Legislation changes and measures adopted due to the COVID-19 pandemic
A law amending various legislative acts, including laws on emergency prevention and control and the Tax Code was adopted in Russia on April 01 in connection with the coronavirus COVID-19 pandemic.
The following amendments were introduced:
- Rent reduction and deferment of payments under real estate leases
- Bankruptcy regulation and postponement
- Special procedure for collecting interest, penalties and fines for late payment of utilities
- Restriction on business inspections
- Suspension of measures for recovery of tax payments
- Postponement of deadlines for submission of reporting
- Reduced social insurance contribution rates for small and medium businesses, deferment of payment of taxes and social insurance contributions for companies from certain industries
- Debt restructuring during the lockdown period
- Non-fulfillment of obligations due to coronavirus COVID-19
- Measures to support business in Moscow
Rent reduction and deferment of payments under real estate leases
The new law requires landlords to grant in 2020 a deferment of payments in the regions where lockdown or state of emergency is introduced.
If, due the introduction of lockdown or state of emergency by regional authorities, tenants are unable to use the property they lease, they will be entitled to conclude an additional agreement with their landlord for deferment of rent payment in 2020.
- This is possible if lease agreements are concluded in 2020 before any lockdown or state of emergency is introduced by local authorities;
- Landlords must conclude such additional agreement within 30 days of their tenant’s request;
- The requirements for deferment terms and conditions are set by the Russian government.
The rent amount may be changed in any other cases by agreement of the parties.
Small and medium enterprises may conclude additional agreements for deferment of rent payments for state property in accordance with Government Decree No. 645 dated August 21, 2010.
Documents: Federal Law No. 98-FZ dated April 01, 2020, Government Decree No. 670-r dated March 19, 2020
Bankruptcy regulation and postponement
The Russian government may introduce a moratorium on bankruptcy proceedings initiated by creditors. This is possible in case of emergency, substantial change in the ruble exchange rate and other similar circumstances.
- The government will set the moratorium duration and extension.
- During the moratorium, it is not allowed to foreclose pledged property, enforcement proceedings for foreclosure are suspended under claims that arose before the moratorium was introduced (seizure of debtor’s property and other restrictions imposed during enforcement proceedings are not lifted).
- The filing of bankruptcy petitions is suspended.
- Companies in the tourism, aviation and other affected industries will be able to conclude settlement agreements in bankruptcy proceedings or will be granted a deferment.
- The Central Bank urges banks to restructure loans for all affected companies from several industries and not just small and medium enterprises.
- Federal Law N 98-FZ dated April 1, 2020
- Information from the Federal Tax Service of Russia on the measures to support business due to a decrease in business and consumer activity amid the spread of coronavirus
- Russian Government Decree on taxes, social insurance contributions and bankruptcy dated March 18, 2020
- Information from the Federal Tax Service of Russia that companies from the tourism and air travel Industries will be able to pay taxes until May 1
Special procedure for collecting interest, penalties and fines for late payment of utilities
The government is entitled to set out how interest, fines, penalties for late or incomplete payment for services rendered under agreements for gas, electricity, heat, water and sanitation supply will be recovered until January 1, 2021.
Document: Federal Law N 98-FZ dated April 1, 2020
Restriction on business inspections
The powers of the government and of the highest executive bodies of the constituent entities of the Russian Federation have been expanded for 2020. This year, the government is entitled to suspend, cancel or postpone tax audits as well as postpone the deadlines provided by the Russian Tax Code:
- The highest executive bodies of the constituent entities of the Russian Federation may extend the deadlines for the payment of regional and local taxes and sales tax if these deadlines have not been changed by the government.
- Small and medium enterprises recorded in the SME register will not be subject to any inspections from April 1 to December 31, 2020 except for inspections due to harm or threat to life, public health as well as natural and man-made emergencies. The government may provide for other regulation.
- In 2020, the government may determine how the federal inspectorates subject to this law should be organized . For example, the government may provide for the grounds, deadlines and frequency of inspections.
- No inspections provided by the law on the protection of rights of legal entities and individual entrepreneurs will be initiated until May 1, 2020. Federal authorities will not initiate field tax audits and scheduled field customs inspections.
- The master plan of the prosecutor’s office’s inspections has been adjusted.
- The Bank of Russia has dialed down regulation and compliance monitoring.
- Federal Law N 102-FZ dated April 1, 2020, Federal Law N 98-FZ dated April 1, 2020
- Government Decree dated March 18, 2020 Information from the Federal Tax Service of Russia on Measures to Support Business due to a Decrease in Business and Consumer Activity amid the Spread of Coronavirus
- Bank of Russia Information Letter N ИН-06-14/34 regarding the Decrease in the Regulatory and Supervisory Burden due to the Spread of COVID-19 dated March 27, 2020
- Bank of Russia Information Letter N ИН-03-41-3/37 regarding the Non-Application of Measures to Credit Organizations dated March 27, 2020
- Information provided by the General Prosecutor’s Office on March 26, 2020
- Federal Tax Service Order N ЕД-7-2/181@ dated March 20, 2020
- Rostekhnadzor information about the suspension of inspections
Suspension of measures for recovery of tax payments
The government may in 2020 extend the deadlines for sending and fulfilling claims for payment of taxes, charges, social insurance contributions, penalties, fines and interest, as well as for adopting decisions for their collection.
