Enactment of the Law that allows fisheries to switch to payment of a single agricultural tax

On December 30, 2008, the RF President signed Federal Act № 314-FZ "On introducing amendments to Part 2 of the Tax Code of RF and individual legal acts of the Russian Federation in the part of increasing efficiency of taxation of the fishery complex". 

The act for the first time ever grants fishery organizations that carry out catching and/or processing of water biological resources with the right to switch to the single agricultural tax. In the past, this right was granted solely to fishery corporations which formed a critical element of a town or settlement.

In compliance with Art. 26.1 of the Tax Code of RF, fishery companies and individual entrepreneurs may switch to payment of the single agricultural tax, provided they observe the following conditions:
· The average number of employees at a fishery over a given tax period does not exceed 300;
· The proportion of revenue from sales of an organization’s catch of water biological resources and/or products it manufactures from water biological resources accounts for not less than 70% over the tax period;
· If it carries out fishery operations using their own fishing vessels or freighted ones (bareboats or time-charters).

This last criterion is also applicable to organizations that form the backbone of a town or settlement’s local economy. In the past, they were allowed to operate only fishing vessels they owned as proprietors. Plus, to confirm a special status of the organization critical for the local economy of a town or settlement, the number of a company’s employees should now account for at least half of the population of a given settlement inclusive of family members residing with them. In the past, the Tax Code of RF set other limitations – not less than 25% of a settlement’s local population.

So, the novelties should give a boost to the number of organizations that will enjoy the right for a lower rate of the levy for the use of water biological resources (at the level of 15% of the regular rate), while as of 2008, there were only 83 such companies.

Meanwhile, payers of the single agricultural tax should pay attention to modifications in the procedure and conditions of termination of this special tax regime: should the taxpayer be deprived of the right to pay the single agricultural tax, it is bound to both recalculate its tax obligations with respect to VAT, corporate profit tax, PIT, the single social tax, the corporate property tax, the tax on private individual’s property over a given tax period and to pay fines for an untimely payment of these taxes and advanced payments by them. In the past, taxpayers did not have to pay fines and penalties.

M. Golovneva – Research Fellow, Department of Tax Policy