Tax calculation on the amounts paid to foreign organizations

Publication date/update: 27.02.2023

Tax calculation is a taxpayer's statement in writing regarding advances, taxes, fees, and other mandatory payments for the reporting year. The document allows to collect and classify information on the volume of accrued and paid taxes, fees, and contributions, as well as to control the accuracy of the calculated amounts.

As a rule, reporting on payments made to counterparties' accounts is not mandatory, except in cases where Russian individual entrepreneurs or companies transfer funds to non-resident firms. In this case, regardless of the amount of taxes paid, the subject is required to submit a report filled out in the form prescribed by law. In this article, we will explain the rules and methods of preparing the document.

The tax calculation for income paid to foreign organizations will be made with respect to the following payments to non-residents of the Russian Federation:

Income from interest, as well as dividends from shares and other securities, including municipal and government securities, as well as those placed through repo transactions.

Dividends from the participation of a foreign company in a Russian joint-stock company.

Payments for the use of intellectual property.

From the sale of real estate and other assets, including securities or shares in an LLC.

Income from renting out real estate or leasing.

Income from fines, penalties, and other payments resulting from non-compliance with contract terms.

Income from the sale of shares in a mutual investment fund or other similar funds.

It is important to note that according to Article 310 of the Russian Tax Code, certain categories of taxpayers are exempt from the obligation to report to the tax authorities. This applies to companies that provide intermediary services in transferring funds from a domestic company to a non-resident company.

It is also important to know that the list provided does not include the category of "other income" that does not fall under any category in accordance with Article 309 of the Tax Code. However, regardless of the need to withhold tax, the company must submit a report in the prescribed form. These criteria are not included in the Russian Tax Code. However, they were formed based on explanations from the Federal Tax Service and court practice in recent years. As a rule, this applies to income "not associated with the usual activities of the company". The exceptions are only transactions with real estate. Thus, the ambiguity of the wording obliges companies to refer to the practice of court cases or consult with lawyers to determine the need to prepare a report.

Article 310 of the Tax Code of the Russian Federation establishes the obligation to provide a tax calculation based on the amount of payments made to non-resident companies for a certain reporting period. According to the law, the obligation arises during the period of actual payment of the amounts. The document is submitted to the tax authority no later than the 28th day of the month following the reporting quarter. The annual report is submitted no later than March 28 of the year following the reporting year. Provided that the profit tax is paid on an advance basis each month, the reporting period is considered to be until the 28th day of each month.

The tax inspection allows the document to be submitted both in electronic and paper form, which simplifies the procedure for a whole category of entrepreneurs.

As we noted earlier, the document is submitted in the form established by the Federal Tax Service and approved by the order "On approval of the form of the calculation of income paid to foreign companies and taxes withheld and the procedure for its completion."

The document contains a title page and three sections, each of which is mandatory to fill out.

From the general rules for preparing the report, we can highlight:

The use of the cumulative totals principle for amounts paid from January 1 of the new year.

The currency in which the payment was made is taken as the basis.

Amounts in rubles should be rounded to the nearest whole number, while amounts in foreign currency are entered without changes.

The report should be filled out from the end to the beginning, as the last section contains a breakdown for the previous one.

If no payments were made during the reporting period, Section #3 can be left blank.

The section consists of 3 subsections:

Information about the recipient of the funds.

The total amount of payments and taxes withheld.

Information about the income beneficiary.

It should be noted that if there are several recipients of payments among non-residents, the number of subsections should correspond to the number of subjects, divided by the recipient code (row code 010). In the case of different payments to the same counterparty, each code should have a new section. Thus, subsection 3.1 contains identification data of the recipient of payments with reflection of the payment type code.

Subsection 3.2 reflects the numbers of the recipient for each money transfer. This can be any number of lines necessary to consolidate each transaction. It is important to know that row 030 "Income symbol" reflects only calculations with foreign banks, row 040 "Income amount" - the full amount of payments. In certain cases, this amount can be reduced by the amount of expenses confirmed by the non-resident.

Subsection 3.3 is filled with data about the beneficiary if they are not the recipient of the payment but the ultimate beneficial owner.

Section 2 contains information about payments made to foreign individuals as beneficiaries. Typically, the structure of the section reflects data on accrued taxes with a breakdown by income code. In the event of non-payment of taxes during the reporting period, the following conditions must be taken into account:

When foreigners receive payments in rubles, the tax amount must be reflected in line 050, regardless of actual payment before the submission deadline.

When a foreign individual receives payment in foreign currency, unpaid taxes are not reflected in the report.

The first section should reflect general information about the amount of tax assessed. Each payment should be separated by the budget classification code. All information should only reflect payments made to legal entities or entrepreneurs.

The cover sheet contains information about the tax agent, correction number, reporting period, and year. In the event of a company's reorganization or changes to an individual's data, information about the individual tax authority and reason code for registration should be placed on the cover sheet.

Most companies and individuals face difficulties when preparing tax reports. To avoid serious mistakes, it is necessary to accurately divide payment amounts by recipient numbers and income serial numbers. It is also important to follow the rules for filling in income classification and tax amounts by budget classification codes. If difficulties arise in preparing the report, it is necessary to seek help from professionals. DVP Audit provides a full range of financial and tax support services, including the preparation of various types of reports to tax authorities.