The Russian Federation Tax Code has established the characteristics of evaluation of the tax base on valuable securities, whereof we shall speak in the article.

 

A valuable security is a document, which certifies the property rights upon conformance with the established form and mandatory requisites, the implementation or transfer of which is possible only at its presentation. Such definition of paper security is found in Article 142 of the RF Civil Code (the RF CC).

 

Valuable securities as well as things, money, other property refer to the objects of civil rights, and, consequently, can be freely deprived or transferred from one person to another by the way of universal succession (succession, re-organization of legal person) or other way admitted in Article 129 of the RF CC.

 

We remind you that according to Article 143 of the Civil Code of RF valuable securities refer to government bonds, bonds, ineligible bills, checks, depositary and savings certificates, bank savings books payable on demand, consignment notes, shares and other papers, which are legally referred to paper securities.

 

According to Article 14 of Federal Law No 156-FZ “On the Investment Trusts”, dated November, 29, 2001, the investment unit is a registered certificate, which certifies the share of its holder in the title to assets making the unit investment fund.

 

While it is impossible to cover all the questions in one article, which are connected with the taxation of securities transactions, we shall touch upon some moments only.

 

Thus, the characteristics of evaluation of tax base are established in Article 280 of the Russian Federation Tax Code.

 

Paragraph 1 of Article 280 of the RF Tax Code defines that the procedure of attribution of civil rights objects to valuable securitiesis is defined by the Civil Code of RF and the applicable legislation of foreign countries.

 

The procedure of referring of valuable securities to the issuing ones is established by the national legislation. National legislation is the legislation of that country, on the territory of which the paper security circulation (conclusion of civil transactions, which imply the change of ownership on security papers, including the security papers out of the formal market) takes place.

 

Refering of paper securities, which circulate over the RF territory, to the issuing ones is carried out in accordance with Federal Law No 39-FZ “Concerning the Securities Market”, dated April 22, 1996.

 

The Letter of the RF Ministry of Finance No 03-03-06/2/157, dated November 21, 2008 pays attention that in case of transactions with foreign financial instruments on the territory of the Russian Federation the qualification of such instruments as valuable securities is performed according to the RF legislation. At the same time, it should be in accordance with the order of the Federal Financial Markets Service No 07-105/pz-n “Regulations on Qualifying Foreign Financial Instruments as Paper Securities”, dated October 23, 2007.

 

In case of settlement of transactions with the financial instruments on the territory of a foreign country, the qualification procedure for such instruments is established by the legislation of the foreign country.

 

If it is impossible to qualify financial instruments as paper securities, then the provisions of Article 280 of the RF Tax Code cannot be applied to such instruments.

 

It should be noticed that any contract is considered to be a contract, if its outcome is a detection of a certain item in assets from one side of the contract and the item in passive from the other side of the contract. Money market instruments or capital markets instruments are distinguished. Financial instruments are as follows: currency, valuable securities and indices of their current rates.

 

In some cases the securities transactions may be qualified as an operation with the term transaction financial instruments. In such a situation a tax payer may choose a taxation scheme of such transactions individually. At the taxation of terminal transactions with the financial instruments one should follow Articles 301 – 305 of RF Tax Code.

 

Taxpayer income from the transactions on the realization or other disposal of valuable securities is defined due to the selling price according to Par. 2 Article 280 of the RF Tax Code, or other disposal of valuable security, as well as:

 

— the sum of cumulative interest (coupon) income, paid to the taxpayer by the customer;

 

— the sum of interest (coupon) income, paid to the taxpayer by the emitter (the maker of promissory note);

 

The income of taxpayer from the realization or other disposal of valuable securities is not included to the sum of interest (coupon) income, if they were accounted in taxes prior.

 

According to Par. 4, Article 280 of the RF Tax Code, the cumulative interest (coupon) income is regarded as part of interest (coupon) income, the payout of which is conditioned by the issue of such valuable securities, calculated proportionally to the number of running days from the date of issue of the valuable security or the date of preceding coupon profit up to the date of the settlement of a transaction (time of security transfer).

