The issue of establishing a permanent representative office on the territory of the Russian Federation is currently very relevant, since the main share of tax revenues from a foreign organization falls on the income tax of a foreign organization and VAT. Therefore, an increase in tax revenues to the budget for income tax directly depends on whether a foreign organization forms a permanent establishment on the territory of the Russian Federation.

In accordance with Art. 246 of the Tax Code of the Russian Federation, foreign organizations operating in the Russian Federation through permanent representative offices and (or) receiving income from sources in the Russian Federation are recognized as corporate income tax payers. For the purposes of Chapter 25 of the Tax Code of the Russian Federation, a permanent establishment of a foreign organization in the Russian Federation means a branch, representative office, department, bureau, office, agency, any other separate subdivision or other place of activity of this organization through which the organization regularly carries out business activities in the territory of the Russian Federation ( paragraph 2 of article 306 of the Tax Code of the Russian Federation). A permanent representative office of a foreign organization is considered established from the beginning of regular business activities through its branch. However, the activity of creating a branch does not in itself create a permanent establishment. A permanent representative office ceases to exist from the moment of termination of entrepreneurial activity through a branch of a foreign organization.

Under the profit of foreign organizations operating in the Russian Federation through permanent representative offices, we mean the income received through these permanent representative offices, reduced by the amount of expenses incurred by these permanent representative offices (clause 2, article 247 of the Tax Code of the Russian Federation).

The legislation of the Russian Federation on taxes and fees establishes the following signs of a permanent establishment, in the presence of a combination of which the activity of a foreign organization in the Russian Federation is recognized as a permanent establishment:

The presence of a separate subdivision or any other place of activity of a foreign organization in the Russian Federation;

Implementation by a foreign organization of entrepreneurial activity on the territory of the Russian Federation;

Carry out such activities on a regular basis.

The main criterion for qualifying the activities of a foreign organization in the Russian Federation as being carried out through a permanent establishment, according to the tax authorities (see order of the Ministry of Taxation of Russia dated March 28, 2003 No. BG-3-23/150), is the regularity of the activities. The activities of separate subdivisions of foreign organizations that have entered or are obliged to register with the tax authorities in accordance with the Regulations on the Peculiarities of Accounting with the Tax Authorities of Foreign Organizations approved by Order No. AP-3-06/124 of April 7, 2000, are recognized as regular. - Position (ie activities carried out for more than 30 days). In other cases, compliance with the criterion of "regular activity" is determined on the basis of an analysis of the actual implementation of the activities of the foreign organization itself or other organizations or individuals in favor of the foreign organization in each specific case. At the same time, individual facts of any business transactions in the Russian Federation (for example, individual facts of the sale in Russia of real estate owned by a foreign organization) cannot be considered as regular activities.

According to the Model Model of the OECD Tax Convention on Taxes on Income and Capital (hereinafter referred to as the Model Convention), which is the basis for the development of international agreements, the term "permanent establishment" means a permanent place of business through which the entrepreneurial activity of the organization is fully and partially carried out. This term specifically includes a place of management, branch, office, factory, workshop, mine, oil or gas well, quarry or other place of extraction of natural resources. If a foreign organization carries out commercial activities in Russia through a permanent establishment, then its profits may be taxed in the Russian Federation, but only to the extent that relates to this permanent establishment.

Comments to the OECD Model Tax Convention Model (hereinafter referred to as Comments) determine the following conditions for the formation of a permanent establishment:

The existence of a place of business, i.e. premises or, in some cases, machinery or equipment;

The place of business must be permanent, i.e. must be installed in a certain place with a certain degree of permanence;

Carrying out business activities of the organization through this fixed place of business.

Similar provisions are contained in international agreements on the avoidance of double taxation (hereinafter referred to as the International Agreements).

Thus, the term "permanent establishment" in Russian and international legislation practically coincides, but there are also fundamental differences.

Place of business

The indicative list of possible types of places where the foreign legal entity itself operates in Russia, united by the general concept of "permanent establishment", includes not only and not so much specific types of subdivisions of the foreign legal entity, but specifically the types of places of activity of the foreign legal entity itself. At the same time, the list of all possible (specific) places of activity is not defined exhaustively and is not closed.

