with the financial statements in accordance with the personal law of the foreign company (i.e. the tax laws in force in the country of registration of such company).
The income tax of a controlled foreign organization is calculated on the amount of profit converted into rubles at the average foreign exchange rate established by the Central Bank of Russia (clause 2 of Article 309.1 of the Tax Code). When calculating the profit of a controlled foreign company, the income listed in clause 4 of Art. 309.1 Tax Code, with the exception of the amounts specified in clause 3 of this article.
See also the article “How to correctly fill out an income tax return when paying dividends”
The amount of income tax is reduced by the amount of withholding from this profit already collected in another state, as well as in the Russian Federation. To confirm payment of the tax, appropriate documentary evidence is provided (clause 11 of Article 309.1 of the Tax Code).
When calculating the tax base, the taxpayer – the controlling person – takes into account the income of a controlled foreign organization only when it exceeds 10 million rubles. in equivalent (clause 7 of article 25.15 of the Tax Code).
Permanent establishment
For profit tax purposes, a permanent representative office (branch) of a foreign organization in the Russian Federation is its separate division or other place of activity through which it regularly carries out business activities in Russia. In practice, it can perform work, provide services, sell goods from warehouses on the territory of the Russian Federation, etc. through a branch, representative office, department, bureau, office, agency and other separate division (Article 7, paragraph 2 of Article 306 of the Tax Code of the Russian Federation) .
In most cases, resident foreign firms pay their own income tax. At the same time, they tax the income received (Article 307 of the Tax Code of the Russian Federation):
- from production, trade and intermediary activities on the territory of the Russian Federation (minus the costs of receiving them);
- from leasing the property of your representative office (minus the costs of its maintenance), from the sale of shares and real estate in Russia;
- from the use of rights to intellectual property, from international transportation, etc.
The income tax rate on such income is 20%. Including 3% is paid to the federal budget, 17% to the regional budget. If in the Russian Federation a foreign company has several branches that operate through permanent representative offices, then it must calculate income tax for each of them. Foreign resident companies pay income tax and advance payments thereunder in the same manner as Russian companies. And they submit tax returns according to the same rules.
Table 1. Payment of tax by a foreign company
| Permanent establishment (accountant) | Tax agent (Russian company) |
|
|
Obligation to notify a Russian tax resident
Taxpayers who are residents of the Russian Federation must notify that they have a participation interest in a controlled foreign company or that they are controlling persons.
Notification of the existence of a share of participation in foreign companies must be provided to the Federal Tax Service within a month after the emergence of such a right, and no later than the 20th day of March of the month following the reporting year, if the share of the profit of such a foreign company is subject to accounting with the person who controls it , in Russia (clause 3 of article 25.14 of the Tax Code).
Find out how the income of foreign organizations is taxed in the Ready-made solution from ConsultantPlus:
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Fines for failure to comply with legal regulations
In case of failure to notify of participation in foreign companies or that the legal entity is a controlling organization in accordance with Ch. 3.4 of the Tax Code, a fine of 50,000 rubles is imposed on the violator. and 100,000 rub. accordingly (Article 129.6 of the Tax Code).
Failure to submit to the Federal Tax Service a profit tax return and annexes along with the financial statements of a controlled organization and other mandatory documents, or the provision of such documents with distorted information, is subject to a fine in the amount of 100,000 rubles. (Clause 1.1 of Article 126 of the Tax Code).
See also the article “How to correctly fill out an income tax return on an accrual basis?”
Incomplete payment or complete non-payment of income tax on the income of a controlled foreign company threatens to impose a fine on the controlling person in the amount of 20% of the tax amount, with a minimum of 100,000 rubles. (Article 129.5 Tax Code).
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| Iris [email protected] Belarus, Minsk Wrote 881 messages Write a private message Reputation: | #11[564766] December 27, 2012, 15:58 |
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| Iris [email protected] Belarus, Minsk Wrote 881 messages Write a private message Reputation: | #12[564825] December 27, 2012, 20:47 |
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| shell [email hidden] Belarus, Minsk Wrote 8776 messages Write a private message Reputation: 1544 | #13[564832] December 27, 2012, 21:31 |
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Only time makes us understand: who is a friend..., who is an enemy..., who is just like that...| Iris [email protected] Belarus, Minsk Wrote 881 messages Write a private message Reputation: | #14[564836] December 27, 2012, 10:12 pm |
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| Anyta [email hidden] Republic of Belarus, Minsk Wrote 178 messages Write a private message Reputation: | #15[564968] December 28, 2012, 12:20 |
Iris wrote:
Girls! Tell me the postings for this situation: A deed from a non-resident was issued for 216 euros. We paid him 216 euros on the condition that he provide a certificate of permanent residence. He didn’t provide it to me like that. I calculated and paid tax on the income of foreign legal entities. Now you get an overpayment of the tax amount. What to do with this amount? 1) Payment to the contractor D60.2.2 K52 -216 euros 2) Income tax charged D60.2.2 K 68.3.2-32.4 euros (15% of 216 euros) And then what? Please tell me!?
