Russia: MOF publishes tax policy plans for 2024

On 2 November 2023, the Ministry of Finance in Russia released a statement regarding the tax policy proposals announced by State Secretary and Deputy Minister of Finance, Alexey Sazanov, during a recent event hosted by the B1 company. The statement provides an overview of the essential aspects covered in his address during the event, encompassing:

  1. Tax Strategy and Burden Changes: The government has no plans to make significant changes to corporate tax policy, such as reintroducing the corporate excess profit tax or raising tax rates, in 2024.There is no intention to raise personal income tax rates in 2024.
  2. Transfer pricing: Proposed changes include measures to reduce instances of foreign exchange earnings from foreign trade transactions not being repatriated to Russia due to taxpayer abuses involving non-market prices. Additionally, adjustments are being considered to permit transfer pricing modifications aligning with the median of the arm’s length range instead of the minimum. Furthermore, there is a proposal to extend the range of safe harbor rates for interest income and expense on controlled debt beyond 31 December 2023, acknowledging concerns that the current allowance of 0% is deemed excessively lenient.
  1. Withholding tax: It is planned to introduce changes to the tax legislation that will allow the collection of tax at source on the amount of additional charges for the transfer pricing (secondary TP adjustment). It is also planned to introduce a withholding tax on services (15%) provided by foreign related parties in order to minimize cases of using intra-group services as a tool for distributing profits abroad.
  2. Controlled foreign companies (CFC): There is a proposal to extend the exemption from penalties for the non-submission of documents concerning Controlled Foreign Corporations (CFCs), specifically in light of European service providers declining to offer services to Russian citizens.
  3. International agreements for the avoidance of double taxation: The Russian government is taking steps to address the economic fallout from the suspension of agreements with “unfriendly” countries. It is also pursuing a new double taxation agreement with the UAE and considering the development of a national BEPS 2.0 standard.

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