 

If the valuable securities are denominated in foreign currency, the taxpayer income from the transactions on the realization or other disposal of the valuable security is defined at the Central Bank of Russia rate on the date of transfer of ownership or on the repayment date.

 

Expenses at the realization (or other disposal) of valuable securities is defined depending on the actual cost of the valuable security, including expenses on its acquisition, expenses at realization, the sum of cumulative interest (coupon) income, payable to the seller of securities. The sums of cumulative interest (coupon) income, previously accounted at the tax assessment, are not included in expenses;

 

If the valuable securities are denominated in foreign currency, at the evaluation of expenses on the realization or other disposal of valuable securities, the acquisition price of valuable security, including expenses for it acquisition, is defined at the Central Bank of Russia rate on the date of registering of the valuable security. A current revaluation of valuable securities denominated in foreign currency is not performed.

 

Is it necessary to accept this standard to the accumulated coupon income or this income is liable to revaluation?

 

In order to answer the Question, we should turn to the letter of the RF Ministry of Finance No 03-03-06/2/128, dated July 17 2007. As it is said in the letter, at the evaluation of expenses at the realization or at the reception of interest (coupon) payment from the issuer, the accumulated interest (coupon) income, paid to the taxpayer by the seller of securities, is accounted in the tax reports in rubles at the Central Bank of Russia rate on the date of acceptance of the valuable security to the accounting.

At the accrual of interest (coupon) income, calculated in foreign currency, in accordance with the requirements of Par. 6 and 8, Article 271 of the RF Tax Code, and Article 328 of the RF Tax Code, the accrued interest (coupon) income in foreign currency, according to the conditions of issue of valuable security, is also accounted at the Central Bank of Russia rate for the end of the reporting (taxation) period or the date of payment. The accrued interest (coupon) income on the valuable security from the date of acquisition for the whole period of being on the balance sheet is accrued in foreign currency and is defined as a difference between the accumulated interest (coupon) income for the end of the reporting (taxation) period and (or) the date of payment of interest (coupon) income by the issuer and the accumulated interest (coupon) income, paid to the seller of securities.

 

Let us assume that the credit organization has provided monetary funds to the organization-borrower on the credit agreement. A compulsory condition of funds provision is a pledge of property; the subject of pledge is valuable securities of the outside organization.

 

The letter of the RF Ministry of Finance No 03-03-06/1/701, dated December 19, 2008, contains the following.

According to subparagraph 7 paragraph 7 Article 272 of the RF Tax Code on the expenses connected with the acquisition of valuable securities, including their value, the date of realization or other disposal of valuable securities is the date of realization of non-operational and others expense, unless otherwise specified in Articles 261, 262, 266 and 267of the RF Tax Code. In opinion of Ministry of Finance, at the transfer of valuable securities by the organization-pledger for the repayment of creditor indebtedness of the organization-borrower in the organization-pledger, the realization (or other disposal) of valuable securities takes place. Moreover, at the tax base determining the income from such realization is specified on the basis of market price of securities for the date of transfer.

The letter of the RF Ministry of Finance No 03-03-06/4/69, dated October 14, 2008, considers the question on the procedure of accounting of the sum of accumulated interest (coupon) income at the realization of corporate bonds, the possession term of which exceeds the accounting period for the purpose of tax assessment.

 

The letter of the RF Ministry of Finance No 03-03-06/4/69, dated October 14, 2008, considers the question on the procedure of accounting of the sum of accumulated interest (coupon) income at the realization of corporate bonds, the term of possession of which exceeds the accounting period for the purpose of tax assessment. The letter specifies that according to Par 6 Article 271 of the RF Ministry of Finance on the loan agreements and other similar agreements (other certificates of indebtedness, including valuable securities), the validity period of which falls within more than one reporting period, the income is considered to be received and is included in the composition of income for the end of the corresponding accounting period.

 

In case of possessing of corporate bonds by the organization within the term, exceeding the reporting period, the organization gets the accumulated interest (coupon) income, which is accounted for tax purposes.

