The business tax amnesty in Russia has ticked off. Comments by Dmitry Kvitko, Head of International Corporate Finance

30 June marked the expiration of the deadline, when Russian citizens were permitted to submit specialized tax filings as part of the business tax amnesty campaign in accordance with Law 140-FZ (also referred to as the Business Tax Amnesty Law).

The essence of the law is to allow the Russian individuals to legalize their assets (shares, real estate, bank accounts, etc.) by including them in specialized tax returns.

The declaration procedure does not appear to be complicated at first glance. Further on, Law 140-FZ entitles the applicants to certain benefits as regards the release of liability under certain clauses of the Criminal Code, the Tax Code, etc. so that the filings may not be used against the applicants.

The tax filing campaign did not prove overwhelmingly successful, though (according to official reports, not more than 2.500 tax returns have been filed). The reasons are various.

Firstly, the citizens have little confidence in the government (virtually, the individuals must confess their ‘sins’, and it is not clear how the red tape will view it, given that liability may be imposed under other ‘unprotected’ clauses of the Criminal Code, the Tax Code which are not covered by the benefits of Law 140-FZ).

Secondly, the periods to which the tax amnesty extends are limited (i.e. prior to 1 January 2015, except for currency exchange offences). Meaning that offences committed in 2015 and 2016 are not exempt and incur liability. Having disclosed their own offences prior to 2014, the individuals facilitated for the tax authorities the task of revealing similar offences in the subsequent years.

Thirdly, there is a technical aspect. Law 140-FZ purports to uplift liability for a limited number of offences only. For instance, a company paid expenses of an individual (in this case the individual must report a financial benefit), or an individual has a bank account in an overseas bank which was not disclosed to the Russian tax authorities (the penalty may amount to up to 100 per cent of the value of the operations).