My colleagues and me have started this year for Korabel.ru with a series of articles dedicated to structural clarifications for provisions of the Law No. 305-FZ On Amending Certain Legislative Acts of the Russian Federation in Connection with the Implementation of Governmental Measures to Support Shipbuilding and Navigation (hereinafter referred to as the “Law on Governmental Support of Shipbuilding and Navigation”).
When I participated in conferences and meetings with representatives from these sectors, I often heard that the above-mentioned law is ‘ephemeral‘, ‘incomprehensible‘ or ‘just a little something that could be done by the state‘. What can I say here? It’s pretty tough, but it’s a law and we must accept it as the expression of the society’s and state’s operating feedback system. Frankly speaking, despite new internet trends towards manifesting and protesting, my legal colleagues and me prefer doing things and be useful. First do, then speak.
So, today I have useful words for you, i.e. our growing experience in the implementation of the Law on Governmental Support of Shipbuilding and Navigation. In late April, we were approached by a foreign financial group participating in the business of a Russian shipowner. This company decided to sell a pretty new vessel built by Russian yards and registered by the Russian International Register of vessels. The trustor and the future buyer of the vessel asked us a lot about the transfer, recruitment of the crew by a third party and, in particular, payment of taxes. As you know, the vessel transfer involves both incomes and ‘expenditures’ on the part of the seller. It is the matter of incomes pursuant to this new law that we will start clarifying now.
Good legal consulting practices require us to define concepts and separate material facts. In our case, these are the transfer of title, registration by the Russian International Register and determination of a taxable base for income taxes during the sale of a vessel.
In accordance with Art. 13 of the RF Merchant Marine Code, vessel owners are entitled to dispose of their vessels in favor of other persons. Subparagraph 1, para 7, Art. 33 of the RF Merchant Marine Code, establishes that the Russian International Register of Vessels may register vessels used for international transportation of cargoes, passengers and their luggage, as well as for towage. Subject to paragraph 1, Art. 248 of the Russian Tax Code, incomes include commodity sales proceeds and extraordinary incomes for the purpose of Chapter 25 of the Russian Tax Code.
According to subparagraph 33, para 1, Art. 251 of the Russian Tax Code (as amended by the Law on Governmental Support of Shipbuilding and Navigation), shipowners’ incomes earned from the operation and/or sales of vessels registered by the Russian International Register of Vessels should be disregarded when the taxable base is determined. For the purpose of Chapter 25 of the Russian Tax Code on taxes on the profit of organizations, taxpayers reduce their earned incomes by the amount of their expenditures incurred. Expenditures are considered those that are justified and documented (and losses in cases provided by Art. 265 of the Russian Tax Code on extraordinary incomes) expenditures incurred by taxpayers. These are the requirements of para 1, Art. 252 of the Russian Tax Code.
Moreover, subject to para 48.5, Art. 270 of the Russian Tax Code, expenditures of shipowners for servicing, repair or other purposes relating to the maintenance, operation and sales of vessels registered by the Russian International Register should be disregarded when the taxable base is determined.
Thus, starting from January 1, 2012 during the sale of a vessel registered by the Russian International Register of Vessels, incomes earned from its sale should be disregarded during the income tax computation pursuant to subparagraph 33, para 1, Art. 251 of the Russian Tax Code as amended by the Law on Governmental Support of Shipbuilding and Navigation. Moreover, from the above date the list of expenditures disregarded during the income tax computation has been supplemented by expenditures relating to the sale of the above-mentioned vessels. Before January 1, 2012, incomes and expenditures relating to the sales of vessels had been taken into account during the income tax computation.
Overall results of our activities enabled the shipowners to safely transfer the title to vessel under the purchase contract and avoid tax overpayment to the budget.
Lawyer, Magister of Commercial Law, Captain
Inmarin Law Office
Kyrill Maslov
https://www.korabel.ru/news/comments/primenyaem_zakon_o_merah_gosudarstvennoy_podderzhki_sudostroeniya_i_sudohodstva.html