I have a similar situation: We made an advance payment, in.org. They promised a certificate, but did not provide it on time. As a result, I calculated and transferred income tax. Wiring: Dt.60.2-Kt.52; Dt.90.8-Kt.68.3.2 (not taught with n/o); Dt.68.3.2-Kt. 51. We will eventually be provided with a rescue package. When they provide it, I will submit it to the Tax Inspectorate for a refund of the tax amount. But it seems to me that in our situation everything is not so simple: according to the law, we did not have the right to transfer 100% of the remuneration to them. Therefore, there must be liability for violation. I was searching for. It seems to me that Article 13.7 of the Code of Administrative Offenses is applicable in our situation. In addition, I am tormented by the question: maybe in our situation it was necessary to calculate the tax amount not as 15% of the remuneration amount, but as: (remuneration plus the amount of overpayment (15% of the remuneration amount)) * 15%. In your case (216 plus 32.4) * 15% = 37.26 (which is 4.86 more). After all, here, in essence, it’s the same as with income tax. Tell me who has any thoughts. The question really bothers me. And maybe there is another way to improve the situation?
I want to draw the moderator's attention to this message because:Notification is being sent...
| Lyudmila [email protected] Belarus, Minsk Wrote 1193 messages Write a private message Reputation: | #16[565002] December 28, 2012, 13:29 |
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| Anyta [email hidden] Republic of Belarus, Minsk Wrote 178 messages Write a private message Reputation: | #17[565005] December 28, 2012, 13:41 |
Lyudmila wrote:
The Internal Revenue Service explained it to me this way... for example, the amount according to the act is 216 euros... if there is no certificate of the place of registration of a non-resident, then there is an obligation to pay income tax of 15%, i.e. 216 * 15% = 32.4 (transfer to the budget) but you pay your non-resident the amount minus i.e. 216 - 32.4 = 183.6 euros. In this case there will be no double taxation. If there is a certificate, then we do not pay 15%.
It's clear. But what to do if you don’t have the certificate yet, and the amount in.org. transferred without retaining 15%?
I want to draw the moderator's attention to this message because:Notification is being sent...
| Lyudmila [email protected] Belarus, Minsk Wrote 1193 messages Write a private message Reputation: | #18[565010] December 28, 2012, 13:47 |
Tatiana wrote:
It's clear. But what to do if you don’t have the certificate yet, and the amount in.org. transferred without retaining 15%?
It seems to me that if the deadlines are already running out, pay the 15% tax on income, and write a letter to the non-resident about the return of the money transferred in excess... let them return it, otherwise they may also pay the tax there, and they will end up in double taxation.
I want to draw the moderator's attention to this message because:Notification is being sent...
| Anyta [email hidden] Republic of Belarus, Minsk Wrote 178 messages Write a private message Reputation: | #19[565015] December 28, 2012, 14:03 |
Lyudmila wrote:
Tatiana wrote:
It's clear. But what to do if you don’t have the certificate yet, and the amount in.org. transferred without retaining 15%?
It seems to me that if the deadlines are already running out, pay the 15% tax on income, and write a letter to the non-resident about the return of the money transferred in excess... let them return it, otherwise they may also pay the tax there, and they will end up in double taxation. We have already paid the tax. And they will provide us with a certificate (just with a delay). When they provide it, I will apply to the Tax Inspectorate for a refund of the tax paid. But regarding the return from foreigners. org. - this is unlikely. They provided in the agreement that the amount of remuneration is transferred without withholding any taxes due for payment on the territory. RB. And they indicated that we bear these expenses at our own expense. We have seen this, but the supplier is a monopolist and dictates conditions in the market. We either agreed to the terms, or he doesn't work with us. And we were very interested. I am concerned about the fact that we transferred the amount of 100% to the supplier without a certificate confirming the location (even though we paid the tax to the budget from our own funds). It seems to me that, even though we will still be provided with a certificate, there is responsibility for this. But I don't know exactly which one. And maybe it’s possible to somehow minimize liability.
I want to draw the moderator's attention to this message because:Notification is being sent...
| Lyudmila [email protected] Belarus, Minsk Wrote 1193 messages Write a private message Reputation: | #20[565019] December 28, 2012, 2:11 pm |
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Special nuances for calculating income tax for foreign organizations appear only in cases where:
- A non-resident does not have a permanent establishment in the Russian Federation, but has income from sources located in Russia. Income tax is withheld by the tax agent making the payment of income.
- A foreign company is controlled by an owner(s) located in Russia. Moreover, the share of participation of such a Russian owner should not be less than 25%. Or a group of Russian co-owners, each of whom has a share of at least 10%, has a majority stake (more than 50% of the share in a foreign company). In general situations, the profit tax of a controlled organization is calculated from the amount of profit of a foreign company minus the tax paid abroad. The tax rate in Russia is 20%.
In other cases, foreign companies (which have a permanent establishment in the Russian Federation and the source of income is located in Russia) are recognized as Russian taxpayers.
They calculate and pay income tax, like all other taxpayers in Russia. You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.
Taxable income of foreign companies
The obligations of a tax agent arise for an organization or individual entrepreneur each time a foreign company pays the income specified in paragraph 1 of Article 309 of the Tax Code of the Russian Federation. These could be, for example:
- dividends to a foreign shareholder or participant;
- interest on debt obligations, including bonds, credits and loans;
- license fees;
- payment for acquired property located on the territory of the Russian Federation;
- rental, sublease and leasing payments for the property of a foreign company used by a tax agent in Russia and so on.