To qualify entrepreneurial activity as activity through a permanent establishment, it is necessary to proceed from the status and nature of the activity of the taxpayer - a foreign legal entity, and the fact of registering a representative office or branch in Russia and carrying out entrepreneurial activity by them in the Russian Federation is not of decisive importance for tax purposes. For example, if an organization, in addition to conducting preparatory activities through an office registered in Moscow, also carries out its main activities in this entity outside this premises, then the place of activity that is not registered with the tax authorities will be recognized as a permanent establishment.

It should be noted that neither the Tax Code of the Russian Federation nor the International Agreements require as an obligatory condition the qualification of entrepreneurial activity as an activity through a permanent establishment of the presence of property or property base of foreign organizations on the territory of the Russian Federation. The Permanent Establishment may also exist without premises, or some space may be used for the need to conduct business. It also does not matter whether the premises, facilities or installations at the disposal of the company are owned or rented. The place of business may be, for example, a place on the market or the place of business may be located in another enterprise (for example, where a foreign organization permanently has at its disposal some or part of its premises belonging to another enterprise, see Comments).

According to the International Agreements and the Tax Code of the Russian Federation, a permanent representative office of a foreign organization is not formed if the organization carries out preparatory and auxiliary activities on the territory of the Russian Federation. The list of activities contained in these acts that do not lead to the formation of a permanent representative office is an exception and creates a presumption of the existence of a permanent representative office if a foreign organization carries out other types of activities than those provided for in this list. The preparatory and auxiliary nature of the activities of the representative office can be determined depending on the main activities of the organization.

In connection with the foregoing, the types of activities listed in the International Agreements and the Tax Code of the Russian Federation will not be considered as carried out through a permanent establishment in the event of their exclusive implementation and provided that the total activity of the permanent place is of a preparatory and auxiliary nature. And where the main purpose of a fixed place of business is identical with the main purpose of the organization, it should not be considered as carrying out preparatory and auxiliary activities.

Regularity of activity or permanence of place of activity

According to this criterion, the main difference between the concept of "permanent establishment" in the Tax Code of the Russian Federation (regularity of activity) and in International agreements (permanent place of activity) arises.

There is no definition of the term “fixed place of business” in the International Agreements. The commentaries establish that the place of business must have a certain degree of permanence, i.e. not be temporary. A place of business, not being organized for temporary use, may constitute a permanent establishment, even if it exists for a very short period of time due to the special nature of the organization's activities or due to certain circumstances (for example, unsuccessful investments) and was liquidated ahead of time. Activities may be intermittent, but operations should be regular.

Meanwhile, the Comments do not contain a clear definition of the concept under consideration. In this regard, it would be advisable to turn to domestic legislation. However, in the Tax Code of the Russian Federation, the criterion of the permanence of the place of activity is replaced by a completely different criterion - the regularity of activity. The definition of the regularity of activity is not contained in the legislation of the Russian Federation on taxes and fees. The proposal of the Ministry of Taxation of Russia to refer to the Regulations when determining the regularity of activities, in our opinion, is not the most successful, since for tax purposes the very concept of “permanent establishment” has no organizational and legal significance, but qualifies the activities of a foreign organization, and the obligation to pay taxes is associated with it named in international agreements.

It seems to us that, since according to the legislation of the Russian Federation on taxes and fees, the actual amounts of tax are determined based on the results of the financial and economic activities of the taxpayer for a certain period (reporting, tax), it makes sense to evaluate the criterion of regularity of activity in relation to the total activity for this period, and not regarding the duration of individual business transactions.

As for the term specified in the International Agreements (“fixed place of business”), when considering this issue, it is necessary to assess the degree of permanence of the place. In our opinion, a permanent place is in the event that entrepreneurial activity through it in order to generate income in the territory of the Russian Federation is carried out continuously or it can be recognized as permanent if it is used more than twice during the tax period.

With the majority of foreign states whose organizations operate in Russia, the Russian Federation has concluded international agreements. According to Art. 7 of the Tax Code of the Russian Federation, when an international treaty of the Russian Federation containing provisions relating to taxation establishes other rules and norms than those provided for by the Tax Code of the Russian Federation and regulatory legal acts on taxes adopted in accordance with it, the rules and norms of international treaties of the Russian Federation are applied. Accordingly, when taxing foreign organizations operating in the Russian Federation through permanent representative offices, the rules of international agreements are applied. However, as noted above, there is no definition of a permanent place of business in the International Agreements. As a rule, in international tax treaties there is a reference to national legislation, if the term is not defined. The Tax Code of the Russian Federation defines another criterion for the formation of a permanent establishment - the regularity of activity.

