Zero accounting in Russia
Author: Irina Bochina, Chief Accountant, Accountor Russia
What is zero accounting?
Zero accounting is the reporting of zero accounts.
Such reporting is usually submitted if a company has no payable tax at the end of the tax period due to the absence of activities. For example, there were no cash movements, no bank account activities, no loan receipts, and no objects of profit and VAT taxation. Such organization is known as a dormant company as it has neither revenues nor expenses, such as, in particular, payroll, property tax, transport tax.
What is the procedure for reporting zero accounts?
Zero accounts are submitted at the same time as ordinary reports, and only the report structure varies depending on the legal of form of the organization and the chosen taxation system. Provided that the above conditions are met (no cash movements and no taxation objects), it is also possible to submit to the Federal Tax Service a single (simplified) tax return which replaces profit tax and VAT returns. This simplified tax return must be submitted either in paper or electronic form no later than the 20th of the month following the ended quarter. The electronic form requirements provided for VAT returns do not apply to this simplified tax return (Letter of Federal Tax Service of Russia N ED-3-15/679 dated February 19, 2016).
If a company decides to submit a return for each tax separately or if it does not meet the above requirements, the following returns will need to be submitted to the Federal Tax Service:
- VAT return: submitted quarterly only in electronic form no later than the 25th of the month following the end of the tax period.
- Profit tax return: submitted quarterly either in paper or electronic form no later than the 28th of the month following the end of the tax period.
- Balance sheets must be submitted once a year on March 31. As far as balance sheets are concerned, there is no zero reporting as they must specify at least the organization’s share capital.
- Another important point: balance sheets stamped by state authorities must be submitted to the Russian State Statistics Service by March 31 (no later than three months after the end of the reporting year).
What about wage reporting when no wages are paid?
It is still necessary to submit wage reports even when there are no employees.
- Insured record (CZV-M/in Russian: СЗВ-М): submitted monthly to the Pension Fund no later than the 15th of the month following the reporting month
- Сalculations of social insurance contributions: submitted quarterly to the Federal Tax Service
- Quarterly reporting form to Social Insurance Fund (4-FSS/in Russian: 4-ФСС): submitted quarterly to the Social Insurance Fund no later than the 20th of the month following the end of the reporting quarter
- Personal income tax statement (6-NDFL/in Russian: 6-НДФЛ): optionally submitted to the Federal Tax Service no later than the last day of the month following the reporting period. However, when all indicators equal zero, this means that no taxable income was received so it is not necessary to submit anything. In this case, the only thing that needs to be done is to send a letter to tax authorities stating that the company is not required to submit 6-NDFL. Otherwise, the Federal Tax Service could block the company’s settlement account.
If a company has no earnings but continues paying employees (for example, head of foreign office), is this also a case of zero accounting?
If a company has no revenues but continues paying salaries and taxes related to salaries, the company cannot submit zero reports. Such company would indeed carry out a number of transactions which will be reflected in its profit tax return, and possibly some of its transactions might be reflected in its VAT return. Reports such as 6-NDFL, 4-FSS, and calculations of social insurance contributions will need to be submitted regardless of the organization’s legal form. It will also be necessary to submit wage reports to the Russian State Statistics Service.
If a representative office financed by a foreign organization also has no earnings but pays a salary to, for example, the head of the representative office, then the situation with wage reports is the same, although, in this case, profit tax return (submitted quarterly no later than the 28th of the month following the end of the tax period) and VAT return will be submitted with zero indicators.
How may we help?
It is clear from our article that the accounting of dormant companies is fairly complex so it is much cheaper and safer to outsource such accounting to professionals. We have extensive experience in keeping the accounting of dormant companies so if you would like to find out more about this service, please feel free to contact us.