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Investment tax deduction

Description

Investment tax deduction (ITB) is the reduction of profit tax by costs of purchasing, manufacturing, upgrading and reconstructing fixed assets.

THE LAW STATES:

  1. ITD will be available for companies  with the Moscow Investor Category 1 and 2 status
  2. Investment in fixed assets related to depreciation groups 3-10 (except for depreciation groups 8-10 of buildings, structures, transfer devices)
  3. Beneficial Profit Tax Rate:
    12,5% for Moscow Investor Category 1 companies;
    8% for Moscow Investor Category 2 companies.
  4. The benefit provides for abating:
    • regional tax - up to 90% of investments in fixed assets
    • federal tax - up to 10% of investments in fixed assets
  5. The unused amount of the regional benefit can be carried forward to max. 7 consecutive tax periods.

* - Transfer devices include facilities designed to transmit electrical, thermal and mechanical energy, liquid and gas substances, signals, information, etc. (e.g. heat and power networks, power transmission and communication lines, pipelines, if they are not part of the fixed asset).

MOSCOW INVESTOR STATUS CRITERIA

1
MAIN
ACTIVITY
MANUFACTURING

except for coke and oil products manufacturing

2
REVENUE FROM MAIN ACTIVITY

> 70%

3
AVERAGE SALARY IN THE COMPANY

rub 68,000

at least average monthly labor income from in Moscow (New Moscow factor - 0.74)

4
FIXED ASSET RENEWAL FACTOR

except for buildings and structures

> 8%

last year

> 35%

over the last 5 years

5
MINIMUM INVESTMENTS IN FIXED ASSETS

The fixed assets shall be put on the balance sheet in Moscow and located in buildings and units the applicant has the rights for

> rub 200 M A YEAR

MOSCOW INVESTOR CATEGORY 1
Tax rate - 12.5% (INSTEAD OF 17%)

> rub 300 M A YEAR

MOSCOW INVESTOR CATEGORY 2
Tax rate - 8% (INSTEAD OF 17%)

ITD INTRODUCTION GOALS

THE NEW SUPPORT MEASURE AIMS AT:

  • implementing prioritized areas of industrial development in Moscow,
  • developing and implementing innovative technologies,
  • renewing fixed assets and increasing investment activity,
  • replacing current benefits that will become invalid in 2023

* The Russian Tax Code prescribes the beneficial regional profit tax rates to expire on January 1, 2023.

Before January 1, 2023 companies can choose - either profit benefit as per the industrial complex (IC), Technopark (TP) status - now 12.5%, or ITD (at the same time ICs and TPs keep the property and land benefits).

The investment tax deduction may become an alternative to the federal Special Investment Contracts (complicated tender procedures for unique technology development and implementation contracts with a mandatory participation of the Russian Government).

MOSCOW INVESTOR STATUS PROCEDURE

A legal entity applying for the Moscow Investor status shall submit the following documents to the Moscow Department of Investment and Industrial Policy

LEGAL FRAMEWORK

Moscow Law # 28 ‘On Investment Tax Deduction’ as of November 20, 2019
Moscow Government Resolution # 630-PP ‘On Application Procedure for Investment Tax Deduction’ as of May 27, 2020

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