Section A 1 C 2 A 3 C 42,00027.1% = 11,382 RR 4 B 5 D 6 A 7 B 235,022 RR (43,000, ,820, ,641, ,462,500)/42.

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Eugene Lambert
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2 Applied Skills, TX RUS Taxation Russia (TX RUS) December 208 Answers and Marking Scheme Section A C 2 A 3 C 42,000*27.% =,382 4 B 5 D 6 A 7 B 235,022 (43,000, ,820, ,64, ,462,500)/4*2.2%/4 8 A,475,000*8/8 = 225,000 9 A 42,000 (35,000 4, ,000 4,000) A 0 D 2 B 3 C 4 D 20,50 (,200,000 (,000, ,000))*3% 5 B,926 (, )*8/8 9

3 Section B OOO Vertical (a) Loan from GmbH Arctic GmbH Arctic owns 35% of the shares in OOO Vertical which exceeds 25%, i.e. the loan is controlled. Net assets: 3,000,000 60,000, ,000,000 = 7,000,000 Net assets*3: 7,000,000*3 = 53,000,000 Principal loan:,000,000*70 = 700,000,000 Interest per three months: 3 October 208,000,000*4%*(3 8)/365*63,587, November 208,000,000*4%*30/365*65 2,36,986 3 December 208,000,000*4%*3/365*70 2,378,082 Total 6,3,03 If the interest is less than the upper threshold below: 4%< 0.25% +7% 4%< 6.75%, i.e. 4% should be applied without limitations. Principal amount + interest unpaid as at 3 December 208 (only for December): 700,000, ,378,082 = 702,378,082 Since 702,378,082 > 53,000,000, then thin capitalisation rules will be applied. Capitalisation coefficient: 702,378,082/(53,000,000*35%) = 3.99 Deductible interest: 6,3,03/3.99 =,560,5 Imputed dividends: 6,3,03,560,5 = 4,542,898 Withholding tax: 4,542,898*5% = 68,435 (b) Foreign bank loan Conditions for treating this loan as an uncontrolled one: () The loan would be provided by a bank which is not affiliated with (not a related party to) either the borrower or the guarantor. (2) During the entire loan period the guarantor does not cancel (redeem) the debt, in respect of either the principal or interest amount of the loan

4 2 (a) Vadim Insurance contributions (IC) for 208 (b) Igor Salary (6,000*2) 732,000 Voluntary medical insurance for himself exempt 0 Support aid on the birth of his daughter 53,000 Support aid deduction (50,000) Per diems within the statutory limits exempt 0 Reimbursement for unused vacation 85,000 Sick leave reimbursement within the limits 0 Material support,000 Material support deduction (4,000) Total tax base for IC 926,000 Pension fund (876,000*22%) 92,720 (926, ,000)*% 5,000 Social fund (755,000 *2.9%) 2,895 Federal fund of obligatory medical insurance (926,000*5.%) 47,226 Total IC payable 266,84 7 Total remuneration received,800,000 Expenses confirmed (>30% professional deduction) (570,000) Taxable base,230,000 IC payable: Pension fund (876,000*22% + (,230, ,000)*%) 228,20 Social fund 0 Federal fund of obligatory medical insurance (,230,000*5.%) 62,730 Total IC 290, (a) Elena Final personal income tax (PIT) for Elena for the year 208 PIT for Elena Gross salary (80,000*2) 960,000 Social deduction (25,000 25,000) (0,000) Should be within max of 20,000 Car sale proceeds,000,000 Acquisition costs properly confirmed (950,000) Property allowance of 250,000 is not tax efficient Interest deduction,000,000*7%*( )/365 (28,000) No imputed interest income 0 Taxable income before housing allowance: 882,000 Expenses incurred by Elena = 6,000,000 *20%, therefore Elena is entitled to the maximum housing allowance of,200, housing allowance (882,000) Taxable income after housing allowance 0 Housing allowance to be carried forward to 209:,200, ,000 38,

5 (b) Personal income tax (PIT) for Anatoly Gross remuneration (Working),435,644 3 Professional deduction for architect 30% (430,693) Taxable income,004,950 Tax at 3% 30,644 4 Working: Gross remuneration x (0.7*x*3%) =,305,000 x 0.09x =,305,000 x*( 0.09) =,305, *x =,305,000 x =,305,000/0.909 =,435, *,435,644 = 430,693 > 400,000 Therefore 30% professional deduction is more tax effective than deduction of actual costs. 3 4 (a) OOO Chocolad Sale of the Bean debt receivable at a loss: 2,752,346 3,058,62 = (305,86 ), i.e. no VAT should be accrued for the loss. ( for no VAT, for explanation) Sale of the Cacao debt at a gain: (7,97,800 7,98,000)*8/8 = 9,800 ( for the difference, for 8/8) 2 (b) OOO Pharmapro Exempt sales (donations)/total sales without VAT: 25,200,000/(249,480,000 (249,480,000 25,200,000)*/) = 25,200,000/229,090,909 = % 2 Note: The same two marks were awarded to candidates who did not round but calculated the above % with the decimal figures, i.e..03% or even more precise. Expenses related to donations: Direct transportation expenses 2,08,520 General and administration expenses 32,4,880*0/8*% 2,993,760 5,075,280 Total expenses (VATable + exempt): (8,733, ,4,880)*0/8 + 2,08,520 45,73,520 Expenses related to donations/total expenses: 5,075,280/45,73,520 =.2% > 5% test ( for correct ratio calculation, for mentioning 5% test) Irrecoverable VAT to be included in costs: 32,4,880*8/8*% = 538,877 VAT recoverable: (8,733,680 + (32,4,880*89%))*8/8 = 7,27,