In the event of a dispute, a legal definition of the term specified in the International Agreement will inevitably be required. When resolving similar litigation disputes, arbitration courts almost always follow the principle of “predominance of form over substance”, and not vice versa. In order to resolve disputes and establish a unified approach to the institution of a “permanent establishment” both in international and national tax practice, it is necessary, firstly, to bring the concept of “permanent establishment” specified in the Tax Code of the Russian Federation into line with the concept of “permanent establishment” , enshrined in International agreements, and secondly, to clearly define the term "permanent place of activity" in the Tax Code of the Russian Federation.

Doing Business

The key point in this matter is the extraction by a foreign organization of income from the place of activity in the territory of the Russian Federation. In this regard, it should be noted that many taxpayers make the mistake of believing that if funds are sent from buyers not to accounts in Russian banks, but abroad, a permanent representative office of a foreign organization does not arise on the territory of the Russian Federation. Meanwhile, the profit of an organization related to a permanent representative office arises when the activities of such an organization operating through a permanent representative office located in the territory of the Russian Federation are aimed at generating income and do not depend on the location of the bank.

The Tax Code of the Russian Federation and the International Agreements do not contain conditions for the receipt of proceeds to the accounts of Russian representative offices of foreign companies, since under Russian legislation on taxes and fees, a taxpayer is a foreign organization - a foreign legal entity that independently performs the duties of a taxpayer on the territory of the Russian Federation represented by its representative office. Consequently, both the head office and the representative office are a single taxpayer.

International agreements and norms of national legislation determine that if an organization conducts business activities through a permanent establishment in another state, then this other state may levy tax on the profits of the organization, but only to the extent that relates to the permanent establishment. Based on this provision, some specialists in the field of taxation of foreign organizations conclude that the right to tax does not apply to the profit that an organization can receive in this state in any other way than through a permanent establishment. Accordingly, when taxing profits made by a foreign entity in a given country, that country's tax authorities may consider the individual sources of profits that the entity earns in their country and determine whether there is a "permanent establishment" for each source. However, this can lead to the problem of tax avoidance. Thus, if an organization establishes in another state a representative office that does not bring profit and is not intended to create profit, and the sole purpose of which is the preparation of business activities that the organization carries out through independent agents or otherwise, then although this business activity can be organized and managed by a permanent establishment, this is difficult to prove in practice.

If a foreign organization organizes a permanent representative office on the territory of another state, then, in our opinion, in order to create a more efficient and simplified tax administration, it should be subject to the tax jurisdiction of this state. Moreover, it would be preferable to levy a tax on all profits that this organization receives in its territory, regardless of whether the profits come from the use of a permanent establishment or from other activities in this territory.

S. ARAKELOV,

Adviser of the tax service of the Russian Federation, III rank

Interdistrict Inspectorate of the Ministry of Taxation of Russia No. 38 for Moscow

An overview of the most important Russian regulations, which are required to be guided by the structural divisions of foreign legal entities registered in our country, is presented by an expert of the Legal Consulting Service GARANT Tatiana Shtukaturova.

We also note that branches, permanent representative offices and other separate or independent structural divisions of legal entities located in the territory of Russia, created in accordance with the legislation of foreign states and located outside the territory of Russia, are subject to the currency legislation of the Russian Federation (, Federal Law of December 10, 2003 No. 173-FZ "On currency regulation and currency control").

Cases when foreign legal entities, including their representative offices, registered in the territory of Russia and carrying out their activities in Russia, are limited in their rights in comparison with Russian ones, are directly established by regulatory legal acts. Let's list some examples.

Foreign companies that want to develop not only in their own country are entering the Russian market. To carry out activities in another state, a company needs to be constantly “present”, namely, to open a permanent representative office, keep records and pay taxes.

A foreign company may open its representative office or branch in Russia (Federal Law "On Foreign Investments in the Russian Federation" dated July 9, 1999 N 160-FZ). To some extent, these forms are similar as separate subdivisions of a legal entity located outside its location, but they also have a significant difference.

The representative office defends the interests of the company, carries out their protection. It acts on behalf of a foreign company and, on its behalf, is engaged only in representing the interests of the parent company. The branch performs the functions of the company itself, including the functions of a representative office (Registration of a branch).

The opening of separate divisions and their activities are governed by the internal regulations of the country in which they are located. They are also subject to the laws of the state where the legal entity is created and registered (What is a separate subdivision).

