
- Awara
- January 30, 2025
- 26
Russia Approves Sweeping Tax Code Changes to Raise Revenue and Streamline System
The State Duma has adopted a series of amendments to the Russian Tax Code, marking a significant shift in the country’s taxation policies. The new measures, which took effect on 1 January 2025, aim to increase revenue while introducing a progressive framework for personal income taxes. The amendments are expected to have long-term implications for individuals, businesses, and the broader economy.
The changes, including a hike in profit taxes, the introduction of a five-stage personal income tax scale, and adjustments to the Simplified Tax System (STS), have sparked widespread debate among economists and businesses.
Progressive Personal Income Tax Scale
A major feature of the new framework is the implementation of a progressive tax scale for personal income. While the existing flat rate of 13% remains for incomes below RUB 2.4 million, higher earnings will now face steeper taxation:
- 15% for income between RUB 2.4 million and RUB 5 million.
- 18% for income between RUB 5 million and RUB 20 million.
- 20% for income between RUB 20 million and RUB 50 million.
- 22% for income exceeding RUB 50 million.
These higher rates apply only to income above the respective thresholds, not to the entire amount. Passive income sources such as dividends, deposit interest, securities transactions, and property sales will continue to be taxed at 13% for amounts up to RUB 2.4 million, with the rate rising to 15% beyond this limit.
Profit Tax Hike and Business Incentives
Businesses will see the profit tax rate rise from 20% to 25%, with the federal share of the tax increasing from 3% to 8%. Regional contributions will remain at 17%. The hike also applies to income from foreign entities operating in Russia, offshore crude hydrocarbon production, and controlled foreign companies (CFCs).
To offset the increased burden, the government has introduced an investment tax deduction. Companies can reduce federal profit taxes by up to 50% of eligible capital expenditures, with unused deductions carried forward to future periods. However, this deduction excludes foreign tax residents, investment agreement participants, and certain excise goods producers.
In addition, R&D expenses and investments in Russian high-tech equipment and software will receive enhanced tax benefits through increased multiplying coefficients.
Revamped Simplified Tax System
The amendments significantly alter the STS, traditionally favored by small and medium-sized enterprises (SMEs). The annual income threshold for STS eligibility will rise to RUB 450 million. Businesses earning between RUB 60 million and RUB 450 million will now be subject to a tiered Value-Added Tax (VAT) system:
- 5% for incomes up to RUB 250 million.
- 7% for incomes between RUB 250 million and RUB 450 million.
Those surpassing these thresholds will revert to the standard VAT rates of 10% or 20%. Exemptions from VAT remain available for businesses with annual incomes under RUB 60 million, provided they notify tax authorities in advance.
Additionally, the headcount limit for STS eligibility will increase from 100 to 130 employees, and the book value of fixed assets will rise to RUB 200 million.
Industry-Specific Tax Adjustments
The tax burden on certain industries is also set to rise. A higher mineral extraction tax will be levied on specific resources, and excise taxes will be expanded to include nicotine raw materials, alcohol-containing medicines, and tobacco-free e-liquids. Property taxes for individuals and businesses owning assets worth over RUB 300 million will increase to 2.5%, while land tax for expensive plots will rise to 1.5%.
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