Changes in personal income tax field as of the year of 2016
The Federal Law as of May 02nd, 2015 # 113-FZ "On Amendments to Parts One and Two of the Tax Code of the Russian Federation in order to increase the responsibility of tax agents for failure to comply with the legislation on taxes and duties" considered the most important changes in the field of personal income tax (PIT) payments starting as of 2016 year.
These changes of the Tax Code have been taken to improve the collection of personal income tax.
Commented law requires submission of tax agents quarterly reporting on PIT calculation, as well as increased responsibility for violation. In addition, it clarifies the calculation, withholding and payment of personal income tax.
The most essential changes, in our opinion, are these one:
- Tax agents will report PIT calculation on a quarterly basis.
- Specified procedure for the PIT payment and reporting for the organizations with separate divisions.
- Change of the terms of notice about the inability to withhold PIT.
- Tax Inspection may stop bank operations if the quarterly calculation of PIT is not timely reported.
- The responsibility of tax agent to submit the information is toughening.
- The rules of PIT calculation by tax agent are clarified.
- New defined dates of individual income receipt in order to calculate PIT.
- Tax agent will be able to pay PIT on vacation and benefits at the end of the month.
- The tax notice is sent by tax authorities only in case tax amount exceeds 100 rubles.
Please have a look below at some details:
1. Tax agents will report personal income tax on a quarterly basis.
From January 01st, 2016 the order of the personal income reporting by tax agents under article 230 of the Tax Code (point 3 article 2 of the Law) will be changed. As before, the tax agents will provide to the tax authorities the information on an annual basis (before April 01st) about the income and personal income tax of each individual for the previous calendar year. Currently, this information is provided in the form of certificates on 2-PIT form (2 – NDFL form).
The Law introduces another form of reporting by the tax agent: the quarterly calculation of the amounts of personal income tax. This document should contain a compilation of information on all individuals who received income from a tax agent (its separate division), on the amounts of income and deduction, on the PIT, as well as other data which is the basis for calculation of the tax (point 5 article 1 of the Law).
Such calculations are expected to be provided by the tax agent till 30th of April for the first quarter; till 31st of July for the period of six months; for the nine months - until October 31st, and for the whole year - no later than 1 April of the following year.
A form on the PIT quarterly calculation is yet to be approved by the Federal Tax Service of Russia, but it is already defined that the quarterly calculations (as well as 2-PIT form (2 – NDFL form)) will be submitted in electronic form (point 3 article 2 of the Law).
However, if the number of individuals to whom the income paid is up to 25 people, the tax agent can choose a convenient form of documents representation – either electronic, either on paper. Prior to these changes, the law allowed submitting a 2-PIT form on paper only if fewer than 10 people.
Apparently, these new duties of a tax agent – to submit quarterly calculations of PIT - will lead to frequent and more operational verification of the correct calculation, withholding and payment of PIT.
2. Specified procedure for the PIT payment and reporting for the organizations with separate divisions.
The law makes more specific the matter that the PIT under the individuals labor or civil contract concluded with this separate division is paid by the location of such separate division (paragraph “e” point 2 article 2 of the Law). In any case, the controlling authorities maintained such approach before.
Secondly, it is determined that at the location of a separate division there should be also presented information on the 2-PIT form for the year and quarterly payment of personal income derived from these separate divisions (paragraph “a” point 3 article 2 of the Law).
Note that earlier provisions of the Tax Code did not explain how the organization with separated divisions should report. The controlling authorities have repeatedly explained that the information on the income of employees of the parent organization (head office) should be submitted to the tax authority where the parent organization (head office) is registered, and the information on the income of employees of separate divisions – at the place of registration of such division. So the commented Law cited provisions of the Tax Code in accordance with already established practice.
Third, an organization - the largest taxpayer will be able to choose where to report on PIT derived from its separate divisions - the tax authority where it is registered as a major taxpayer or the place of the corresponding separate division (separately for each unit) (paragraph “a” point 3 article 2 of the Law).
3. Change of the terms of notice about the inability to withhold PIT.
Tax agents are not always able to withhold the tax, such as the payment of income (benefit) in kind or in the form of material benefits. In case, before the end of the year the others cash payments will not be done and tax agent will not be able to withhold the personal income tax, the obligation to pay tax on it is removed and transferred to the individual.
On the inability to withhold the PIT, tax agent must inform the tax authorities and taxpayer - individual (point 5 article 226 of the Tax Code). The amendments should be done not later than March 01st of the following year (paragraph “c” point 2 article 2 of the Law). The term is extended since the previous rules provided that such notice shall be made not later than February 01st of the following year.
As new regulations become effective as of January 1st, 2016, we believe that the notice concerned to the year of 2015 can be submitted until March 01st 2016.
This notice should be submitted on the same way as the annual report of an individual PIT (2-PIT form) and a quarterly calculation.