In the tax sense, there is the concept of "permanent representative office of a foreign organization". This is any separate subdivision through which the organization regularly carries out business activities in the Russian Federation.

There are three main characteristics of a permanent establishment:

• Presence of a separate subdivision or other place of business in the territory of the Russian Federation
• Carrying out business activities by a foreign organization on the territory of the Russian Federation
• Carrying out activities on a regular basis

Any form of presence of a foreign company in the Russian Federation can be recognized as a permanent place of business. Carrying out entrepreneurial activities on an ongoing basis means that the company conducts or intends to conduct business in the territory of the Russian Federation for a period exceeding 30 calendar days, continuously or in aggregate for a year. In this case, it is obliged to register with the tax authority at the place of business.

It should be noted that the powers of the Russian Federation to levy taxes are regulated by international tax agreements with a number of countries in order to avoid double taxation. These agreements determine the procedure for delimiting the rights of each of the states in the field of taxation, and the procedure for calculating and paying taxes, bringing to responsibility for tax violations, etc. determined within the state.

Foreign organizations that are taxpayers under the laws of the Russian Federation are required to pay taxes, report to the Russian tax authorities at the place of registration and provide reports.

Accounting statements of a representative office of a foreign organization

According to the legislation, foreign representative offices operating on the territory of the Russian Federation have the right not to keep accounting records in accordance with the rules established by Law N 402-FZ, if they keep records of income and expenses and other objects of taxation in the manner determined by the tax legislation of the Russian Federation.

At the beginning of the financial year, it is necessary to approve an accounting policy that determines the methods of accounting. Representative offices of foreign companies can carry out accounting both according to Russian rules and according to the rules of their country, if they do not contradict international financial reporting standards.

If the accounting policy stipulates that accounting is kept in accordance with Russian laws and standards, the representative office is obliged to keep accounting records in accordance with Law N 402-FZ and, as a result, submit accounting (financial) statements to the tax authority. In other cases, accounting (financial) statements are not submitted to the tax authority.

Income tax for foreign organizations

In accordance with the Tax Code of the Russian Federation, foreign organizations operating in the Russian Federation through permanent representative offices and (or) receiving income from sources in the Russian Federation are recognized as income taxpayers.

For foreign organizations, profit is recognized as income received through a permanent establishment, reduced by the amount of expenses incurred by this representative office, which are economically justified. The representative office will be able to take into account for tax purposes only those expenses that are aimed at ensuring its activities in the Russian Federation. Such expenses must be documented and incurred in order to carry out activities aimed at generating income.

Value Added Tax for Foreign Organizations

Foreign organizations that sell goods, services, works on the territory of the Russian Federation through permanent representative offices are VAT payers on the same basis as Russian companies. They calculate and pay VAT to the budget and submit reports to the tax authorities on a general basis. If the territory of a foreign state is recognized as the place of sale of works and services, these operations are not subject to taxation in the territory of the Russian Federation, in addition, the amounts of VAT paid to suppliers during the performance of these works are not subject to tax deductions for these operations. Tax amounts are taken into account in the cost of work and are not subject to reimbursement from the budget.

Property tax for foreign organizations

If a permanent establishment is endowed with fixed assets recorded on its balance sheet, an obligation arises to calculate and pay property tax. The objects of taxation for foreign organizations operating in the Russian Federation through permanent representative offices are movable and immovable property related to fixed assets, property received under a concession agreement. Movable property accepted for accounting from January 1, 2013 is not subject to taxation.

Insurance premiums for foreign organizations

With regard to compulsory insurance (pension, medical and social), a permanent establishment of a foreign organization has exactly the same obligations as a Russian organization. A representative office of a foreign organization must be registered with the FIU and the FSS and report to the funds.

If individuals work in a foreign representative office with whom labor and civil law contracts are concluded, and payments are made, then these payments are subject to taxation by insurance contributions to the Pension Fund, the Social Insurance Fund, the Federal Medical Insurance Fund.

Personal income tax for foreign organizations

Permanent representative offices of foreign organizations in the Russian Federation, from which or as a result of relations with which the taxpayer received income, act as tax agents. They are obliged to calculate, withhold from the taxpayer the amount of personal income tax from the amount of wages and other remuneration accrued to the employees of the representative office, and transfer to RF budget.

