Research & Development and Government Incentives news
Issue #10 | November 2015
- Regional tax incentives
- Priority development territories
- Court practice
- Special economic zones
- Free Port of Vladivostok
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30 November 2015
Changes in the investment legislation of Moscow
In November 2015, significant amendments were made to the Law On Corporate Property Tax. In particular, the list of properties eligible to receive a reduced tax rate by applying a 0.1 coefficient to the tax rate has been expanded to include properties occupied by retail stores, banks and cinemas located on the ground, first and second floors of buildings adjacent to pedestrian areas.
Furthermore, new changes have been introduced according to which the reduced corporate property tax rate for parking structures will still be effective for parking structures that are taxed based on their carrying value. However, the reduced rate will not be applicable to parking structures located in business centers and shopping malls subject to property tax based on their cadastral value. The new version of the law comes into effect 1 January 2016.
Please see our presentation Tax Incentives for Organizations for more details about changes in the investment legislation and tax incentives in Moscow.
27 November 2015
Reduced state support for regions
There has been a recent trend toward reducing tax incentives in the regions and introducing additional conditions that limit the options for state support.
For example, on 24 November 2015, a law was adopted in the Perm Region that will increase the income tax rate applicable to the absolute majority of companies in the region, including banks and insurance organizations, from 13.5% to 18% by 1 January 2018. However, in the case of capital investments, the tax rate applicable to a company may be reduced to the current rate, depending on the amount of investments and taxable profit amount.
On 25 November 2015, a law was adopted in the Komi Republic that introduces significant changes to the application of tax incentives. In particular, the law introduces amendments to the list of investors for which property tax and income tax rates are reduced, imposing restrictions on types of economic activity. The law also introduces restrictions on the application of tax incentives by taxpayers in cases where tax payment reductions are due to support provided in the form of an investment loan.
On 26 November 2015, a law was adopted in the Voronezh Region restricting application of a reduced corporate property tax rate of 1.1% for agricultural producers to only those companies registered in the region. The law applies a corporate property tax rate of 1.1% instead of a tax exemption to residents of technology parks and industrial parks as well as organizations operating on airfields and companies that lease aviation equipment.
On 27 November 2015, laws were adopted that remove property tax and income tax incentives for all organizations implementing investment projects in the Kirov Region except investors engaged in processing industries. The Law comes into force on 1 January 2016. The current version of the law in the Kirov Region providing for the application of tax incentives to all organizations implementing investment projects came into force just on 28 May 2015 and a previously adopted version of the law was already provided for the application of tax incentives only to organizations engaged in processing industries.
On 27 November 2015, a law was adopted that reduces the corporate property tax rate for agricultural companies in the Pskov Region by 25% in 2016. The current version of the law exempts such organizations from property tax.
26 November 2015
Tax incentives for manufacturers of beer and beer-based beverages in the Republic of Bashkortostan
On 26 November 2015, a law was adopted according to which manufacturers of beer and beer-based beverages are exempt from property tax, provided that their production volume in the Republic of Bashkortostan amounts to at least 10 million decaliters per year.
The law is effective from 1 January 2016 to 31 December 2018.
26 November 2015
Tax incentives for hotels and exhibition centers in St. Petersburg
The Finance Committee of St. Petersburg has developed a draft law giving companies investing in the construction of hotels and exhibition areas an exemption from the corporate property tax. To be entitled to the corporate property tax exemption, organizations are required to invest at least RUB 10 million in the construction of a three-star hotel with at least 50 rooms within a period of no more than three consecutive calendar years from 1 January 2016 to 31 December 2020.
Starting from 1 January 2016, organizations that invest in the construction of exhibition halls with a total area of more than 35,000 square meters may be exempt from property tax with respect to fixed assets recognized and put into operation in St. Petersburg within the period from 1 January 2014. An anti-corruption review of the Draft Law was completed on 2 December 2015.
25 November 2015
Tax incentives for organizations contributing to sustainable improvements in tax revenues of the Komi Republic
On 25 November 2015, a law was adopted in the Komi Republic that sets the reduced property tax rate of 2% for organizations contributing to an increase in the tax base by more than RUB 5 billion compared to the tax base of the previous tax period.
