1. Will the income tax rate change in 2019?
The basic income tax rates to be charged to the federal and regional budgets until 2024 will not change (according to Federal Law No. 301-FZ adopted on 03 August 2018). Thus, in 2019, we will pay our taxes at the good old rates: 3% to the federal and 17% to the regional budget.
Legal Basis and Details:
Federal Law No. 301-FZ, dated 03 August 2018, “On the Amendment to Part 2 of the Tax Code of the Russian Federation”: according to Article 15, “2020” in Art. 284, Clause 1, Item 15, para. 2 and 3 of Part Two of the Tax Code of the Russian Federation is replaced with “2024”.
Starting from 1 January 2019, the tax rate shall amount to 20 percent, unless otherwise provided for by this article. Whereby the amount of the tax assessed at the tax rate of 2 percent (3 percent in 2017-2024) shall be charged to the federal budget, unless otherwise provided for by this chapter; the tax amount assessed at the tax rate of 18 percent (17 percent in 2017-2024) shall be charged to the budgets of Russian regions.
2. Will regions still be entitled to set out lower tax rates in 2019?
No. According to Federal Law No. 302-FZ, regions will not be entitled to set out lower income tax rates. An exemption is made for particular types of organizations, e.g. residents of special economic zones.
If a region adopted a resolution on introducing a lower income tax rate prior to 01 January 2018, such rate may be maintained until 01 January 2023. Moreover, between 2019 and 2022, such lower tax rates may be revised, namely increased, upon a discretion of regional authorities.
Legal Basis and Details:
Federal Law No. 302-FZ, dated 03 August 2018, “On the Amendment to Parts 1 and 2 of the Tax Code of the Russian Federation”: Article 284, Clause 1, Item 2 of the Tax Code of the Russian Federation, introduces the below addition: “Taxpayers shall apply lower rates of the corporate income tax to be charged to the budgets of Russian regions and set out by Russian regions prior to 01 January 2018 until expiry of the validity term thereof but no later than 1 January 2023. Moreover, the Russian regions are entitled to increase such lower tax rates for the tax periods of 2019-2022.”
This addition comes into force on 01 January 2019.
3. Which fixed assets may be depreciated in 2019 at the multiplying factor?
We have two good messages, especially for the companies actively using innovative technologies and production equipment. In the first instance, the list of the main process equipment used in line with the best practices will be thrice longer than before and comprise 583 items (before: 246 items). In the second instance, such equipment may be depreciated using multiplying factor 2. The legal basis for such amendments is set out in Art. 259.3, Clause 1, Item 5 of the Tax Code of the Russian Federation that comes into force on 01 January 2019.
Legal Basis and Details:
Decree of the Government No. 622-r, dated 07 April 2018
Article 259.3 of the Tax Code of the Russian Federation (the new version comes into force on 1 January 2019 according to Federal Law No. 219-FZ, dated 21 July 2014).
4. How will interests on a borrowing or a loan issued by a foreign related person be accounted in 2019?
Special-purpose provisions, according to which a debt associated with borrowed funds shall not be deemed a controlled indebtedness, will come into force in 2019. Such provisions are listed in Clause 7 added to Article 269 of the Tax Code of the Russian Federation in accordance with Federal Law No. 199-FZ. According thereto, interests on a borrowing or a loan received from a foreign related person shall be completely accounted as expenses provided that the below terms and conditions are simultaneously complied with:
- the borrowed funds were invested into construction of a complex in Russia to be used only for manufacturing goods (rendering services);
- such new complex will be commissioned after 01 January 2019;
- according to the terms and conditions of a borrowing, the repayment period shall start at least 5 years after generation of such debt;
- the aggregated share directly and indirectly owned by a foreign related person in a Russian company that received borrowed funds shall not exceed 35 percent;
the foreign creditor shall be registered in a foreign country, with which a double-taxation agreement (treaty, convention) is entered into.
Legal Basis and Details:
Federal Law No. 199-FZ, dated 19 July 2018, Article 2, Clause 3.
Article 269, Clause 7 of the Tax Code of the Russian Federation (new version)
This addition comes into force on 01 January 2019.
5. Will expenses associated with vacation packages for employees be taken into account for assessment of the income tax in 2019?
Starting from 2019, the cost of vacation packages both for employees and their family members may be taken into account for assessment of the income tax. In compliance with the amendments introduced into Articles 255 and 270 of the Federal Code of the Russian Federation by Federal Law No. 133-FZ, the expenses associated with transportation, accommodation and catering in a hotel or any other accommodations within the territory of the Russian Federation, health resort services, and tour services set out in Article 255, Clause 16, Item 9 of the Tax Code of the Russian Federation (medical expenses of insured employees).
However, the below terms and conditions shall be observed:
- The vacation shall take place in Russia.
- The expenses shall not exceed RUB 50,000 per year and employee.
- The total annual amount of vacation package expenses, expenses in form of contributions made within the framework of voluntary life and health insurance agreements, as well as employer’s expenses borne under medical service agreement entered into for the benefit of employees shall not exceed 6 percent of the annual expenses for labour remuneration of a company.
Legal Basis and Details:
Federal Law No. 133-FZ, dated 23 April 2018, “On the Amendments to Articles 255 and 270, Part 2 of the Tax Code of the Russian Federation”
6. Which preferences will innovative companies have innovative companies have in 2019?
The companies acknowledged as participants of innovative scientific and technological projects are exempted from the income tax for 10 years provided that they perform activities in line with the requirements of Article 2 (Clause 9) and Article 14 of Federal Law No. 216-FZ. The 10-year period starts from their acknowledgement as such.
Legal Basis and Details:
Federal Law No. 373-FZ, dated 30 October 2018
Tax Code of the Russian Federation, Article 246.1
New provisions come into force on 01 January 2019
7. Will residents of special administrative districts have any preferences in 2019?
Yes. Starting from 2019, foreign companies that are acknowledged to be global may get tax preferences if they become registered companies of the Russky Island (Primorsky Territory) or the Oktyabrsky Island (Kaliningrad Region).
To become a global company, it is required to observe a range of requirements (e.g., invest into the Russian economy at least RUB 50 M within 6 months from the registration). The status of a global company is obtained at the time of the state registration.
Federal Laws No. 290-FZ, 291-FZ, 292-FZ, 294-FZ, 295-FZ, dated 03 August 2018
8. Will the manner of tax payment by residents of the special economic zones of Crimea and Sevastopol change in 2019?
Yes. The manner of applying lower tax rates will change. Starting from 2019, this preference will be available for residents only within the validity term of the agreement on operation in the special economic zones. If such agreement is terminated by a judicial award, the company shall pay the tax at the standard rates (we described the amount thereof above in the beginning). May such agreement be terminated not by a judicial award? The amendment applies exclusively to termination by a judicial award. Anyway, the preferences are available exclusively for an existing agreement on operation in the special economic zone.
Legal Basis and Details:
Federal Law No. 297-FZ, dated 03 August 2018