Measures for recovery of tax payments are suspended until May 1, 2020:
- For small and medium enterprises. SMEs do not need to apply for suspension of measures. Any decisions adopted before March 25, 2020 will not be suspended.
- For companies operating in the tourism and air transportation industries;
- For companies operating in the fitness, sports, art, culture and film industries.
The adoption of decisions to block accounts is also postponed for SMEs.
- Federal Law N 102-FZ dated April 1, 2020
- Federal Tax Service Letter N ЕД-20-8/32@ dated March 25, 2020
- Information from the Federal Tax Service of Russia FAQ about the measures for suspension of collection to support small and medium businesses
- Information from the Federal Tax Service of Russia The Federal Tax Service of Russia has taken steps to support small and medium businesses
Postponement of deadlines for submission of reporting
- In 2020, the government and the highest executive bodies in the regions may extend the deadlines for reporting to tax authorities.
- The deadlines for reporting have been postponed following the presidential decree on non-working days.
- The deadline for submitting a mandatory copy of annual financial statements for 2019 was postponed on April 6, 2020.
- Federal Law N 102-FZ dated April 1, 2020
- Russian Ministry of Finance Letter N 07-04-07/24096, Federal Tax Service Letter N ВД-4-1/5303@ dated March 27, 2020 regarding the deadlines for submitting a mandatory copy of annual financial statements for 2019
- Information from Rosstat dated March 26, 2020 Rosstat has extended the deadlines for reporting due to the non-working days
Debt restructuring during the lockdown period
The Central Bank has recommended not considering debt restructuring events during the lockdown period when developing and using models for assessing creditworthiness to determine borrowers’ default.
The Bank of Russia has introduced additional measures to support borrowers from the most vulnerable sectors of the economy as well as financial organizations. The following measures have been approved:
- The list of sectors of the economy to which the previously adopted measures to support lending and credit to small and medium businesses apply has been extended;
- It is recommended to change the lending currency to rubles to reduce credit risks;
- The value of acquiring commissions for online purchases is limited to a maximum of 1% from April 15, 2020 to September 30, 2020.
- Bank of Russia Information Letter N ИН-03-47/30 dated March 27, 2020 regarding the organization of work due to the threat of the spread of covid-19 and application of measures to the Credit Bureau
- Information from the Bank of Russia The Bank of Russia has approved additional measures to support individuals, the economy and the financial sector amid the coronavirus pandemic
Non-fulfillment of obligations due to coronavirus COVID-19
The Chamber of Commerce and Industry at the federal and regional levels has started issuing since March 26, 2020 certificates of force majeure for foreign trade transactions and international agreements. These certificates are issued free of charge.
When restrictions are introduced due to the coronavirus, the procedure for each specific transaction depends on the terms of each individual contract.
The question remains as to whether the current situation constitutes force majeure:
- A high alert regime (lockdown) has been introduced in all regions;
- The spread of coronavirus COVID-19 was recognized as force majeure in Moscow Oblast on March 13, 2020 and in Moscow on March 14, 2020;
- The spread of coronavirus has not yet been recognized as force majeure in St. Petersburg and Leningrad Oblast.
- Information from the Russian Ministry of Economic Development The services for issuance of certificates of force majeure have become free for businesses
- Moscow Mayor Decree N 12-УМ dated March 05, 2020, Moscow Mayor Decree N 34-УМ dated March 29, 2020
- Decree No. 115-ПГ issued by Moscow Oblast Governor on March 13, 2020
- Decree No. 108-ПГ issued by Moscow Oblast Governor on March 12, 2020
Measures to support business in Moscow
The government of Moscow has adopted the following measures to support business in Moscow.
1. Extension of tax payment deadlines until December 31, 2020 inclusive
Payment deadlines have been extended for:
- Advance payments for property and land tax for Q1 2020 for organizations in the tourism, catering, culture, fitness and sport, leisure and hotel industries;
- Sales tax for Q1 2020 for all organizations.
These provisions will become effective at the same time as the federal law entitling the regions to adopt decisions to extend the deadlines for payment of regional and local taxes although the deferment will apply to the relationships that arose before the entry into force of this rule.
2. Exemption from rent payment under leases for non-residential property
Organizations from the culture, fitness and sports, exhibition, entertainment, education, leisure and social work industries which have been required under Moscow Mayor Decree No. 12-УМ dated March 05, 2020 to suspend their activities may apply for exemption from rent payment for non-residential premises and land owned by Moscow.
3. Extension of deadlines for payment of rent for April-June 2020 to December 31, 2020
Organizations from the hotel, catering and tourism industries may apply for an extension of deadlines until December 31 for the payment of rent for April-June for non-residential premises and land owned by Moscow.
4. 50% reduction in fees under trade and service contracts
A reduction of 50% is applied to the payments owed by SMEs:
- under contracts for trade and provision of services in non-stationary retail facilities
- under contracts for placement of non-stationary retail facility
concluded under Appendix No. 5 to Moscow Government Decree No. 26-ПП dated February 3, 2011.
Document: Moscow Government Decree N 212-ПП dated March 24, 2020
If you have any questions about the changes outlined above, please do not hesitate to contact us.