Foreign companies that have traditionally imported office and other equipment free of duty are suddenly being charged tax on the items, a Moscow lawyer said Monday.
"We're talking about pretty big money for many of these companies," said Karen Handelsman, a lawyer at Baker and McKenzie. "It's almost impossible to advise anyone about what will happen at the border."
Handelsman said it has been the accepted practice that accredited representative offices of foreign companies could import equipment free of customs, excise, value-added and special taxes, with the understanding that the items would later be re-exported.
But in recent weeks companies have complained that some customs officials have begun demanding duty on these items, Handelsman said. Some officials are also now demanding duty on equipment that is already here.
Handelsman said the officials appear to be following a strict interpretation of the existing legislation, which calls for duties to be applied.
The inconsistency at customs means foreign firms bringing equipment to Russia cannot plan ahead for duties, Handelsman said. Many are being hit by hefty warehousing fees as they wait for their goods to clear at border points.
"They've got you coming and going," she said.
In a related matter, it is now clear that foreign representative offices are not subject to VAT on their office and residential rents, according to the Arthur Andersen accounting firm.
Tax on rent has been a thorny issue ever since the Russian government issued amendments to the law on VAT in April 1994 that removed the exemption, retroactive to Jan. 1, 1994. Until this change, accredited representative offices from 88 countries had been exempt from VAT on rentals.
The matter was finally cleared up in August when both the State Tax Service and the Finance Ministry issued letters correcting what was deemed "a mistake."
But it is still unclear, Arthur Andersen says, whether VAT will be charged for the period between Jan. 1, 1994 and the August "correction."
"We don't know how local inspectors will interpret it," said Oleg Lesnichy, a research assistant at the accounting firm.
Recent Legislation
Film Tax (Finance Ministry letter, No. 701, Oct. 4). Companies that obtain films or videotapes of films that were not produced in the Commonwealth of Independent States must pay a registration fee of 350 minimum salaries. In a related matter, the Russian Federation State Customs Committee issued a resolution Sept. 6 that says all shipments of films and videocassettes of films from abroad must include a customs declaration that states: the name of the film in Russian and English, the country, year, length and genre of film, and the reason for importing the film.
Promissory Notes (Order, Russian Federation Government, No. 1094, 26 Sept.). Calls for the introduction of a standard form for promissory notes across the Russian Federation.
Beverage Regulations (Order, Russian Federation Government, No. 1088, 26 Sept.). Further regulates the sale of alcoholic beverages. Beer, wine and spirits cannot be sold without a clear label identifying the producer, nor can they be sold if the expiration date has elapsed. Alcoholic beverages cannot be sold by unlicensed retailers, nor by retailers who do not have proper storage facilities. Alcohol cannot be sold to people under 18 years of age.
Hotel Tax (Order, St. Petersburg City government). St. Petersburg hotels and other organizations using their facilities in the capacity of hotels are subject to a new tax. "The special purpose tax for the development of St. Petersburg's tourist complex infrastructure" levies a tax rate of $0.10, $0.15 or $0.20 on rooms, depending on the classification of the hotel. The tax is calculated on the number of available rooms, regardless of whether they are occupied.
"We're talking about pretty big money for many of these companies," said Karen Handelsman, a lawyer at Baker and McKenzie. "It's almost impossible to advise anyone about what will happen at the border."
Handelsman said it has been the accepted practice that accredited representative offices of foreign companies could import equipment free of customs, excise, value-added and special taxes, with the understanding that the items would later be re-exported.
But in recent weeks companies have complained that some customs officials have begun demanding duty on these items, Handelsman said. Some officials are also now demanding duty on equipment that is already here.
Handelsman said the officials appear to be following a strict interpretation of the existing legislation, which calls for duties to be applied.
The inconsistency at customs means foreign firms bringing equipment to Russia cannot plan ahead for duties, Handelsman said. Many are being hit by hefty warehousing fees as they wait for their goods to clear at border points.
"They've got you coming and going," she said.
In a related matter, it is now clear that foreign representative offices are not subject to VAT on their office and residential rents, according to the Arthur Andersen accounting firm.
Tax on rent has been a thorny issue ever since the Russian government issued amendments to the law on VAT in April 1994 that removed the exemption, retroactive to Jan. 1, 1994. Until this change, accredited representative offices from 88 countries had been exempt from VAT on rentals.
The matter was finally cleared up in August when both the State Tax Service and the Finance Ministry issued letters correcting what was deemed "a mistake."
But it is still unclear, Arthur Andersen says, whether VAT will be charged for the period between Jan. 1, 1994 and the August "correction."
"We don't know how local inspectors will interpret it," said Oleg Lesnichy, a research assistant at the accounting firm.
Recent Legislation
Film Tax (Finance Ministry letter, No. 701, Oct. 4). Companies that obtain films or videotapes of films that were not produced in the Commonwealth of Independent States must pay a registration fee of 350 minimum salaries. In a related matter, the Russian Federation State Customs Committee issued a resolution Sept. 6 that says all shipments of films and videocassettes of films from abroad must include a customs declaration that states: the name of the film in Russian and English, the country, year, length and genre of film, and the reason for importing the film.
Promissory Notes (Order, Russian Federation Government, No. 1094, 26 Sept.). Calls for the introduction of a standard form for promissory notes across the Russian Federation.
Beverage Regulations (Order, Russian Federation Government, No. 1088, 26 Sept.). Further regulates the sale of alcoholic beverages. Beer, wine and spirits cannot be sold without a clear label identifying the producer, nor can they be sold if the expiration date has elapsed. Alcoholic beverages cannot be sold by unlicensed retailers, nor by retailers who do not have proper storage facilities. Alcohol cannot be sold to people under 18 years of age.
Hotel Tax (Order, St. Petersburg City government). St. Petersburg hotels and other organizations using their facilities in the capacity of hotels are subject to a new tax. "The special purpose tax for the development of St. Petersburg's tourist complex infrastructure" levies a tax rate of $0.10, $0.15 or $0.20 on rooms, depending on the classification of the hotel. The tax is calculated on the number of available rooms, regardless of whether they are occupied.
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