President Vladimir Putin approved a windfall profit tax on large Russian companies as the government seeks additional sources of income for the budget against the backdrop of massive spending on its war in Ukraine.
(Bloomberg) — President Vladimir Putin approved a windfall profit tax on large Russian companies as the government seeks additional sources of income for the budget against the backdrop of massive spending on its war in Ukraine.
Companies will be subject to a 10% tax paid on the difference in profit in 2021-2022 compared with 2018-2019. The law that comes into force in January will apply to businesses that made an average annual profit of more than 1 billion rubles ($10.5 million) in that period.
Finance Minister Anton Siluanov said the government expects to raise about 300 billion rubles from the measure.
The rate will halve to 5% for companies that opt to pay the tax before Nov. 30, according to the law published on the government’s legislation website. Small and medium-sized businesses, as well as oil and gas producers and coal mining companies are exempt.
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Subsidiaries of foreign-owned companies that haven’t yet left Russia since the February 2022 invasion of Ukraine and have enjoyed surging sales will also have to pay the tax.
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Siluanov said earlier that the tax would be a “one-time fee in agreement with business,” and that a permanent levy on excess profit would be inappropriate. His deputy Alexei Sazanov said, however, that the authorities could return to the tax in future if it was needed to help finance Russia’s budget deficit.
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