New tax benefits for innovative companies and marquee investors1 December 2017
The legislature is in the process of adopting a number of tax benefits intended to stimulate the development of innovative companies and marquee investments in Russia.
Expanded list of excluded taxable profits expenses
A new law enacted in July 2017 expanded the list of expenses that can be excluded from taxable profits. These now include expenses connected with newly conducted scientific research undertaken at the expense of exclusive rights acquired by counterparties regarding inventions, utility models or industrial designs used in such research. Further, this law allows taxpayers to exclude from their taxable profits:
- amounts paid in the form of performance bonuses; and
- other incentive payments made to employees conducting scientific research.
Previously, only the salaries of scientific employees, as established in their contracts, and not their bonuses could be classified as research and development expenses and excluded from the employer's taxable profits in accordance with a special procedure.
New investment tax deduction
A recently passed draft bill allows taxpayers to deduct expenses incurred when purchasing or upgrading fixed assets from their taxable profits.
The draft bill introduces an article on investment tax deduction to the Tax Code. A taxpayer can reduce part of its taxable profits, which is credited to the state budget revenues of the constituent Russian entities, for an investment tax deduction. The amount of the deduction cannot exceed 90% of:
- expenses incurred by purchasing production equipment and disposing of goods, with an initial cost of Rb100,000; or
- expenses incurred in the relevant period in cases of the completion, reconstruction or modernisation of equipment.
This investment incentive will be in effect until December 31 2027, but only in regions which introduce it in their regional laws.
Differentiated terms for enforcing concessionary income tax rates
Parliament has also adopted a draft bill regarding the tax exemption available to investors implementing large investment projects in priority social and economic development areas (TOR) and in the territory of the free port of Vladivostok. The draft bill determines the differentiated terms for enforcing the concessionary income tax rates, depending on the volume of capital investments that the investor intends to contribute.
Under the draft bill, the concessionary income tax rates will be enforced for taxpayer residents of a TOR or the territory of the free port of Vladivostok as of the tax period that follows three consecutive profitless tax periods.
Further, the concessionary income tax rates will be enforced for taxpayers with investment plans of at least Rb500 million as of the tax period that follows five consecutive profitless tax periods.