In addition, the representative office of a foreign organization is also obliged to provide the tax authority at the place of its registration with information on the income of individuals and the amounts of taxes accrued and withheld from them.

Along with tax and accounting reporting, foreign legal entities operating in the territory of the Russian Federation submit an annual report on their activities, regardless of the tax status and financial results of their activities in the reporting year. The report reflects the features of the functioning of a foreign representative office, branch or branch on the territory of the Russian Federation.

Firmmaker, January 2014
Maria Romashkan (Zenchenko)
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Topic 5. Permanent representation of a foreign organization in the Russian Federation for tax purposes

5.1. Importance of the tax status of a foreign organization

The main thing for the emergence of the institution of representation is the actual activity of a resident of one state on the territory of another state. Moreover, this activity should have a number of special features, i.e. whether or not the activity of a foreign legal entity on the territory of the Russian Federation falls under the concept of a permanent establishment in accordance with the legislation of the Russian Federation and international tax treaties.

In order to properly qualify the activities of a foreign organization and determine its taxation obligations, it is necessary to disclose the content of the concept of "permanent establishment", i.e. establish the essential features, in the presence of which the activity of a foreign organization leads to the formation of a permanent establishment for tax purposes.

5.2. Definition of a permanent establishment in accordance with the norms of international agreements

Depending on the country with which the relevant agreement on the avoidance of double taxation is concluded, the concept of "permanent establishment" may vary, taking into account the specifics and features of a particular agreement. At the same time, agreements, as a rule, establish general rules for determining the fact of the formation of a permanent establishment, referring to the norms of the domestic legislation of the states parties to the agreement in case a particular term or concept is not defined (or not clearly defined) by the agreement itself.

Definition of a permanent establishment in accordance with Russian tax legislation.

The definition of the concept of "permanent establishment of a foreign organization" for the purposes of Chapter 25 of the Tax Code of the Russian Federation and the criteria on the basis of which the activities of a foreign organization are considered leading to the formation of a permanent establishment are given in Art. 306 of the Tax Code of the Russian Federation.

In accordance with paragraph 2 of Art. 306 of the Tax Code of the Russian Federation, a permanent establishment of a foreign organization in the Russian Federation is understood as a branch, representative office, branch, bureau, office, agency, any other separate subdivision or other place of activity of this organization (hereinafter referred to as the branch), through which the organization regularly carries out business activities in the territory of the Russian Federation, related to:

subsoil use and (or) use of other natural resources;

carrying out the construction, installation, installation, assembly, adjustment, maintenance and operation of equipment, including slot machines, as provided for by the contracts;

sale of goods from warehouses located on the territory of the Russian Federation and belonging to this organization or leased by it;

the implementation of other works, the provision of services, the conduct of other activities, with the exception of the provisions of paragraph 4 of Art. 306 Tax Code of the Russian Federation

Directly from paragraph 2 of Art. 306 of the Tax Code of the Russian Federation it follows that the legislation establishes the following signs of a permanent establishment:

the presence of a separate subdivision or any other place of activity of a foreign organization on the territory of the Russian Federation;

implementation by a foreign organization of entrepreneurial activity on the territory of the Russian Federation;

carrying out activities on a regular basis.

If there is a combination of these characteristics, the activity of a foreign organization in the Russian Federation is defined as leading to the formation of a permanent establishment.

Analyzing the signs, in accordance with which the formation of a permanent establishment is recognized, it is necessary to clarify the following concepts: entrepreneurial activity, place of activity and regularity of activity.

It is considered that a foreign organization has a permanent place if its activities in the Russian Federation are carried out in a rented premises or in the premises of a customer or any other area specially provided for this.

Example 5 A foreign organization has equipment in Russia that it leases to a Russian organization. Such activities of a foreign organization may lead to the formation of a permanent representative office in the Russian Federation.

When tangible property (in this case equipment) is transferred or leased to third parties through a fixed place of business held by an enterprise of one Contracting State in another, that activity makes the place of business a permanent establishment. This position is also stated in clause 2.4.1. Guidelines for tax authorities on the application of certain provisions of Chapter 25 of the Tax Code of the Russian Federation concerning the specifics of taxation of profits (income) of foreign organizations, approved by order of the Ministry of Taxation of the Russian Federation dated March 28, 2003. No. BG-3-23/150. According to these Methodological Recommendations, if the mere fact of ownership of property by a foreign organization in the territory of the Russian Federation cannot be considered as leading to the formation of its permanent representative office in the territory of the Russian Federation (clause 5 of article 306 of the Tax Code of the Russian Federation), then the use of such property for commercial purposes may under certain conditions, establish a permanent representative office of a foreign organization.

