The increased stringency of the supervisory function amongst banks of the Russian Federation in 2018 was the inevitable result of the coming-into-force of the CRS MCAA in respect to the taxation of residents within the Russian Federation. Here we will outline some of the key changes.
The CRS (Common Reporting Standard) is the fundamental principle of an agreement on the automatic exchange of tax information and in its essence is simple: if you have an account abroad and no one knows about it, it is now no longer a secret. Of course, there are still loopholes to get around the agreement, and the CRS itself has not yet fully come into force, but its implementation is inevitable, and information in this respect can be useful.
In light of this agreement, many forex agents have an obvious question: how does one act by this agreement? For now, it is not clear exactly whether the accounts in forex companies will be under the scrutiny of the automatic information exchange or not. The agents’ concern is quite logical, since, for example, at ICE FX, with a stake of $200,000, the yearly compensation can reach more than $17,000, assuming you are a Pro-partner and your clients have chosen investments in the iComposite x6 index.
It is essential to understand that failure to pay taxes on such income may leave individuals exposed to Article 198 of the Criminal Code of the Russian Federation, which states: “evasion is committed in a large or an especially large amount.” In this case, “large” and “particularly large” would be more than 600,000 rubles ($9,412) and 1,800,000 rubles ($28,237, respectively. That is, if the agent has not paid taxes on these amounts, he runs the risk of tax litigation. Naturally, the first precedent will not result in a particularly strict outcome, but is it worth putting yourself at risk?
What should a Forex agent do?
The forex taxes for an agent in the Russian Federation are not complex or astronomical in size, contrary to common misconceptions on the Internet. Therefore, anyone using recommendations from ICE FX will be able to pay them and relax, forgetting about any theoretical conflicts with taxation.
Few agents realize that they are in fact entrepreneurs, as they provide agency services for their referrals (customers). This is stated explicitly in the Civil Code of the Russian Federation, Article 2: “Civil law regulates the relations between persons engaged in entrepreneurial activities or with their participation, proceeding from the fact that the entrepreneurial activity is an independent activity carried out at its own risk aimed at systematic profit from use of property, sale of goods, performance of work or provision of services.”
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This state of affairs does not complicate the position of the agent, but rather significantly simplifies it, since his status allows him to officially register as an “Individual Entrepreneur” and pay penny taxes. Today, an “Individual entrepreneur” can pay up to 6 percent of turnover on a simplified taxation system in relation to their income (once fees, etc. have been included)
This rate is half as much as the same personal income tax, where the agent would have to pay 13 percent. And given that the country is under sanctions and the budget needs to increase the tax base, this rate may grow over time. This will only increase the attractiveness of being an individual entrepreneur.
It is also important to know, that the government of the Russian Federation extended the moratorium on scheduled inspections of small businesses until 2022, which can also be regarded as an additional incentive for the registration as an individual entrepreneur.
In light of such events, the CEO of ICE FX, Vladimir Kondrashov, decided to recruit professional lawyers to create instructions for forex agents: how to register as an individual entrepreneur, what classifiers of economic activities are worth choosing, and how to properly file a tax return. Also, within six months from the date of publication of this manual, anyone can ask questions on this topic (in the comment section of the article) and get the answer of a qualified specialist in the field of jurisprudence.
How Forex Agents Can Correctly Pay Their Taxes
Forex agents do not have to let go of their tax status, as the world changes and undeclared incomes in the case of a budget deficit, can lead to unnecessary complications. Moreover, shortly, there will be instructions published on the payment of taxes in Russia by traders and investors, as well as similar articles on paying taxes in Ukraine and other CIS countries.