A law adopted in late 2010 and implemented from January 1st of the running year, introduced a rate of 0% on corporate profit tax for companies; (both domestic and foreign) who sell or otherwise alienate (including redemption), shares (stakes) to Russian companies, provided that they belonged to the taxpayer on the basis of property or any other right for more than 5 years.
In addition, shares in Russian companies must meet certain criteria (ie not publicly traded, etc.) in order to apply the zero rate on corporate profit tax. Last but not least, the zero rate of corporate profit tax applies only to shares acquired after January 1st, 2011 and therefore will be applied in practice only after January 1st, 2016.
■ Exemption from corporate profit tax for transfers to Russian companies, for purposes of increasing their net assets:
Another law adopted also in late 2010 and implemented from January 1st, 2011, with retroactive application (applicable to transactions after January 1st, 2007), introduces an exception to the corporate profit tax; by giving shareholders very effective mechanisms regarding tax, so that they can increase the net assets of Russian subsidiaries that have suffered from the global economic downturn.
Consequently to this law, the list of income that are not subject to corporate profit tax has been extended so as to include the assets, property rights, and intellectual property transferred from another shareholder (not just the majority shareholder as it was before the amendment), to the Russian company for purposes of increasing the net assets.
Expected changes
■ Values of Transfer Pricing:
2010 was supposed to be the year of reforming the rule for transfer pricing values (TES) of Russia, with the introduction of a new chapter in the Tax Legislation of Russia over the rules and procedures of TES which will be implemented from January 1st this year. However, the draft law on Transfer Pricing Values passed only from the lower part of the Russian Parliament and remains at this stage even today.
Notwithstanding the above, if the capital on the transfer pricing values is introduced into the legislation, it is very likely that it will significantly change the business environment in Russia. Primarily, the responsibility for proving that a particular transaction is on a commercial basis will fall on the taxpayer. Consequently, the taxpayer must prepare and maintain certain documents to justify the pricing method used in controlled transactions where the amount of revenues or expenses exceed the limit of RUB 100 million in a fiscal period.