4. Tax inspection may stop bank operations if the quarterly PIT calculation is not timely reported.
If the tax agent has not provided a quarterly PIT calculation within 10 days after the deadline, the tax inspection may stop the company’ operations via bank accounts and electronic transfers of funds (based on point 6 article 6.1 of the Tax Code it is a delay of 10 working days).
The next day, after a tax agent provided the required PIT calculation, the decision of tax inspection should be reversed (point 4 article 1 of the Law).
These rules are regulated by new point 3.2 article 76 of the Tax Code.
5. The responsibility of tax agent to submit the information is toughening.
Firstly, point 1.2 of the Tax Code establishes liability for failure to quarterly PIT calculation - a fine in amount of 1,000 rubles per month (complete and incomplete) from the date fixed for submission (point 7 article 1 of the Law). Note that still the failure to provide 2 – PIT form is facing the responsibility of point 1 article 126 of the Tax Code by a fine of 200 rubles per each document.
Secondly, a new article 126.1 of the Tax Code sets out the responsibility of tax agents for the submission of documents (quarterly report (calculation), 2 – PIT form) with false or misinformation.
For each such document provided there is a fine in amount of 500 rubles (regardless of the number of individuals provided in the report).
If the tax agent identifies errors and provides updated documents until the moment he found out that the tax authority recognized misinformation, he is discharged from the responsibility (paragraph 8 article 1 of the Law).
As the change will take effect from January 01st, 2016 it is applied if the violation was committed by a tax agent after this date.
6. The rules of PIT calculation by a tax agent are clarified.
Commented Law clarifies the provisions of point 3 article 223 of the Tax Code about the procedure of PIT calculation: income tax of residents taxable at 13% (point 1 article 224 of the Tax Code, except for dividends) will be calculated on the date of PIT receipt on an accrual basis from the beginning of the tax period to offset previously withheld amount of tax (paragraph “a” point 2 article 2 of the Law).
Previously, the Tax Code provided that personal income tax on such income shall be calculated once at the end of each month, and is held at their actual payment. These conditions are fulfilled if the income is paid at the end of the month, as in the case of monthly wages (the date of receipt is the last day of the month – point 2 article 226 of the Tax Code). However, it is not clear what to do with the rest of the employee's income (vacation, bonuses, etc.). paid till the end of the month, for example, in the middle (the date of receipt is not the last day of the month, but the others dates listed in article 223 of the Tax Code). In practice, tax agents faced with the question of the moment of calculation, withholding and payment of personal income tax on such payments.
7. New defined dates of individual income receipt in order to calculate personal income tax.
For the purpose of calculating personal income tax on certain types of income the Law corrects the dates of their receipt listed in article 223 of the Tax Code (point 1 article 223):
- Date of payment for the securities – in case the taxpayer received a financial benefit from the purchase of securities (in excess of their market value over the sum of the cost of acquisition), and payment takes place after the transfer of property of them to the taxpayer;
- Date of setoff of counter claims of the same kind (previously, the Tax Code did not explain what is a date of receipt of income in case the side of counter claims setoff is an individual);
- Date of bad debt writing off from the balance of the organization (this rule is effective from January 01st, 2016 but before the controlling authorities adhere to this state);
- Last day of the month in which the expense report after returning of the employee from a business trip is approved (previous controlling authorities presumed that date of receipt of income in this case is a date of the approval of the employee expense);
- Last day of each month during the period of the loans – in case the material benefit received from saving on interest on borrowed (credit) funds (previously the Tax Code provided that date of income receipt of in such cases is date of payment of interest by the taxpayer. If the loan was interest-free, the authorities considered a date of income receipt as date of actual repayment of borrowed funds, including the monthly repayment of the loan).
8. Tax agent will be able to pay PIT on vacation and benefits at the end of the month.
From January 01st, 2016 there will be set a single term (deadline) for the PIT withheld by the tax agent payment into the budget - not later than a day following the day of income payment.
An exception of this rule is the payment of temporary disability benefits (including benefits for care of a sick child) and vacation payments - withholding tax on them is transferred not later than on the last day of the month in which the payments are made.
9. The tax notice is sent by tax authorities only in case the amount of tax exceeds 100 rubles.
The Tax Code provides that the most of individuals taxes are calculated by the tax authority and the latter sends notice to an individual on their payment. Mainly, these are property tax, land and transport tax. The notice on their payment can be sent concerned to no more than 3 previous tax periods (point 2 article 52 of the Tax Code).
Commented Law introduces a rule according to which as of June 02nd, 2015 the tax notice is not sent if the total amount of taxes is less than 100 rubles.
The exception is when the notification is sent in the year after which three-year period for which the tax might be charged expires (point 3 article 1 of the Law).
Would you need any clarification or additional details, please free to contact us anytime.