Regularity.

Example 6 The Russian enterprise has entered into agreements with firms - residents of Austria and Germany for the provision of equipment maintenance services on the territory of the Russian Federation. Employees of foreign firms come to the enterprise 1-2 times a year and within 2-3 days provide services stipulated by the terms of the contracts.

The Department of the Ministry of Taxes and Taxes of the Russian Federation for the city of Moscow took the following position regarding the recognition of regular activity in this situation (letter dated June 18, 2003 No. 26-12 / 32420).

In this case, it is necessary to be guided by the definitions of the term "permanent establishment", which are given in Art. 5 of the Convention between the Government of the Russian Federation and the Government of the Republic of Austria of April 13, 2000 "On the avoidance of double taxation with respect to taxes on income and capital" and in Art. 5 of the Agreement between the Russian Federation and the Federal Republic of Germany dated May 29, 1996 "On the avoidance of double taxation with respect to taxes on income and property."

In these articles, it is determined that the expression "permanent establishment" means a fixed place of business through which the activities of the enterprise are carried out in whole or in part. At the same time, the agreements do not determine the period of time after which the activity of a foreign organization in the territory of another state leads to the formation of a permanent representative office (the exception is construction sites), as well as the dates for the beginning and completion of the activities of a permanent representative office. Therefore, when determining the dates for the beginning and completion of the activities of a permanent mission, paragraph 3 of Art. 306 of the Tax Code of the Russian Federation, i.e. regularity criterion.

Based on clause 2.1 of the Regulations on Accounting Features of Foreign Organizations with Tax Authorities, the activity of a foreign organization is regular if it carries out or intends to carry out it in the Russian Federation through a branch for a period exceeding 30 calendar days a year (continuously or in aggregate).

Given the above, the activities of firms - residents of Austria and Germany to provide equipment maintenance services on the territory of the Russian Federation are not regular and do not lead to the formation of permanent representative offices of these firms in the Russian Federation.

Example 7In accordance with a separate contract, the German enterprise once a year sends German specialists to the Russian enterprise for a period of less than 25 days to train the operating personnel in the rules of equipment operation.

In this case, in accordance with Art. 5 of the Agreement between the Russian Federation and the Federal Republic of Germany of May 29, 1996 “On the avoidance of double taxation with respect to taxes on income and property”, the provision of services and the extraction of income can be considered as one-time and do not lead to the formation of a permanent establishment in the territory of the Russian Federation. With respect to derived income should be guided by paragraph 2 of Art. 309 of the Tax Code of the Russian Federation. The duties of a tax agent in the event of payment of income by a foreign organization are defined in paragraph 2 of Art. 310 of the Tax Code of the Russian Federation.

Example 8 The Finnish company several times a year provides the Russian organization with services for the repair and maintenance of equipment located in the territory of the Russian Federation (the specialists of the Finnish company stay in the Russian Federation for a total of less than 30 days).

In accordance with Art. 4 of the Agreement between the Government of the Russian Federation and the Government of the Republic of Finland dated May 4, 1996, a permanent establishment of a foreign legal entity is understood as a permanent place of regular activity related to the construction, installation, installation, assembly, adjustment and maintenance of equipment, as well as the performance of other works.

In accordance with Art. 7 of the above Agreement, the income received by a Finnish company is not related to the implementation of activities through a permanent establishment and, accordingly, this income is subject to taxation only in the country of tax residence of the company, i.e. in Finland.

Example 9 A German company once a year sends its specialists to the Russian Federation for a period of less than 25 days to provide engineering services to a Russian company (services for training service personnel of beverage bottling lines).

In accordance with the provisions of the Agreement between the Russian Federation and the Federal Republic of Germany dated May 29, 1996 "On the avoidance of double taxation with respect to taxes on income and property" and Chapter 25 of the Tax Code of the Russian Federation, a permanent representative office is formed with the regular implementation of business activities by an enterprise. In the case under consideration, the provision of services and the extraction of income can be considered as one-time and not leading to the formation of a permanent establishment in the territory of the Russian Federation (letter of the Ministry of Finance of the Russian Federation of March 26, 2002 No. 04-06-05 / 1/14).

