Trade Levy in Russia: Taxation Particularities

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Author:
Vladimir Ryvkin
Head of Tax Department
According to Chapter 33 “Trade Levy” of the Russian
Federation Tax Code and Article 1 of the Law of the City of
Moscow № 62 of 17.12.2014 “On the Trade
Levy” (hereinafter referred to as the Law of the City of
Moscow № 62), trade levy is being introduced within the
territory of Moscow on July 1, 2015.
Trade levy is a local fee levied on companies and individual entrepreneurs involved in retail,
wholesale, and small-scale wholesale trade on a mercantile establishment of movable or
immovable property (Articles 411, 412 of Chapter 33 of the RF Tax Code).
Mercantile establishments used for trade include areas, buildings, constructions, stationary
and non-stationary retail facilities and outlets, and also immovable properties used by retail
market management companies in their operations (Article 413 of the RF Tax Code).
Trade levy may be paid by companies involved in trading activities within the city of Moscow
through a mercantile establishment of movable and/or immovable property (Clause 1, Article
411 of the RF Tax Code).
For the purposes of trade levy payments, trading activity is recognized as any business
activity related to the retail, wholesale, and small-scale wholesale purchase and selling of
goods via mercantile establishments which count as stationary or non-stationary
distribution facilities and warehouses (Paragraph 4 of Clause 2, Paragraph 2 of Clause 4,
Article 413 of the RF Tax Code).
Trade Levy in Russia:
Taxation
Particularities

If a taxpayer uses mercantile establishments of movable or immovable property for trading
activity once in a quarter then this means the mercantile establishments are recognized as a
tax units (Clause 1, Article 412 of the RF Tax Code).
The notion of trading activity includes, in particular (Clause 2, Article 413 of the RF Tax
Code):
1. Trade through fixed-location trading network outlets without sales floors (with the
exception of fixed-location trading network outlets without sales floors which are filling
stations);
2. Trade through non-fixed-location trading network outlets;
3. Trade through fixed-location trading network outlets which have sales floors;
The said tax related activities involve trading via mercantile establishments which operate
as distribution facilities.
Despite this the Tax code does not define the notion of “distribution facilities”. Taking into
consideration the provisions of Clause 1, Article 11 of the RF Tax Code, then the definition
given by the Clause 8, Article 2 of the Federal Law № 381-ФЗ of 28.12.2009 “On the
fundamentals of government regulations for trading activity in the Russian Federation” can
be applied, stating that a distribution facility is a body of two or more operating mercantile
establishments that are managed by the same owning body, or a body of two or more
mercantile establishments run under the same brand or another means of commercial
indication.
A similar notion is offered by Federal Standard GOST P 51303-2013 “Russian Federation
National Standard. Trading. Terms and Definitions” approved by the Rossstandart order №
582-ст of 28.08.2013.
Mercantile establishments are defined as a building, construction or a part thereof,
intentionally fitted with equipment designed and used for trading activities, namely goods
demonstration, customer service and cash payments (Clause 4, Article 2 of the Federal Law
№ 381-ФЗ).

Consequently, the compulsory characteristics of distribution facilities are that there are no
less than two operating mercantile establishments that: 1) either are managed by the same
owning body, or 2) are run under the same brand or another means of commercial indication.
A similar approach is revealed in the Central District Federal Anti-Monopoly Service
Regulation of 20.05.2014 on the case № А36-4330/2013, where the judges stated that any
arguments for recognizing a business entity operating on only one mercantile establishment,
though using a commercial brand also used by other legal entities, as a distribution facility,
are based on a misinterpretation of Clause 8, Article 2 and Part 1, Article 13 of the Federal
Trade Act.
A distribution facility is considered to be stationary without a sales area if it is situated in a
building or construction (or parts thereof) that does not have separated areas intended and
equipped for sales purposes, as well as in the buildings or constructions (or parts thereof)
that are used for making contracts on retail purchases and sale of goods and for bidding
activities. This group of mercantile establishments includes indoor markets (fairs), shopping
centers, shopping stands, vending machines and the like (Article 346.27 of the RF Tax
Code).
The distribution facility is considered to be non-stationary if it is operating as delivery door-
to-door trade or if it consists of mercantile establishments that are not qualified as
stationary ones (Article 346.27 of the RF Tax Code).
The distribution facility is considered to be stationary with a sales area if it is situated in
buildings or constructions (or parts thereof) that are meant for trading activities and
customer service, and have separated areas intended and equipped for these purposes. This
group of mercantile establishments includes stores and trade pavilions (Article 346.27 of
the RF Tax Code).
A store is a specially equipped building or a part of a building intended for selling goods and
serving customers, furnished with sales, auxiliary, administration, and amenity facilities, and
areas used for accepting, storing and preparing goods for predistribution.
A trade pavilion is a building which has a sales area and provides one or several workplaces.

According to provisions of Paragraph 5, Clause 3, Article 346.43 of the RF Tax Code, a sales
area is a part of a store or a trade pavilion occupied by equipment used for goods
demonstration, customer service, and cash payments, by cash registering equipment, with
workplaces for operations staff and customer aisles. Leased spaces of sales areas are also
included into the notion.
Areas of sales, auxiliary, administration, and amenity facilities, and areas of accepting,
storing and predistribution preparation of goods that are not used for customer service are
not recognized as parts of the sales area. The sales area is defined in entitling and inventory
documents.
4. Trade conducted by means of supplying goods from a warehouse.
This type of tax related trading activity implies the release of goods from warehouses, and
warehouse is defined as any area, building, construction, open space or parts thereof
equipped for storing of goods and carrying out storage operations.
A storage operation is any operation including the accepting, sorting, assembling, packing,
supplying, or shipping of goods (Clause 33 of GOST P 51303-2013 “Trading. Terms and
Definitions”).
Despite Clause 2, Article 413 of the RF Tax Code stating that trading activities include
trading goods out of warehouses, the law does not define the notion of “trading goods out of
warehouses”. In common business practice it is normally understood as the customer
directly receiving the goods from the warehouse.
The RF Ministry of Finance clarifies that all questions on the trade levy should be referred to
Moscow Finance Department (letter of the Ministry of Finance N 03-11-11/27412 of
13.05.2015).
Further, Moscow Finance Department states that this kind of trading activity does not
impose a trade levy in Moscow and consequently does not entail the necessity for such
businesses to be registered as trade levy payers (letters of Moscow Finance Department of
№ 90-01-01-07-53/15 of 20.04.2015 and № 90-01-01-07-38/15 of 17.03.2015).

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Trade Levy in Russia: Taxation Particularities

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Trade Levy in Russia: Taxation Particularities