We remind you that starting on January 1, 2025, the tax rates on corporate income tax will change by virtue of Federal Law No. 176-FZ dated 07/12/2024 “On Amendments to Parts One and Two of the Tax Code of the Russian Federation”. The main innovations affect, among other things, the corporate income tax.

At the moment, the corporate income tax rate is 20%. Beginning in 2025, the income tax rate will increase to 25%, of which 8% will go to the federal budget and 17% to regional budgets. It is expected that such a regime will be in effect until 2030.

Special rates will be set:

1) for individual organizations, for example:

• for IT organizations, the tax rate credited to the federal budget will be 5%, to the regional budget 0% (para. 1.15 of Article 284 of the Tax Code of the Russian Federation). Currently, the income tax rate is 0%.

• for small technology companies, the laws of the constituent entities of the Russian Federation may establish reduced tax rates credited to the regional budget (paras. 1.8-5 of Article 284 of the Tax Code of the Russian Federation);

• for organizations holding licenses for the use of subsurface areas in respect of profits received from the development of these subsurface areas, from 01.01.2025, the tax rate is set at 20%, provided that the company has exported at least one batch of liquefied natural gas on the basis of a license by December 31, 2022 inclusive.

2) for certain incomes. Thus, dividends paid to a foreign organization will be taxed at a rate of 15% (Para. 3, subpara. 3, Article 284 of the Tax Code of the Russian Federation). The tax rate on all income of foreign organizations not related to activities in the Russian Federation through a permanent representative office increases from 20% to 25% from 01.01.2025 (with some exceptions). Due to the increase in the rate, organizations may need corrective accounting entries, especially when applying Accounting Regulations (PBU) 18/02, if there are deferred tax assets and/or deferred tax liabilities in accounting as of December 31, 2024.

Increasing the coefficient rate

From 2025, it will be possible to increase certain types of expenses when calculating income tax by applying an increasing coefficient, which will be changed from 1.5 to 2.

The increasing coefficient can be used to account for the costs of:

• purchase of fixed assets included in the Unified Register (PP 878) and related to the field of artificial intelligence, as well as those included in the list of Russian high-tech equipment;

• acquisition of amortised intangible assets in the form of software licenses and databases;

• Research and development activities (R&D), which are listed in a special List approved by Government Decree No. 988 dated December 24, 2008;

• purchase of licenses for programs and databases included in the Unified Register of Russian Software and Databases related to the field of artificial intelligence.

Federal investment deduction

The deduction allows a lump-sum reduction of tax to the federal budget for a significant part of expenditure on the acquisition or creation of a fixed asset or intangible asset or expenditure on modernization, retrofitting and technical re-equipment.

Fixed assets and intangible assets are included in depreciation groups at the initial cost, reduced by deduction and expenses of the reporting period. If, when forming the initial cost of an object, expenses are adjusted at an increased coefficient, the deduction is not applied (paras. 4, 7 of Article 286.2 of the Tax Code of the Russian Federation).

Unlike the regional investment deduction, the federal one applies throughout Russia. Only one of these two deductions can be used.

If the amount of income tax is insufficient for a full deduction, its balance can be transferred to the next tax period. But, the amount of the federal part of the tax in each tax period must be at least 3% of profit over the next 6 years and at least 2% in subsequent years.

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