Most significant repeals made in 2017

By Elena Rybnikova, Head of Quality Control and Methodology Department at Intercomp

No laws have been drawn up once and forever. As societies develop and evolve so does their legislative system. Laws are improved through partial revisions or full repeal to meet the new requirements that have arisen from changes in society.


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Elena Rybnikova
Head of Quality Control and Methodology Department at Intercomp

In 2017, not only numerous amendments were introduced to the law, but a significant number of laws were also repealed to meet today’s requirements. Below we will consider some of these changes and their effect, as well as how business can be reorganized taking into account those changes.

Labor Code

1. Reversal of Russian Supreme Court ruling No. 307-KG17-1728 dated July 18, 2017 defining the concept of part-time work

Russian laws do not provide a clear definition of the concept of part-time work so any work reduction adopted by companies is lawful. Let’s take the example of employee on maternity leave that comes to work to earn money in addition to the awarded maternity benefit. It is in the employer’s interests that such employee fulfills her work duties for as long as possible so her working hours are reduced as little as possible.

Now, part-time work conditions for employees who work but still continue caring for a child under the age of 1.5 must be at least one hour less than regular working hours.

As a result of field audits conducted in 2017, the Social Insurance Fund did not allow many companies to deduct the benefits paid to employees if their working hours had not been sufficiently reduced.

2. USSR Labor State Committee and All-Union Central Trade Union Council Presidium order annuled on June 18, 2017

Overtime on weekends and public holidays is no longer taken into account to determine the duration of overtime payable at a higher rate (Amendments to Federal Law No. 125 dated June 18, 2017)

All hours worked during public holidays must be paid double (Article 153 Russian Labor Code).

Taxes

3. Abolition of VAT relief for suburban railway services

From January 01, 2018 onwards suburban railway services will be subject to VAT as per the general rule. Previously, these services used to be subject to 0% VAT.

4. Repeal of Federal Law N 212-FZ On Social Insurance Contributions to the Russian Pension Fund, the Social Insurance Fund of the Russian Federation and the Federal Fund for Mandatory Health Insurance

Social insurance contributions are now considered tax payments, and as such, are regulated by the provisions set out in Chapter 34 of the Russian Tax Code. The administration of social insurance contributions has thus been transferred to tax authorities.

This transfer was completed on January 01, 2017, but that does not mean that everything prior to that date will fall under the competence of the Federal Tax Service. The provisions of the Russian Tax Code are not retroactive, tax audits will be conducted based on accrued and paid taxes and on tax reporting for the three previous years. So, after receiving data from the funds, the Federal Tax Service is fully entitled to verify the accruals and payments of social insurance contributions for 2014, 2015, and 2016.

The companies with significant discrepancies in the bases for personal income tax and social insurance contributions will be at risk.

Companies with arrears in payments of social insurance contributions could have their bank accounts blocked and be subject to substantial penalties for non-payment of taxes as, unlike the funds, the Federal Tax Service has the powers to impose such sanctions. The transfer of information about arrears from the funds to the Federal Tax Service is done relatively slowly and not very smoothly. The information is transferred erroneously: arrears “appear” for taxpayers who did not have any and “disappear” for others who failed to pay their social contributions in due time.

Managers need to find out from their accounting department whether they owed or had overpaid social insurance contributions before January 01, 2017. Measures also need to be taken to update the data in the Federal Tax Service’s tax accounting system, and in case of arrears of payments to the funds, existing debts should be repaid.

If the amount owed cannot be repaid at once, then companies need to submit to the Federal Tax Service an application for debt restructuring.

5. Abolition of reporting on mandatory pension insurance contributions (RSV-1 form)

Employers will submit the data from RSV-1 forms as part of the single calculation of social insurance contributions sent to tax authorities.

Business

6. No registration certificate issued since 2017 upon registration of individual entrepreneurs

Records of entry in the State Register of Individual Entrepreneurs (Form No. 50007) are now issued to individual entrepreneurs instead of registration certificates.

Important note: references to “registration certificate” in contract templates, documentation and VAT invoices on the basis of which individual entrepreneurs perform their activities should be changed to “entry record”.

7. Cancelation of protected electronic control tape

Protected electronic control tapes have no longer been required in cash registers since 2017. They have been replaced with fiscal memory devices and new cash register equipment supporting online data transfer from cash registers to tax authorities via the internet.

This has so far affected everyone who previously used cash registers. These rules will also apply to all companies settling accounts with individuals from July 01, 2018, including companies operating under the patent taxation system and single tax on imputed earnings.

Real estate property. Cadastral activities

8. Repeal of Federal Law N 221-FZ On Cadastral Activities

The notion of delimitation plan is now found in Article 22 of Federal Law N 218-FZ On State Registration of Real Estate Property.

9. Repeal on January 01, 2017 of provisions of Articles 4-15 in Chapter 2 of Federal Law N 221-FZ On State Cadaster of Real Estate Property dated July 24, 2007

Real estate properties are now registered in the Unified Real Estate Property Register and single registration system on the basis of the provisions of Federal Law N 218-FZ.

10. Revocation of ownership title certificate in 2017

Strict reporting forms will no longer be issued. Extracts from a single register will be issued instead.

It is important not to lose the extract consisting of a blank page with text printed in black issued among other personal documentation as this extract will not stand out from the total number of documents.