From 2025, some of the current incentives that affect both companies and private individuals (amendments to the Russian Tax Code by Federal Law N 259-FZ of August 8, 2024) as well as foreign IT companies will be abolished.
Taxation of the economic benefit by share purchases
From 2025, the sale of shares to an individual at a price below the actual value (i.e. below the value of the selling share in terms of net assets) will result in an “economic benefit” for the buyer.
The economic benefit, which is calculated as the difference between the actual value and the contractually agreed price, will be subject to personal income tax from 2025, the rates will range from 13% to 22%.
This provision is particularly relevant for management buy-out transactions by foreign companies that sell their Russian subsidiaries to the local management well below market value or sell at a symbolic price. It should also be noted that such transactions require the approval of the government commission and the sale price may not exceed 50% of the market value under the current rules. This means that an economic benefit may arise for the buyer (in any case if the actual value will be higher than 50% of the market value), which leads to taxation, regardless of the agreements between the parties.
Exemption from profits tax of debt relief for payment for shares to foreign persons
From 2025 a tax incentive shall be applied to debt relief arrangements between sellers and buyers of shares in a Russian company.
Relief of debt from share purchase agreements concluded in 2024 or 2025 between a Russian buyer and a foreign seller will therefore be exempt from profits tax if the buyer is a Russian legal entity. Therefore, if the debt of the buyer will be relieved this will not result in taxation.
IT benefits for subsidiaries of foreign groups partially abolished
The incentives for Russian IT companies with regard to profits tax and social security contributions apply, among other things, to companies that derive at least 70% of their income from IT activities.
From 2025, the sale of software developed, adapted and/or modified by a foreign company (with the exception of controllable foreign companies, CFC) belonging to the same group as the IT company in question is excluded from the list of such activities.
This change will primarily affect subsidiaries of foreign groups that sell the group's programs in the Russian Federation. For these companies, the application of the above-mentioned incentives will most likely no longer apply.
In addition, a draft resolution of the Russian government is currently under public discussion, which prohibits the accreditation of IT companies with 50% or more foreign participation. Without accreditation, it will no longer be possible to apply the above-mentioned incentives. It is currently planned that these changes will come into force from August 1, 2025.