No changes expected in Russian corporate taxation in coming years

Last week, finance minister Anton Siluanov presented his ministry’s proposed tax policy framework for 2016–2018. He promised that the tax burden on Russian corporations would not increase and that no major tax reforms were planned for the next few years. Siluanov noted that Russia’s tax system is already largely in place, with nearly all of the major reforms of recent years now implemented. Big changes include revision of taxation of the oil sector (see BOFIT Weekly 48/2014), subjecting foreign-registered Russian firms to tax liability (BOFIT Weekly 48/2014), as well as laws on intra-group transfer pricing and conglomerate taxation (BOFIT Weekly 35/2012). In the future, attention will focus on improving the practical functioning of the tax system.

Under the released framework, the tax system would be developed over the coming years to support economic growth and increase tax fairness. The minister emphasized the need to immediately start the measures aiming at bolstering economic growth. Beyond traditional subsidies for capital investment, the ministry hopes to stimulate investment through e.g. lowering the tax burden on companies during the initial investment phase to when an investment becomes profitable. Companies will be allowed to deduct investment expenses from their profit tax and the government will try to speed up payment of value-added tax refunds of exports. In federal districts targeted for development (e.g. the Far East Federal District), companies will get additional benefits for investing. Special tax incentives will also be made available to encourage operation of small and medium-sized enterprises (SMEs).

To increase tax fairness, the ministry would make tax evasion harder and grant benefits to prudent taxpayers. To limit the extensive abuses of the VAT refund system, tax officials are moving increasingly to on-line services. The Duma this spring passed a law on tax amnesty for private individuals voluntarily declaring off-shore assets of to the tax authorities. The law took effect this week (June 8). The law grants tax amnesty to repatriated assets (except the fruits of criminal activity) if the declaration is filed by the end of this year (BOFIT Weekly 14/2015). It is hoped that the law will increase openness and in longer term broaden the tax base.