 

Concerning the expenses in the sum of accumulated interest (coupon) income, paid to the seller of securities, with the reference for subparagraph 7 paragraph 7 article 272 of the RF Ministry of Finance it is said, that the expenses should be considered for the date of realization or disposal of the mentioned above valuable securities.

For the purpose of taxation the valuable securities are considered as:

 

— publicly traded;

— non-publicly traded;

Valuable securities are considered to be publicly traded only at the simultaneous adherence to the specifications defined in Paragraph 3 Article 280 of the RF Tax Code:

 

— if they are admitted for circulation by at least one authorized trade institutor in accordance with the national legislation;

 

— if the information on the prices (price quotations) is published in mass media, including electronic resources, or may be provided by the trade organizer or other authorized person to any person interested therein within three years after the date of accomplishment of security services;

 

— if a market quotation is calculated on valuable securities, when it is specified in the corresponding national legislation.

 

National legislation, as we already mentioned, is a legislation of that country, on the territory of which the paper security circulation (conclusion of civil transactions, which imply the change of ownership on the security papers, including the security papers out of the formal market) takes place.

 

According to the opinion of the RF Ministry of Finance, which is contained in the letter No 03-03-06/1/565 dated October 7, 2008, if the transactions with foreign valuable security allow to define the territory on which the specified transactions took place, the national legislation, specified in paragraph 3 Article 280 of the RF Ministry of Finance, is considered to be a specified foreign country.

If the transactions with valuable securities, carried out at the over-the-counter market, allow to determine the point (country) of transaction, then in order to acknowledge the valuable security as traded, the taxpayer should have information, specified in paragraph 3 Article 280 of the RF Ministry of Finance, from the trade organizer or other authorized person according to the legislation of the country, on which territory the transaction with a the valuable security took place. As the Letter of the RF Ministry of Finance No 03-03-06/2/122, dated September 16, 2008 states, if the trade organizer is absent or the necessary information, specified in paragraph 3 Article 280 the RF Ministry of Finance, is missing, the valuable security is considered to be non-publicly traded and not corresponding to the criteria, specified in paragraph 3 Article 280 of the RF Ministry of Finance.

 

The market price of publicly traded valuable securities, according to paragrapg 5 Article 280 of the RF Tax Code, is the actual price of their realization, if this price lies within the minimal and maximal transaction prices (price interval) with the specified valuable paper, registered by the trade organizer at the securities market for the date of the transaction settlement.

 

The date of transaction settlement is considered as:

 

— a tender date, on which a bargain with paper security is concluded — if the transaction takes place through the trade organizer;

 

— the date for defining of all existing conditions of valuable security transfers, which is the day of execution of an agreement – if a valuable security is traded out of the organized securities market.

 

It should be noted that the parties sometimes conclude a preliminary agreement. According to paragraph 1 Article 429 of the RF Civil Code the parties are obliged to conclude a future agreement on the transfer of property, the execution of work or provision of services (basic agreement) on conditions specified by the preliminary agreement. According to the opinion of the RF Ministry of Finance, which is contained in the letter No 03-03-06/2/237, dated December 25, 2007, in case of conclusion of preliminary agreement and specifying all relevant conditions for the transfer of the valuable security, the date of settlement of transaction is considered to be the date of signing of such agreement.

According to the provisions of paragraph 1 Article 435 the RF Civil Code, the offer is a proposal addressed to one or several particular persons, which reflects a serious intention of the person, who made this proposal, and considers to have concluded an agreement with the addressee who will accept the proposal. The offer should contain the essence of the agreement. The agreement is considered as concluded from the moment of receiving of the acceptance by the person who has sent the offer, which is specified in paragraph 1 Article 433 of the RF Civil Code. The letter of the RF Ministry of Finance, No 03-03-06/1/600, dated October 23, 2008, specifies that in case of conclusion of the offer and specifying all relevant conditions for the transfer of the valuable security, the date of settlement of transaction is considered to be the date of receiving of the acceptance by the person who sent the offer.

