Russian Tax Changes Signed Into Law

by Tatiana Smolenskaya, Tax-News.com, Moscow

01 December 2008

Changes to the Russian corporate tax regime recently unveiled by Prime Minister Vladimir Putin were signed into law by President Dmitry Medvedev on Wednesday, having received the approval of the Federation Council.

The amendments to the Russian Tax Code and other laws that were signed by Medvedev on Wednesday will see corporate taxes cut by 4% to 20% from January 1, 2009.

In addition, companies will pay tax on their actual profits as opposed to the "paper profits" displayed in company accounts. Regions will also be able to reduce their share of the total by up to 10%, currently set at 4%, therefore allowing a lowest possible overall rate of 10%.

Small businesses can also expect a substantial tax cut next year under the reforms detailed by Putin, with the rate of profit tax for small firms to be lowered to 5% from 15%.

Additional changes designed to ease the tax burden on business include updating the value-added tax rules to accelerate refunds to businesses and simplify the advance VAT payment process. Additionally, the investment depreciation allowance will be increased to 30% from 10% of the cost of fixed assets. These changes are also due to take effect from January 1, 2009.

It also emerged that legislation extending the presidential term to six years (from the current limit of four) has been approved by the Federation Council in a near-unanimous vote. This is being viewed by many as a further sign that Prime Minister Putin will re-assume the Presidency after Medvedev leaves the role.

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