Description of the Tax System

The legislation of the Russian Federation on taxes and levies comprises the Tax Code and Federal Laws adopted in accordance with it. The Tax Code establishes general taxation principles in the Russian Federation including:
     -types of taxes and levies in the Russian Federation;
     -grounds on which obligations to pay taxes and levies are based (amended, terminated) and the procedure by which these obligations are to be fulfilled;
     -rights and obligations of taxpayers, tax authorities and other participants in relationships regulated by tax and levies legislation;
     -forms and methods of tax control;
     -responsibility for tax violations; and
     -procedure for appealing against the actions (or inactions) of the tax authorities and their officers.

Tax Authorities

The tax authorities of the Russian Federation are the Ministry of Taxes and Levies of the Russian Federation and its territorial administrations in the Russian Federation. The tax authorities have the right to:
     -require taxpayers to submit documents that support the calculation and payment of taxes;
     -carry out tax reviews in the procedure established by the Tax Code;
     -withdraw documents testifying that tax violations have been committed;
     -summon taxpayers to the offices of the tax authorities to provide explanations in connection with their tax payments;
     -suspend transactions in individuals' bank accounts or seize taxpayers' property;
     -inspect any warehouses, production, commercial or other premises and areas used by taxpayers for profit-making purposes, take stock of taxpayers' property;
     -summon, as witnesses, people who may be aware of circumstances that may be of significance to tax control;
     -file claims with courts of general jurisdiction and arbitration courts regarding the imposition of penalties for violating legislation on taxes and levies, including those imposed on parent (subsidiary or associated) companies in the event that revenues from subsidiary or associated (parent) companies are posted to their accounts; and
     -monitor large expenditure of individuals with regard to its conformity with their income.

Tax authorities are responsible for losses caused to taxpayers as a result of illegal actions (decisions) taken or inactions not taken by them or by their officers.

Registration of Organisation with theTax Authorities

All entities must register with the tax authorities at the place of the entity's location, at the place of location of their branches and representative offices and at the place of location of their immovable property and transport vehicles that are subject to taxation.

Permanent Establishment of a Foreign Legal Entity

The concept of 'permanent establishment' in the tax legislation of the Russian Federation is applied only to determine the tax status of a foreign legal entity This concept has no legal implications. It is necessary to distinguish between a permanent establishment of a foreign legal entity for tax purposes and a representative office as an independent subdivision of a foreign legal entity in the Russian Federation.

Foreign legal entities that perform their activities in the Russian Federation through a permanent establishment must accrue and pay taxes themselves.

A permanent establishment of a foreign legal entity in Russia and its head office abroad are a single legal entity, therefore, cash transferred from the head office to the permanent establishment is not subject to any tax.

Federal Taxes

Federal taxes and levies are those established by legislative acts of the Russian Federation and collected on its entire territory.

The following federal taxes are currently levied;
     a) income tax (profit tax) of entities;
     b) value-added tax;
     c) excises on certain types and groups of goods;
     d) tax on stock and commodity exchange operations;
     e) customs duty;
     f) fees for reproducing mineral resources;
     g) fees for using natural resources;
     h) individual income tax;
     i) taxes remitted to the road funds;
     j) state duty;
     k) tax on inherited and donated property;
     l) levy for using the names or and words and word combinations formed on the basis of these names;
     m) tax on the purchase of foreign currency banknotes and payment documents expressed in foreign currency;
     n) gambling tax
     o) payment for using water sources;
     p) charges for issuing a licence and the right to produce and sell ethyl alcohol, and products containing alcohol and spirits; and
     q) tax on certain means of transportation.

                                               (1)        (2)        (3)        (4)