Transactions with the specified date may be made on one and the same valuable security via one or more trade organizers. In this case the taxpayer has the right to choose the trade organizer, and the value of price interval for the purposes of taxation.

The information on the price interval for the date of settlement of transaction may be absent in the trade organizers. In this case the taxpayer may take the price interval at the realization of paper securities on the data of the nearest trades, which took place prior to the settlement of the specified transaction, in case if the trade on valuable securities of that trade organizer was conducted at least once within the previous 12 months.

If the taxpayer preserves the specified above procedure, the actual price of securities conversion, being in the corresponding price interval, is accepted for the tax purposes as a market value.

 

In case of conversion of securities at the price below the bottom transaction price at the organized market, a minimal price of a transaction at the organized market of valuable securities is accepted at the evaluation of the financial result.

 

In case of conversion of securities at the price above the maximum transaction price at the organized market, the actual price of their realization is accepted at the evaluation of the financial result.

In addition, a purchaser of securities, which are acquired at the price above the maximum price of transactions at the organized market, can reflect the value of acquisition as the maximal price of trade in the tax accounting, if it meets the criteria, established in Article 252 of the RF Tax Code, in particular, in case of the economic feasibility of incurred charges, which is specified in the letter of the RF Ministry of Finance 03-02-07/1-452, dated November 23, 2007.

 

According to subparagraph 1.5 paragraph 1 of the Procedure of calculation of market price of equity securities and investment units of share investment funds, eligible for circulation through the trade organizer, approved by the decree of the RF FCSM No 03-52/ps, dated December 24, 2003, at the calculation of the market price, the transactions are counted, made on the basis of applications to all participants of trade, on the valuable securities, included into the quotation lists, as well as eligible for circulation through trade organizers without passing the listing procedure.

 

According to the Letter of RF Ministry of Finance No 03-03-06/2/237, dated December 25, 2007, in case of presence of presence of information from trade organizers on the transactions made at the same day with the same valuable security, both with and without the specified counterparties, it is necessary to use the information on the price interval on the transactions without the specified counterparties. The information on the price interval of transactions, committed as a result of announcement of the addressed bids, is not taken into account. The information on the price interval of transactions without the specified counterparties gets a priority in this case. If the transactions without the specified counterparties were not made within 12 months, then information on the price interval with the specified counterparties may be used.

In case if only one transaction without the specified counterparties was registered by trade organizers for the date of the realization of publicly traded valuables by the organization, then, according to the opinion of RF Ministry of Finance, the market price of the valuable securities will be acknowledged as equal to that transaction without the specified counterparties. A similar position was expressed in the letter of the RF Ministry of Finance No 03-03-06/2/147, dated August 2, 2007.

The Letter of the RF Ministry of Finance No 03-03-06/1/565, dated October 7, 2008 pays attention that there is a procedure of defining the market value concerning the transactions with foreign securities, circulating on the organized market and made on the territory of a foreign country, which is established by paragraph 5 Article 280 of the RF Tax Code. Moreover, the possibilities of using the specified objectives of the world information analysis systems (Bloomberg, Reuters, etc) for the prices at the over-the-counter market are not provided by the RF Tax Code.

At the same time, the Ministry of Finance considers that the taxpayer has the right to use the data of the specified world analytical systems on the outcome of tenders at foreign organized markets (price intervals, market quotations and other data) for the purposes specified in paragraph 5 Article 280 of the RF Tax Code.

 

Let us pay attention to the Letter of the RF Ministry of Finance No 03-03-06/2/104, dated August 13, 2008, which specifies that the price interval, set at the organized market in the foreign country, cannot be applied to the actual price of the realization or the disposal of valuable securities of a foreign issuer.

 

As for non-publicly traded valuable securities, for the purposes of taxation, an actual price of realization of valuable securities is used at the fulfillment of at least one the following conditions set in paragraph 6 Article 280 of the RF Tax Code.

 

If the actual price of the transaction lies within the price interval of a similar (identical, homogeneous) valuable security, registered by the trade organizer on the data of the nearest trades, which took prior to the settlement of the specified transaction, in case if the trade on valuable securities of that trade organizer was conducted at least once within the previous 12 months.

