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Government and institution measures in response to COVID-19.

Government and institution measures in response to COVID-19.

Return to homepage  |  Last updated: 18 November, 2020

Tax measures – Direct and Indirect

(e.g. payment deferrals, rate reductions…)

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

Support of the systematic companies

List of the strategic companies is published at the website of Government of RF

The strategic companies can receive special measures of state support:

  • State (via VEB.RF) guaranty for the interest-free loans supporting employment: the company can get 6 months interest-free loan in amount of minimal monthly salary for each employee in case the company does not cut the stuff and keeps people employed
  • Special subsidy for the working capital loans: the state subsidizes part of the interest rate in amount of the “Key central bank rate” and provides (via VEB.RF) the state guaranty covering 50% of the loan amount
  • Tax deferrals, state guaranty and direct subsidies for selected strategic companies (Direction #651 of the Government of RF)

In order to apply for support in accordance with the 651 Direction, the company has to:

  • Be a Russian legal entity with the share of direct / indirect participation of foreign legal entities not exceeding 50%
  • Have no overdue taxes and tax-like liabilities
  • Pass through stress-test and perform analysis of the financial standing and forecast

Based on results of the stress-testing the company are qualified according to their risk level to baskets: low risk, average risk, high risk, extremely high risk

The companies qualified in two latter baskets can apply for the state support, and have to perform the perform analysis of the financial standing and forecast

Financial analysis

The company applying for the state support has to provide the detailed cashflow forecast for next 2 years. Additionally it has to develop the recovery and turnaround plan and the debt restructuring strategy.

Based on results of the analysis the company calculates cash gaps and required amounts of the state support

Decision-making process

Application of the strategic company goes through 4 levels of check, including confirmation of the forecast and financial standing by the VEB.RF.

Employment-related measures

(e.g. state compensation schemes, training…)

Labor policy

  • Remote work (home office) and shorter work week (subject to employees' consent or without the employees’ consent in exceptional justified cases with the prior 2-month employees’ notification)
  • Declaration of downtime (temporary suspension of the work) by SO for reasons of an economic, technological, technical or organizational nature. The employees are paid 2/3 of overage or fixed monthly basic salary during the downtime period.

Economic stimulus measures

(e.g. loans, moratorium on debt repayments…)

Monetary policy

  • On 27 July 2020, the Bank of Russia cut the key rate to 4.25% per annum.

Banking regulations

  • Central bank permitted the banks not to increase loan loss provisions if the loan was restructured due to coronavirus consequences

Incentives to companies to continue operating

  • Deferral of loan payments for up to 6 months to SME in hard-hit industries (leisure and hospitality, transportation, travel, etc.)
  • Six-month 0% interest loans to businesses in hard-hit industries to pay salaries to the employees
  • 2% interest loans to resumption of activities to businesses in hard-hit industries or in industries requiring support to resume its activities
  • 5% interest loans to 'systemically important' companies (list of these companies is adopted by the Government)
  • Subsidies to the travel operators to return the funds to the tourists and reimburse travel operators’ expenses to return the tourists from the foreign countries due to the coronavirus outbreak
  • Each Russian region may provide the supporting measures that will apply to the companies of this particular region, e.g. Moscow key measures: i) 8% interest loans to the priority sectors’ SMEs incorporated less than 3 years ago; ii) subsidies to the SMEs exporters, franchisees; iii) partial compensation of expenses for purchase of new equipment (SMEs – hotels and residents of Moscow innovation cluster); iv) partial compensation (up to RUB 700,000 until 31.12.2020) to SMEs for promotion of their commodities and services on online markets; for payment of services of online food delivery services
  • Automatic prolongation of some licenses till the end of 2020 (e.g. licenses for the retail sale of alcoholic products / licenses for the use of mineral recourses / etc.)

System-wide measures

  • Creation of a financial reserve in amount up to RUB 300 billion established to support the economy and compensate quarantined citizens for lost income
  • Non-application of penalties for certain government contracts in case of violation of obligations by the contractor due to the consequences of the spread of new coronavirus disease
  • A six-month moratorium on initiating bankruptcy proceedings in respect of the companies and individual entrepreneurs in hard-hit industries (leisure and hospitality, transportation, travel, etc.);  'systemically important' companies; strategic companies
  • Deferral of lease payments under real estate lease agreements until 1 October 2020 for companies and individual entrepreneurs in hard-hit industries (leisure and hospitality, transportation, travel, etc.). The lessee is entitled to a decrease in lease payments for the quarantine period if the lessee could not use the premises due to quarantine measures
  • Covid-19 measures could trigger contract’s force-majeure clause if these measures indeed impact affected party’s ability to perform its contractual obligations
  • Suspension of the inspections to be conducted in respect of SME by the state and municipal authorities according to the Federal Law as of 26.12.2008 No. 294-FZ “On protection of the legal entities in the course of state and municipal supervision” until 31 December 2020
  • Amendments to the corporate legislation in respect of joint-stock companies (conducting of the shareholders’ meetings in a remote environment, deferral of the deadlines for submission and disclosure of the annual and intermediary consolidated financial statements, deferral of the mandatory internal audit for the PJSC until 1 January 2021, etc.)

Customs Measures

Customs audits

  • Commission of the prime minister: suspension of customs audits (planned on-site customs inspections) until 31 December 2020. With the exception of unscheduled inspections, the basis of which is harm to life, health of citizens, checks which result in the issuance of permits, licenses, etc.

Measures to ease the lockdown

  • Stores, restaurants are open with strict physical distancing and hygienic & sanitary requirements

Recovery Plan Overview

  • Recovery plan : Nationwide economic recovery plan
  • Budget : 5 trillion rubles (USD70.5 billion)
  • Announcement : June 2nd 2020
  • Main orientations : Sustainable economic growth, recovery of employment and incomes of residents.

Main measures

The main features of the plan have not yet been made public. It is only known that the plan comprise of nine parts and contains around 500 activities in various fields.

The program of increased spending will last until the end of 2021 with the aim of bringing Russia’s unemployment rate back below 5% and getting the economy growing at 2.5% a year — faster than any annual expansion since 2012. Prime minister of Russia said the program was divided into three stages: “stabilization” until the end of 2020, “recovery” until the middle of 2021 and “growth” from the final quarter of next year.

Other measures and sources

Main sources of information

  • Russia: Proposed withholding tax rate changes, income tax treaties to be renegotiated (COVID-19)
  • In response to the COVID-19 pandemic, starting 1 January 2021, for companies in the IT sector, the social security contribution rate will be reduced from 14% to 7.6% and the corporate income tax rate will be reduced from 20% to 3%.
  • Costs incurred for the acquisition, production and supply of medical equipment for the diagnosis and treatment of COVID-19 should be deductible for corporate income tax purposes.
  • The sale of medical supplies aimed to combat the COVID-19 pandemic is subject to a reduced 10% VAT rate.
  • Russian Ministry of Finance clarified that the period of stay in Russia of individuals who are unable to leave the country due to travel restrictions should be considered  for the purposes of the 183-day residence criterion.
  • For individuals and individual entrepreneurs income from suspended interest payments on all types of bank loans during the interest payment holidays should be exempt.

Contact us

Tax: Anna Voronkova – avoronkova@kpmg.ru
Restructuring: Andrei Mitrofanov – amitrofanov@kpmg.ru
Legal: Irina Narysheva – inarysheva@kpmg.ru