Taxation of separate divisions: who pays – the branch or the “head”?

A separate division from the point of view of the tax code

The term “separate division” is interpreted in its own way by the civil and tax legislation of Russia. The Civil Code of the Russian Federation clearly distinguishes branches and representative offices from this concept - as entities endowed with broader powers in comparison with ordinary divisions. Their legal status is subject to recording in the constituent documents of the company:

1. A representative office is a unit representing an organization in another locality or region.
2. The branch not only protects the interests of the company, but also assumes its functions, in whole or in part, for activities in its territory.

The Tax Code (clause 2 of Article 11) defines “separate” as any division that meets the following criteria:

• territorial distance from the parent organization;
• the presence of stationary workplaces, at least one, equipped for a period of more than a month.

Territorial branches with any legal status are not legal entities and cannot act as independent taxpayers. What are the powers of these divisions, whether they are included in the organization’s Charter as branches/representative offices - for tax purposes it does not matter significantly. The exception is the use of a simplified tax regime by such companies.

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Separate divisions and simplified tax system

Art. 346 of the Tax Code of the Russian Federation (clause 3, paragraph 1) limits the ability to use the “simplified” code for companies that have separate divisions in the form of representative offices and branches. If territorial branches are not registered as branches, a legal entity is not prohibited from being taxed under the simplified system, provided that it has the right to do so in principle.

However, the Federal Tax Service pays close attention to the taxation of separate divisions under the simplified tax system. Disputes often arise between companies and tax authorities when the latter look for signs of a branch or representative office in the documents of a “regular” structural department. To avoid misunderstandings, when opening territorial offices, the “head” should not endow them with property, expanded powers and other attributes of independence.

Experts recommend paying attention to the following points when preparing documents:

• the Charter of a legal entity should not contain any mention of territorial branches;
• in the names of departments it is necessary to avoid the use of the words “branch” and “representative office”;
• there is no need to develop a separate regulation for a remote division; it can work on the basis of an order from the general director of the company;
• It is better not to appoint a manager to a separate office, and if one is necessary, strictly limit his powers.

Provisions of the Civil Code in relation to separate divisions

Article 55 of the Civil Code of the Russian Federation defines the concept and legal status of representative offices and branches of a legal entity.
— According to paragraph 1 of the article, a representative office is a separate division of a legal entity located outside its location, which represents the interests of the legal entity and protects them.

— According to clause 2, a branch is a separate division of a legal entity located outside its location and performing all or part of its functions, including the functions of a representative office.

Paragraph 3 of the article establishes that representative offices and branches are not legal entities. They are endowed with property by the legal entity that created them and act on the basis of the provisions approved by it. The heads of representative offices and branches are appointed by the legal entity and act on the basis of its power of attorney. Representative offices and branches must be indicated in the Unified State Register of Legal Entities.

So, how does a separate division differ from a branch?

In fact, the only difference is that a branch is only a type of separate division of an organization.

But at the same time:

• the branch is directly named as such in the Unified State Register of Legal Entities and, accordingly, the Federal Tax Service of the Russian Federation registers it for taxation independently on the basis of register information, in contrast to a separate division, which the organization declares by submitting information to the tax authority;
• The 5th and 6th digits of the branch checkpoint have the value 02, 03 or 43. In the checkpoint of other branch offices, the 5th and 6th digits have the meaning:

- if this is a representative office - 04, 05 or 44;

- if this is a regular OP - 31, 32 or 45.

In this article, we will not consider the nuances of the procedure for registering a unit, but will immediately move on to the specifics of taxation.
The main point that must be remembered when deciding to open a separate division is that organizations with branches do not have the right to use the simplified tax system. This prohibition is directly contained in paragraphs. 1 clause 3 art. 346.12 Tax Code of the Russian Federation). If an organization begins to carry out activities outside its location and does not make changes to the Unified State Register of Legal Entities, then it has the right to continue to apply the simplified taxation system.

Payment of taxes by separate divisions

The taxation procedure for structural divisions depends on their legal status, the type of taxes and fees levied, and whether the department has its own balance sheet or bank account.

