Tax Considerations in Foreign Trade and Investment in the USSR

The purpose of this Article is to provide a primer on the tax treatment accorded in the USSR to the various forms of income that foreign companies and individuals may earn in the course of doing business or otherwise investing there. This Article will not provide exhaustive answers to all questions arising in connection with the taxation of income earned by foreign businesses in the USSR. Such exhaustive answers are not currently possible because of frequent changes in Soviet tax legislation and the lack of comprehensive and sophisticated regulations interpreting that legislation. The Soviet Government, at both the union and republic levels, recently has adopted legislation that attempts to answer some of these tax-related questions.

These laws are part of an ongoing effort to reform and modernize the Soviet system of taxation to accommodate a more market-oriented economy. The Soviet tax regime, as it applies to foreign investment-related income, must be viewed against these current reform efforts. Thus, before analyzing the specific tax provisions relating to foreign investment-related income in the USSR, this Article will discuss the reform process and the recent changes in Soviet taxation.