If the actual price of the transaction differs from the weighted average price within the range of 20% of decrease or increase from the similar (identical, homogeneous) valuable security, calculated by the trade organizers in accordance with the rules set by them on the result of tenders for the date of conclusion of the transaction or the nearest date of tenders prior to the conclusion of transaction, if these tenders on the valuable securities were conducted at least once within the previous 12 months.

 

If the information on the results of tenders on the similar valuable securities is absent, then the actual price of the transaction is accepted for the purposes of taxation on condition that the indicated price does not differ from the accounting price of this valuable security more than on 20%.

 

In order to calculate the accounting price by the taxpayer or with the attraction of the evaluator, the methods of value assessment, established by the RF legislation, should be used.

In the taxpayer defines the accounting price of the share individually, he should fix the used method of the value assessment in his accounting policy.

In order to calculate the accounting price of the share, in particular, by the organization, the asset value of the issuer per share is used.

In order to define the value of net assets of joint stock companies one should be guided by the Procedure of Value Assessment of Net Assets of Joint Stock Companies, approved by the Order of the RF Ministry of Finance No 10n and RF FCSM No 03-6/pz dated January 29, 2003.

 

If the authorized capital of joint stock company consists of both ordinary shares and preference shares of various denominational value, then at the defining of calculating price of an ordinary share, according to the opinion of the RF Ministry of Finance (the letter No 03-03-06/1/700, dated December 19, 2008), the company may use the quota of net asset value of the issuer, accounted for the ordinary shares. In order to calculate the accounting price of the preference share, quota of the net asset value, accounted for the preference shares, is used.

Tax authorities determine the calculated value of shares at the conduction of taxpayer’s inspections.

The decree of FAS No А19-829/08-15-F02-3403/08, dated July 22, 2008 of the Eastern-Siberian district, specifies that the RF Tax Code does not foresee the independent calculation of the security value.

According to paragraph 2 Article 40 of the RF Tax Code the taxation authorities, when exercising control of the correctness of the assessed taxes have a right to validate the use of value on transactions only in the following cases:

 

— between the interdependent persons;

– on the goods exchange (barter) transactions;

— at the conclusion of foreign trade transactions;

— at the difference of the value within the range of 20% of decrease or increase from the price level, applied by the taxpayer on the identical (homogeneous) goods (works, services) within a short period of time.

 

Thus, paragraph 2 Article 40 of the RF Tax Code does not give the right to the tax authorities to conduct calculations on their own, but gives the right to check the correctness of the price use.

Furthermore, tax authorities have a right to validate the use of prices in exceptional cases only, as enumerated above.

As long as the mentioned circumstances were not establisheded by the tax inspection, the court finds, that tax authorities have a right neither to check the correctness of application of shares value nor to make a share price calculation on their own.

 

In order to define the accounting price of the debt security, the refinancing rate of the Russian Central Bank may be used.

 

What valuable securities may be considered as identical, homogeneous, similar?

 

Identical valuable securities are considered for tax purposes as valuable securities with identical characteristics, namely: paper type, currency of payment, nominal value, type of declared income, terms and conditions of circulation.

Homogeneous valuable securities, defined on the basis of parameters, peculiar for homogeneous goods, are considered as valuable securities, which certify equal proprietary rights. Moreover, a grouping of valuable securities on the given feature can be performed in two categories: debt securities and equity securities.

Similar valuable securities are valuable securities, possessing similar characteristics, in particular, the appearance of valuable security, condition circulation, type of income.

 

Tax base on the securities transactions is defined separately according to paragraph 8 Article 280 of the RF Tax Code, except for the tax base on security services, determined by the professional participants of the securities market.

Tax base on the publicly traded securities transactions is defined separately by the taxpayers separately from the tax base on the non-publicly traded securities.

 

The procedure of loss record from the securities transactions is established in the paragraphs 10 and 11 Article 280 of the Russian Federation Tax Code.