Entrepreneurial activity. To recognize that as a result of the activities of a foreign organization a permanent establishment is formed for tax purposes, it is necessary that this activity be of an entrepreneurial nature.

Since most organizations are created specifically for the purpose of making a profit, their activities on the territory of the Russian Federation are entrepreneurial.

1. The object of taxation for foreign organizations operating in the Russian Federation through a permanent representative office is:

income received by a foreign organization as a result of carrying out activities on the territory of the Russian Federation through its permanent representative office, reduced by the amount of expenses incurred by this permanent representative office, determined taking into account the provisions of paragraph 4 of this article;

income of a foreign organization from the possession, use and (or) disposal of the property of a permanent representative office of this organization in the Russian Federation, net of expenses associated with the receipt of such income;

Other income from sources in the Russian Federation, specified in paragraph 1 of Article 309 of this Code, relating to a permanent establishment.

2. The tax base is defined as the monetary expression of the object of taxation established by paragraph 1 of this article.

When determining the tax base of a foreign non-profit organization, the provisions of paragraph 2 of Article 251 of this Code shall be taken into account.

3. If a foreign organization carries out on the territory of the Russian Federation activities of a preparatory and (or) auxiliary nature in the interests of third parties, leading to the formation of a permanent representative office, and at the same time such activities do not provide for the receipt of remuneration, the tax base is determined in the amount of 20 per cent of the expenses of that permanent establishment related to such activities.

4. If a foreign organization has more than one branch on the territory of the Russian Federation, through which activity leads to the formation of a permanent representative office, the tax base and the amount of tax are calculated separately for each branch.

If a foreign organization carries out activities through such branches within the framework of a single technological process, or in other similar cases in agreement with the federal executive body authorized for control and supervision in the field of taxes and fees, such an organization has the right to calculate taxable profit related to its activities through a branch on the territory of the Russian Federation, as a whole for a group of such branches (including for all branches), provided that all branches included in the group apply a single accounting policy for tax purposes. At the same time, a foreign organization independently determines which of the branches will keep tax records, as well as submit tax returns at the location of each branch. The amount of income tax payable to the budget in such a case shall be distributed among the branches in accordance with the general procedure provided for by Article 288 of this Code. This does not take into account the cost of fixed assets and intangible assets, as well as the average number of employees (wage fund of employees) who are not related to the activities of a foreign organization in the territory of the Russian Federation through a permanent establishment.

A foreign organization that is an operator of a new offshore hydrocarbon field, carrying out activities through more than one branch on the territory of the Russian Federation (or recognized as such in accordance with paragraph 2 of Article 306 of this Code), related to the production of hydrocarbon raw materials at the specified new offshore hydrocarbon field, has the right determine the tax base for such activities related to the same new offshore hydrocarbon field, as a whole for a group of such departments (including for all departments), provided that all departments included in the group apply a single accounting policy for tax purposes. At the same time, the foreign organization independently determines which of the branches will keep tax records and submit tax returns at the location of each branch. In this case, the payment of tax is made through one of these branches at the choice of the taxpayer. Notification of the choice of branch through which tax is paid is sent by the taxpayer to the tax authorities at the location of each of the branches before November 30 of the year preceding the tax period.

5. Foreign organizations operating in the Russian Federation through a permanent representative office shall apply the provisions provided for by this Code.

(see text in previous edition)

6. Foreign organizations operating in the Russian Federation through a permanent representative office shall pay tax at the rates established by paragraph 1 of Article 284 of this Code, with the exception of income listed in subparagraphs 1, , paragraph two of subparagraph 3 of paragraph 1 of Article 309 of this Code. Said income related to a permanent establishment shall be taxed separately from other income at the rates established by subparagraph 3 of paragraph 3 and paragraph 4 of Article 284 of this Code.

(see text in previous edition)

7. When income from which, in accordance with Article 309 of this Code, was actually withheld and transferred to the budget system of the Russian Federation to the appropriate account of the Federal Treasury, is included in the amount of profit of a foreign organization, the tax, the amount of tax payable by this organization shall be reduced by the amount withheld tax. If the amount of tax withheld in a tax period exceeds the amount of tax for that period, the amount of overpaid tax is subject to refund or offset against future tax payments of this organization in the manner prescribed by Article 78 of this Code.

(see text in previous edition)

8. Foreign organizations operating in the Russian Federation through a permanent representative office shall pay advance payments and tax in the manner prescribed