Leaving Russia becomes even more expensive

Lately, Russian authorities have been discussing the introduction of a windfall tax to supplement the budget. The bill “On the tax on excess profits of previous years” is currently not publicly available, although it has been sent to major taxpayers for comment.

According to the media, the obligation to pay this one-time tax will fall on companies whose profits in 2021-2022 exceeded those for 2018-2019, and the difference was more than 1 billion rubles. The rate of windfall tax will amount to 5% of the difference.

The taxpayers are expected to be both Russian and foreign companies with permanent representation in Russia, including foreign firms leaving the Russian market. Alternatively, the latter will be able to take this fee into account in the price of the exit transaction, although they will still need to pay a contribution to the budget of at least 5% of the value of the shares or stock.

Small and medium-sized businesses, as well as enterprises of the oil, gas and coal industries will be exempt from windfall tax. In addition, investments under capital investment protection and promotion agreements (CIPA) can be deducted from the new tax base.

The relevant amendments to the Tax Code of the Russian Federation are supposed to enter into force in 2024. However, companies will be entitled to transfer to the budget half of the amount of tax already in 2023, in which case the amount of tax to be paid the following year will be reduced by the previously made payment.