An income tax incentive in the form of a tax rate reduction by 1.1% will also be applied to organizations participating in consolidated groups of taxpayers that contributed to income tax growth by at least 10% for a tax period of the incentive compared to the average year tax amount for three previous tax periods. The Law comes into force on 1 January 2016.
12 November 2015
Changes in the investment legislation of the Vladimir Region
On 10 November 2015, amendments were adopted to the law On State Support of Investment Activity, and on 12 November 2015, laws were adopted on property tax and income tax with respect to organizations receiving state support for investment activity in the Vladimir Region.
The above laws come into force on 1 January 2016. Please see our News, Issue No. 9 (October), for more details about changes in the investment legislation of the Vladimir Region.
Regional tax incentives
13 November 2015
Expansion of state support for the residents of priority development territories
The Ministry of Economic Development of the Russian Federation has submitted for public discussion a draft law that would remove from the Federal Law on priority development territories (PDTs) transitional provisions limiting the establishment of PDTs in federal districts of the Russian Federation other than the Far East Federal Region and monocities until 30 March 2018.
The Draft Law also provides for a specific legal regime for entrepreneurial or other activities in terms of the application of a free customs zone customs regime to the residents of PDTs located in monocities.
Moreover, the Draft Law proposes expanding the category of monoprofile municipalities in which the establishment of PDTs is allowed through the inclusion of monocities of the second category. If the proposal is accepted, the number of monocities where PDTs are allowed will increase from 71 to 225.
Priority development territories
17 November 2015
Additional income tax assessments related to non-application of a corporate property tax incentive
On 17 November 2015, the Interregional Inspectorate of the Federal Tax Service for the Largest Taxpayers (hereinafter, the Inspectorate) filed an appeal in the case of OJSC RITEK (hereinafter, the Company), which was assessed additional income tax related to non-application of a corporate property tax incentive due to incorrect classification of fixed assets subject to tax incentives.
The error was identified by the Inspectorate during a field tax audit. The Company claimed the tax incentive by filing written objections, however, the Inspectorate did not accept them.
The court accepted the arguments made by the Company and decided in favor of the taxpayer, as the Company claimed the corporate property tax incentive in an appropriate manner, i.e. by filing written objections as part of the field tax audit with respect to incentives related to the object of the audit and the audited tax period.
The Moscow Arbitration Court ruled that the Inspectorate should have had to calculate actual tax liabilities affecting the income tax increase and the property tax decrease.
23 November 2015
Tax incentives for the residents of the special economic zone in the Magadan Region
According to Federal Law No. 321-FZ of 23 November 2015, residents of the special economic zone (SEZ) in the Magadan Region are eligible for tax incentives in the form of a reduced corporate income tax rate of no more than 13.5% (instead of 20%) until 1 January 2025. Moreover, organizations participating in the SEZ in the Magadan Region are subject to MET with respect to minerals extracted from a subsoil plot with a 0.6 ratio. The law comes into effect on 1 January 2016.
The Ministry of Economic Development of Russia has submitted for public discussion a draft order setting the minimum investment amount required for obtaining resident status in the SEZ in the Magadan Region as RUB 500,000, but no less than the total amount of savings from the tax exemption.
19 November 2015
Tax incentives for the residents of SEZ Lotus in the Astrakhan Region
Draft laws have been adopted in the first reading that would apply several tax incentives to the residents of the Lotus industrial special economic zone. The incentives include exemptions from transport tax and property tax for a period of 12 years, and a reduced corporate income tax rate of 2% for 10 years from the resident's first profit-making year. Subsequently, the income tax rate may be set at 10%. The Resolution on the establishment of SEZ Lotus was approved by the government of the Russian Federation in November 2014.
Special economic zones
25 November 2015
Tax incentives for the residents of the Free Port of Vladivostok
On 25 November 2015, a draft law was adopted in the third reading that will exempt residents of the Free Port of Vladivostok from property tax for a period of five years from the month following the month of the recognition of property on the balance sheet of an organization. The residents will also be entitled to a reduced tax rate of 0.5% over the next five years.
A draft law was also adopted in the third reading allowing a reduced corporate income tax rate of 5% to be applied during the first five tax periods from the receipt of profit by an organization, and not lower than 12% over the next five tax periods.