Tax deduction in Russia

Taxes in Russia

Main article: Taxes in Russia

Tax deduction for fitness services

Main article: Tax deduction for fitness services

2024

Introduction of investment tax deduction

On November 29, 2024, Russian Prime Minister Mikhail Mishustin signed a decree on the parameters of the federal investment tax deduction. Its size is 3% - the income tax payment can be reduced by such an amount, provided that these funds are invested in the development of production.

Deputy Prime Minister - Head of the Government Apparatus Dmitry Grigorenko notes that the introduction of the deduction will be an additional impetus for the development of entrepreneurial activity in Russia. The measure is aimed at supporting not only traditional sectors of the economy, but also high-tech industries, including telecommunications and information technology. Data center operators, Internet providers, mobile communication companies, etc. will be able to take advantage of the investment tax deduction.

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Freepik

In accordance with the decree, enterprises and organizations engaged in the following types of economic activities receive the right to an investment tax deduction:

• Extraction of useful; minerals
• Manufacturing industries (excluding food, beverage and tobacco products);
• Provision of electric power, gas and steam; air conditioning;
• Scientific research and development;
• Telecommunications;
• Data processing, provision of information placement services and related works;
• Hotel services;
• Catering.

It is expected that the new measure will help entrepreneurs reduce the cost of acquiring and modernizing fixed assets, as well as increase the efficiency of their projects. According to Grigorenko, the creation of comfortable conditions for the development of digital companies will strengthen the infrastructure necessary to improve the efficiency of the economy and public administration.

As reported on the website of the Federal Tax Service, in order to receive an investment deduction at the end of the year, the taxpayer needs:

• Prepare copies of documents confirming the right to a tax deduction (for example, broker reports confirming the period of ownership of the sold securities, as well as the correct calculation of the tax deduction).
• Fill out a tax return (in the form of 3-NDFL).
• Submit to the tax authority at the place of residence a completed tax return with copies of documents confirming the right to receive a tax deduction.^[1]

Mishustin instructed to introduce an investment in the costs of introducing Russian software

In July 2024, Prime Minister Mikhail Mishustin gave several instructions to support companies implementing domestic software. In particular, the Ministry of Digital Development and the Ministry of Finance were instructed to introduce a federal investment tax deduction to reduce the costs of companies in the implementation of complex projects for the implementation of Russian software and hardware systems (PAC). Read more here

The government approved the introduction of a tax deduction for investments in Russian startups

On April 1, 2024, it became known that the Government of the Russian Federation approved the introduction of a tax deduction for venture capital investments. Amendments to the Tax Code relate to investment partnership (DIT) agreements concluded for a period of at least five years without early termination. Under these agreements, venture capital or direct investment is expected.

As Izvestia writes with reference to the press service of the Ministry of Finance of the Russian Federation, this initiative is needed to stimulate investment in fast-growing high-tech companies and the innovative sector of the economy. The department stressed that the investment tax deduction (ING) will be provided from the regional budget. At the same time, subjects will be able to establish the right to use it.

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Unsplash

Previously, tax deductions were available on other grounds, for example, when investing in the modernization of an enterprise or in the infrastructure of the region. The changes should stimulate the direction of funds in innovative projects, contribute to increasing the technological sovereignty of the country and intensify the venture capital investment market, according to the government.

The income tax deduction is provided to increase the investment attractiveness of certain financial investments, as it increases the actual income from them, "Vladimir Chernov, an analyst at Freedom Finance Global, commented on the initiative, adding that it will support the venture capital investment market in Russia, which is rather poorly developed compared to some countries.

By the beginning of April 2024, 187 officially registered organizations were indicated on the website of the Federal Notary Chamber in the register of investment partnerships against 140 in February 2023. Thus, there was an increase of 30%.^[2]

2023: Moscow region was the first to adopt a law on tax deduction for Russian software

The Moscow region was the first to adopt a law on tax deduction for Russian software. The press service of the regional Ministry of Investment, Industry and Science announced this on March 23, 2023. Read more here.

2022: Tax deduction payments in Russia increased by 400 billion rubles

In 2022, the Russians returned 2.7 trillion rubles in total with the help of tax deductions, which is 400 billion rubles more in comparison with 2021. Such data from the Federal Tax Service (FTS) were released in May 2023.

According to the statistics of the department, most often citizens in 2022 issued a property deduction for the purchase of housing. This benefit was used by 4.3 million people. The total amount of property deductions provided amounted to almost 2 trillion rubles. A year earlier, 4 million people declared deductions under this program in the amount of 1.7 trillion rubles.

Tax deduction payments in Russia for the year increased by 400 billion rubles

In second place is the social deduction, 3.4 million taxpayers received it. They include social deductions on the amounts transferred to taxpayers in the form of donations, for the treatment and purchase of medicines, their own training, as well as the study of children, siblings under 24 in full-time format. This also includes compensation for the amount of contributions under voluntary insurance contracts, contributions under contracts of NGOs, DPSs and DSFs, as well as for passing an independent assessment for compliance with qualification requirements. In 2022, 3.4 million people received tax deductions in the amount of 206 billion rubles, a year earlier 2.6 million citizens received deductions in the amount of 139 billion rubles.

This is followed by a deduction for mortgage interest - it was issued by 1.5 million Russians in 2022, receiving 373 billion rubles. In 2021, 1.3 million citizens received such deductions for a total of 318.8 billion rubles.

Since 2022, deductions for sports and recreation services have appeared. In total, by the end of 2022, the Tax Code provided for 7 groups of tax deductions: standard, social, investment, property, professional and two types of deductions for transferring losses from investments in the stock market or participation in an investment partnership.^[3]

2021: The State Duma adopted a law on online receipt of tax deductions

In April 2021, the State Duma adopted in the third (final) reading a law on simplified online registration of tax deductions for citizens. In accordance with the innovations, property (for expenses on the purchase of housing and repayment of interest on loans) and investment (for operations taken into account on an individual investment account) tax deductions on personal income tax (NDFL) can be received through the taxpayer's personal account and without filing a 3-NDFL return.

According to the Chairman of the State Duma Vyacheslav Volodin, the law will simplify life for many.

The pandemic [coronavirus COVID-19 - approx. TAdviser] showed us how important it is to develop digital technologies, make access to public services remote, so that a person can use them in any situation, "he said.

The State Duma adopted a law on simplified receipt of tax deductions

After the law comes into force (January 1, 2022), contacts with the tax service will be carried out through a personal account, and tax authorities using an automated information system will themselves check the taxpayer's right to a tax deduction (as part of information interaction with banks that are connected to such a system).

It is expected that the implementation of the simplified procedure will lead to a significant reduction in the time for the provision of tax deductions.

The amendments also establish responsibility for providing banks, brokers and professional participants with inaccurate information when making deductions in a simplified manner. The fine for this can reach 20% of the amount of the illegally received deduction.

Citizens of Russia who are officially employed have the right to a tax deduction, from whose income tax (personal income tax) is paid. When purchasing housing, the amount of deduction is 13% of its value, but should not exceed 260 thousand rubles. At the same time, the limit of the tax base is 2 million rubles.^[4]

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