Windfall profits tax 2024 in Russia

In January 1, 2024, a windfall profits tax comes into effect in Russia.

1. WHO WILL PAY THIS TAX?

This tax is imposed exclusively for commercial companies, not individuals.The tax will be levied on both Russian companies and foreign companies doing business in Russia. But the tax does not apply to:
a) Organizations with up to 250 people, as well as with revenues of up to 2 billion rubles (about 22 million dollars);
b) Russian organizations created after January 1, 2021;
c) Foreign companies that started doing business in Russia though permanent representatives offices after January 1, 2021;
d) Independent organizations that during 2022 produced hydrocarbon raw materials (coal and gas), as well as those involved in their processing, as well as organizations that were members of a consolidated group of taxpayers with such areas of activity;
e) Organizations that were levied the unified agricultural tax continuously from January 1, 2018 through December 31, 2022;
f) Credit organizations and non-credit financial organizations in respect of which, as of January 1, 2023, measures were taken to prevent bankruptcy from the Central Bank of Russia or Deposit Insurance Agency state corporation;
g) Developer organizations implementing projects using funds from participants in shared equity construction placed in escrow accounts (in accordance with Federal Law N 214-FZ "On participation in shared equity construction of apartment buildings.."), which did not pay dividends in 2021 and 2022.

Organizations not mentioned in the list must pay the windfall tax.

2. TAX BASE, RATE, AND DUE DATE

The taxable asset is the surplus profit, which in turn is defined as the excess of the arithmetic average of profit for 2021 and profit for 2022 over the arithmetic average of profit for 2018 and profit for 2019, that is:
(2021 profit + 2022 profit)/2 - (2018 profit + 2019 profit)/2

The rate is 10% of the base, and is to be paid till January 28, 2024. Given that the law contains the specific years for calculating the tax base and the exact payment deadline, we can conclude that this law is valid only once.



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