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Key takeaways of Vladimir Putin&’s address to the country

Key takeaways of Vladimir Putin&’s address to the country

LEGAL DIGEST, NEWS \ 25.06.2020

On Tuesday, June 23, Russian President Vladimir Putin delivered an address, in which he summed up the main results of the fight against coronavirus infection in the country in the past three months, and also highlighted new supporting measures.

New supporting measures for IT-companies

In the IT-industry, a “tax manoeuvre” will be carried out, which implies:

– reduction of the insurance premium rate to 7.6% indefinitely;

– reduction of the profits tax rate to 3% indefinitely.

The President also noted that the new measures will make the conditions for IT “better than in such attractive jurisdictions for IT business as Indian and Irish. Actually, it will be one of the lowest tax rates in the world”.

Statutory enactments that formalize the measures proposed by the Russian President will be adopted in the nearest future.

New Personal Income Tax scale

Russian President Vladimir Putin proposed to raise the personal income tax rate (Russian acronym “NDFL”) from 13% to 15%, starting from January 1, 2021, for citizens with income over 5,000,000 rubles a year, and the 60,000,000,000 rubles received as a result of this measure will be used for treatment of children with serious diseases. Additional 2% tax will only be paid on income exceeding 5,000,000 rubles a year.

Differentiating the personal income tax rate will lead to the increasing complexity of tax managing, declaration and payment for some employees, therefore companies are recommended to allocate additional administrative resources for this starting next year.

New developments for controlled foreign companies

Among other issues, Vladimir Putin proposed to simplify the tax payment scheme for those who are tax residents in Russia but develop business abroad. According to him, such citizens should be allowed to pay a fixed tax amount of 5,000,000 rubles a year without additional reporting.

A controlled foreign company (CFC), which is not recognised as a tax resident of the Russian Federation and controlling person of which is a legal entity and (or) individuals being recognised as tax residents of the Russian Federation, is considered for profit taxation purposes in the Russian Federation.