VAT

Payers of value added tax are legal entities. Since the divisions are not recognized as independent entities, they do not have VAT obligations.

The parent organization submits a VAT return to the Federal Tax Service inspectorate at the place of registration of the legal entity itself. Calculation and payment of tax is made in the total amount without distribution to branches.

Excise taxes

Excise taxes are payable at the location of units engaged in the production and sale of excisable goods and services. For taxpayer organizations, this means that they need to submit excise tax returns for each branch separately - to their territorial bodies of the Federal Tax Service.

Tax reporting on excise taxes is provided upon the sale or transfer of excisable products. If the unit did not have such operations during the reporting period, there is no need to submit a declaration for it.

Personal income tax

A legal entity as an employer is a tax agent for income taxation of its employees - individuals. The company is required to submit information about personnel income to “its” inspectorate. At the same time, it must transfer the amount of taxes withheld from employees at the place of their registration as taxpayers.

To do this, when opening separate divisions, an organization registers with the tax authorities at the location of each of them. Personal income tax is paid according to the details of the relevant inspection, and data on the income of the personnel of a particular department is also duplicated there.

Income tax

The procedure for paying income tax by legal entities with remote divisions is regulated by Article 288 of the Tax Code of the Russian Federation. Regarding the tax going to the federal budget, the transfer of advance payments and debts at the end of the tax period is made by the “head” of the company in the total amount, without breaking down by branches.

Calculations for income tax with regional budgets occur taking into account the location of all structural divisions and the parent organization. From the total tax base of the company, it is necessary to allocate the share attributable to each branch or representative office. Then advance payments are calculated and transferred to the relevant Federal Tax Service - local and central. Income tax returns are submitted in a similar way - at the place of registration of the legal entity and to the territorial authorities that keep records of regional representative offices.

Property tax

The organization's property tax is paid separately at the location of the head office and branches, if the divisions have their own balance sheet and assets accepted for it.

Payment for taxable property registered with a central organization is calculated and transferred in advance payments to the Federal Tax Service where the legal entity is registered. Tax on property belonging to subdivisions is paid in the same way. For each branch, the tax base is calculated separately, which is multiplied by the tax rate established in a particular subject of the federation. The amount of property tax goes to the regional budget.

Transport tax

The procedure for paying transport tax depends on the place of state registration of vehicles. If the car is assigned to the head office, payments for it will be made to the central Federal Tax Service. In this case, the machine may actually be located in a remote department. Transport transferred to the branch using papers is registered locally and is taxed there.

This rule applies only to the permanent registration of the vehicle. If a temporary registration is issued, in order to avoid double taxation, tax is not charged at the place of temporary location of the car.

Land tax

The payment of land tax by separate divisions is not regulated by the Tax Code. In general cases, the organization that owns the object of land taxation at the location of the branch submits a declaration and makes payment for the site to the local budget.

If the unit has its own account, the amount of land tax calculated for the tax period is transferred from it.

Property tax

In accordance with paragraph 2 of Art.
346.11 of the Tax Code of the Russian Federation, simplified organizations are not payers of property tax, but there is an exception to this rule, which concerns the tax paid in respect of real estate objects, the tax base for which is determined as their cadastral value. Russian organizations calculate the tax base for property tax at cadastral value for the following types of real estate (clauses 1, 2, 4, clause 1, article 378.2 of the Tax Code of the Russian Federation):

1) administrative and business centers and shopping centers (complexes) and premises in them;

2) non-residential premises, the purpose, permitted use or name of which provides for the placement of offices, retail facilities, public catering and consumer services, or which are actually used for these purposes.

From January 1, 2021, the purpose, permitted use or name of such objects is determined in accordance with the Unified State Register of Real Estate or technical accounting (inventory) documents (clause 2, clause 1, article 378.2 of the Tax Code of the Russian Federation). Before this date, their purpose was determined in accordance with cadastral passports of real estate objects or technical accounting (inventory) documents (clause 2, clause 1, article 378.2 of the Tax Code of the Russian Federation);

3) residential buildings and residential premises that are not taken into account on the balance sheet as fixed assets in the manner established for accounting.

