The Russian Government is planning to introduce a “windfall” tax – an extraordinary tax on excess profits to make up for budget deficit. The legislative amendments have been drafted by the Ministry of Finance; the corresponding bill, however, has neither been published on the web portal regulation.gov.ru nor has it yet been introduced to the State Duma.
It is known from the media, though, that the relevant amendments are to come into force from 2024, with the windfall tax to be paid no later than January 28th, 2024. At the same time, companies will have the option to pay the windfall tax in advance in 2023. Along with Russian companies, permanent establishments of foreign organizations will also be considered taxpayers.
The amount of windfall tax is 10% of the profit increase in 2021-2022 in comparison to 2018-2019 (5% if paid in advance in 2023).
The windfall tax only applies to companies with the average profit in 2021-2022 exceeding RUB 1 billion (approx. EUR 11.5 million). In addition, SMEs, oil, gas and coal companies, as well as companies established after January 1st, 2021 (except in cases of reorganization) are not considered taxpayers. Similarly, permanent establishments of foreign organizations that commenced activities after January 1st, 2021 are not considered as taxpayers.
The windfall tax should be viewed as a one-time crisis measure to support the Russian budget. Therefore, we expect that this measure will ultimately be implemented with minimal changes despite criticism from many Russian companies.