6 5 Karina (a) Personal income tax (PIT) to be withheld at source by OOO Minder Tax at 3% Gross salary 2,000*6,260,000 Children allowance for January only (one month) since in February her income exceeds 350,000 : 2*,400 (2,800) Semi-annual voluntary medical insurance for herself 2,000 Semi-annual voluntary medical insurance for her children 25,000 Professional leadership training (exempt) 0 Yoga courses,000 Less exemption on gift from employer (4,000) Voluntary life insurance for kids (one year) 6,000 Taxable base,325,200 Tax at 3% 72,276 7 (b) Final PIT liability for Karina Taxable base at 3%,325,200 Charity deduction (within 25% of taxable income taxed at both 3% and 35% rate actual amount is below the limitation): in kind 0 in cash (30,000) ( for 25%, for cash only) The maximum social deduction should be within 20,000 Contributions to the non-state pension fund 7,000*2 (within the limit of 20,000 per annum) (84,000) Karina s Spanish lessons (within the limit of 20,000 per annum) 20,000 84,000 (36,000) Educational deduction for her son (maximum out of 55,000) (50,000) Educational deduction for her daughter (35,000) Taxable base at 3% rate,090,200 Tax due to the budget at 3% 4,726 Tax withheld at source at 3% (from part (a)) (72,276) Tax due from the budget at 3% (30,550) Taxable base at 35% rate: Imputed interest income on loan for consumer s needs: 5 August 30 September: CBR is 7% 4% is less than 4.67% (2/3*7%), so imputed interest will be following: (2/3*7% 4%)*2,000,000*( )/365,082 ( for 2/3, for correct CBR rate, for correct days) Note: Candidates who rounded 2/3 of CBR rate to two decimals were awarded full marks for the answer,33. October 3 December: CBR is 5% 4% is more than 2/3*5%, no imputed interest income 0 Tax at 35% (,082 * 35%) 3,

7 6 OOO Merry (a) Corporate profits tax for the year 208 Revenue: Revenue from sales to Russian customers (64,6,000*0/8) 39,500,000 Revenue from sales to CIS customers (confirmed exports),500,000 Prepayments from Russian customers (exempt) 0 5,000,000 Direct expenses: Direct materials (24,780,000*0/8) 2,000,000 Direct wages (3,000*300*2),600,000 Direct insurance against accident at work (300*5,000) 4,500,000 (only 4,500,000 will be deductible out of 5,000,000 ) Direct depreciation (Working) 24,003,300 3 (6,3,300) Indirect expenses: Indirect salaries (5*,000*2),800,000 Voluntary medical insurance (,800,000 +,600,000)*6% 6,804,000 (8,604,000) Business entertainment expenses: Official lunches (483,800*0/8) 4,000 Visa expenses for non-employees non-deductible 0 Cost of external translators 436,600 Taxi from the hotel to the meeting venue and back 25,000 Hotel accommodation non-deductible 0 Guided tour in Kremlin non-deductible 0 (87,600) Business entertainment expenses should be within the limit below for profits tax purposes: 4%*(,600, ,500,000 +,800, ,804,000) = 4,988,60 ( for insurance against accident at work, for medical insurance, for 4%) Tax loss (9,578,900) 3 Working: Direct depreciation Net book value (NBV) as of 3 December ,500*0/8*70%*( 5.6%)^(8 + 2) 60,279 2 NBV as of 3 December ,279*( 5.6%)^2 (80,268) 80,0 The difference: 80,0* 300 = 24,003,300 Note: Full marks were also awarded to candidates who multiplied by 300 in the beginning of the calculation and received the depreciation cost of 24,003,366. (b) Provided that OOO Merry applies the allocation method to direct expenses incurred for the services rendered, the completion ratio should be calculated as follows: (26,337,600*0/8)/(0 + 5,000,000 + (26,337,600*0/8)) = 2.878% 2 ( for net of VAT, for correct formula, for 5,000,000 (follow through from part (a)), for zero inventory balance)

TX RUS. Taxation Russia (TX RUS) Applied Skills. Tuesday 4 December The Association of Chartered Certified Accountants TX RUS ACCA

TX RUS. Taxation Russia (TX RUS) Applied Skills. Tuesday 4 December The Association of Chartered Certified Accountants TX RUS ACCA Applied Skills Taxation Russia (TX RUS) Tuesday 4 December 2018 TX RUS ACCA Time allowed: 3 hours 15 minutes This question paper is divided into two sections: Section A ALL 15 questions are compulsory