Settlements with extra-budgetary funds

Separate divisions are engaged in settlements of insurance premiums on their own only if they have three signs of independence (No. 212-FZ of July 24, 2009, Article 15, Part 11):

• own balance;
• separate current account;
• authority to pay wages to staff.

The company's territorial branches interact with insurance funds by registering with local bodies of the Pension Fund, Social Insurance Fund and Compulsory Medical Insurance Fund. If a branch does not meet the listed requirements for at least one of the parameters, extra-budgetary funds communicate directly with the “head”.

For correct taxation of separate divisions in 2015, the organization is obliged to promptly report their creation and liquidation:

1. Registration of branches and representative offices occurs through registration of changes in the Unified State Register of Legal Entities - in the Federal Tax Service at the location of the legal entity.
2. Termination of the activities of a representative office or branch is recorded on the basis of a message in form C-09-3-2 sent by the company within three days from the date of the decision to close.
3. For divisions that are not branches, the period for notifying the tax office is 1 month - upon opening, 3 days - when information changes. The notification form – S-09-3-1 is submitted to the “head” inspection.
4. It is necessary to deregister a territorial branch within 3 days from the date of termination of work.

In accordance with Article 116 of the Tax Code of the Russian Federation, for untimely provision of information on the creation or liquidation of divisions: a fine in the amount of 5 to 10 thousand rubles.

Insurance premiums

When we talk about insurance premiums, first of all, we need to pay attention to who directly accrues remuneration for the work of its employees - a separate division or the organization itself.
If accruals are made directly by the parent organization, then in this case, in accordance with clause 11 of Art. 431 of the Tax Code of the Russian Federation, the organization pays insurance premiums to the tax authority at the place of its registration. It does not matter where the employees for whom contributions are paid actually work - at the head office or in a separate division. If accruals are made by a separate division, then it pays them accordingly. This rule also applies to the place of reporting. At the same time, in the payment order for the payment of contributions, the department indicates the checkpoint and details of the tax authority at the place of its registration (clause 4 of Appendix No. 1 to Order of the Ministry of Finance of Russia dated November 12, 2013 No. 107n).

If an organization decides to vest a separate division with the authority to accrue remuneration to employees, it is obliged to notify the tax authority at the place of its registration about this. The notification form and the procedure for filling it out were approved by Order of the Federal Tax Service of Russia dated January 10, 2017 N ММВ-7-14/ [email protected]

In accordance with paragraphs. 7 clause 3.4 art. 23 of the Tax Code of the Russian Federation The message must be sent to the tax authority at the location of the organization’s head office within a month from the day on which the separate division was vested with this right or was deprived of it (clause 7, clause 3.4, article 23 of the Tax Code of the Russian Federation).

Submitting reports

In accordance with current regulations, submission of financial statements for each separate division to the relevant territorial bodies of the Federal Tax Service is not provided. This conclusion is based on the requirements of paragraph 33 of Order No. 34n of the Ministry of Finance dated July 29, 1998 “On approval of the Regulations on accounting and financial reporting in the Russian Federation”, and also follows from the provisions of the Law “On Accounting” dated November 21, 1996. No. 129-FZ.

Both the branch and the representative office are not legal entities and operate on the basis of property that was transferred to them by the legal entity that created them, which means the absence of independent property rights (ownership rights).

However, the fact that there is no need to submit financial statements for each separate division excludes the obligation to submit tax returns for income tax both to the territorial body of the Federal Tax Service at the location of the parent organization, and for all separate divisions that make advance payments on account of the income tax. profit (clause 3 of article 80 of the Tax Code of the Russian Federation). At the same time, regardless of the choice of the responsible “payer” in the manner discussed above, the Tax Code requires the submission of income tax returns to the territorial bodies of the Federal Tax Service, both at the location of each separate division and at the location of the “parent” organization, regardless of who pays the advance payments (Article 289 of the Tax Code of the Russian Federation).

It is noteworthy that the accountant’s obligation to submit an income tax return for each separate division and at the location of the parent organization also arises if any of them does not conduct business, that is, it is necessary to submit “zero” reporting in any case. to all business units.