Bill amending the Tax Code passes the second reading in the State Duma

The Amendments approved during the second reading of the Bill introduce changes to Federal Law No. 488-FZ “On Industrial Policy in the Russian Federation” dated 31 December 2014, establishing a new type of mandatory payment – the technology fee.

The technology fee will be paid on products specified in the list approved by the Russian Government:

• When they are imported into Russia
• When they are produced in Russia, on the continental shelf or in the exclusive economic zone of Russia

The amount of the fee and the procedure for calculating and paying it will also be approved by the Russian Government. The fee will be paid by legal entities and individual entrepreneurs that import relevant products into Russia and/or produce such products in Russia. It is stipulated that the fee will be paid on each listed product unit which is imported into or produced in Russia.

! The technology fee will apply from September 2026.

In addition to expanding the application of federal investment tax credit (FITC) in accordance with the Bill, the Amendments permit Russian constituent entities to establish an investment tax credit on expenses determined on a regional level. 

In the context of international taxation, the Amendments propose extending the provisions of the Tax Code that grant tax exemption or allow the application of reduced withholding tax rates, which were established by suspended double tax treaties, with respect to the following types of income: 

• Until 31 December 2035: interest income on existing long-term loans
• Until 31 December 2028:
  • Income from aircraft purchases
  • License fees for granting the right to broadcast major international and foreign sporting events (see a more detailed description below)
  • Income from the use and (or) granting the right to use any patent, drawing, model, diagram, secret formula, technology or information regarding industrial or scientific experience (know-how)
  • Income from international maritime transportation and marine vessel leases

As is clear from the list above, the exempted income includes income from using and/or granting rights to broadcast sporting events, including Olympic, Paralympic and Deaflympic Games, World Chess Olympiads, world and European championships and cups or other international and foreign sporting competitions and events, as well as the “rights to use international and foreign sports content for terrestrial, satellite, cable and/or other distribution of such broadcasts.” The income is exempt from withholding tax provided that the Russian entity paying the income and the foreign entity receiving the income are not related parties in accordance with Article 105.1 of the Tax Code.

At the same time, the exemption no longer applies to income from using and/or granting the right to use copyright materials and/or related rights (any literary, artistic or scientific works, including software, cinematographic films, phonograms, tape recordings or other media for use in radio and television broadcasts, or other means of reproduction and dissemination of information).

Nor is the extension applied to income (royalties) from using and/or granting rights to use audiovisual works and other intellectual property and means of individualization on TV channels for terrestrial, satellite, cable and/or other distribution of such channels. In addition, the withholding tax exemption no longer applies to income from the sale of marine vessels registered in the Russian International Ship Registry and located in Russia.

The Tax Code is also supplemented with new provisions permitting Russian companies to forgive certain debts due from foreign companies owned 50% or more by foreign states in which they are domiciled. Such a debt may be treated as a bad debt due to a Russian company if the following conditions are met (it is not quite clear from the Bill’s wording whether conditions 3 and 4 must be met simultaneously):

1. The debt represents interest, fines, penalties and/or other sanctions and is recognized as income of the Russian company no later than 31 December 2029 in accordance with the new subparagraph 14⁷ paragraph 4, Article 271 of the Tax Code.
2. The debt obligations are terminated due to debt forgiveness or expiry of the limitation period.
3. The foreign entity is subject to prohibitive, restrictive or similar measures imposed by foreign states, their associations or international financial and other organizations on payments, financial transactions and borrowing activities.
4. A foreign state’s direct or indirect interest in the foreign entity domiciled in the foreign state is at least 50%.

Income derived by a foreign company from the forgiveness of debt by a Russian company, including the principal, is also exempt from withholding tax in Russia in accordance with the new subparagraph 13, paragraph 2, Article 310 of the Tax Code (conditions 2, 3 and 4).

Additional conditions are established for granting the existing profit tax exemption to CFCs that act as holding or subholding companies. Under the amended paragraph 7, Article 25.13-1 of the Tax Code, such CFCs qualify for the exemption if their profit (income) is subject to an income tax rate of at least 15% in accordance with the legislation of a CFC’s country of domicile. These provisions will apply to the exemption of CFCs’ profit for tax periods starting from 2026.

Under the amended Article 105.14 of the Tax Code, controlled transactions include transactions with residents of foreign states if the corporate income tax rate set by the legislation of a foreign state does not exceed 15%. 

Changes planned from 2026 require bookmakers to pay tax at a rate of 7%. The tax base is calculated as betting income less relevant expenses specified in Chapter 25 of the Tax Code.

The amendments maintain the current procedure, which requires three criteria to be met simultaneously to transition to this regime — asset, income, and taxes (the text for the first reading of the Bill proposed stipulating that meeting at least one criterion is sufficient).

An amendment permitting the seizure of documents during monitoring has also been removed.

The change in tax payment deadlines proposed by the initial version of the Bill is abolished, so the existing procedure remains in place – if the tax payment deadline falls on a non-business day, the tax is paid on the next business day.

Below is a brief overview of the key changes in the Tax Code that were proposed by the initial version of the Bill and are not expected to be revised.

VAT

• Increase in the rate from 20% to 22%
• Introduction of amendments to Article 149 of the Tax Code, stipulating that VAT exemptions no longer apply to:
  • Bank card servicing operations
  • Payment system operators’ activities for collecting, processing and providing data on bank card transactions
  • Activities involving the sale of precious metals from ores, concentrates and scrap by taxpayers engaged in the extraction of precious metals to precious metal refiners – subject to VAT at a rate of 0% if relevant documents are available
• Clarification of the VAT treatment of mining infrastructure leases
• Treatment of payments (or partial payments) under a utility digital rights acquisition contract executed via an investment platform as payments (or prepayments) for future deliveries of goods (work, services or exclusive rights) for VAT purposes

Excise duties

• Indexation of excise duty rates for 2026–2027: (ethyl alcohol, wine and alcoholic products, alcohol-containing products, tobacco and nicotine-containing products, sugar-sweetened beverages)
• Cancellation of advance excise duty payments on alcoholic and/or alcohol-containing products by producers
• Reference average wholesale price of jet fuel, gasoline and diesel fuel for 2028
• Adjustments to the calculation of the Ts_neft (Цнефть) and Ts (Ц) indicators to reflect changes in the Russian oil pricing methodology
• Clarification of parameters for allowable deviations of actual wholesale prices of domestic motor fuel from their reference values

IT-related incentives 

• Increase in the preferential social security contribution rate for IT companies from 7.6% to 15%
• Restrictions on the application of IT-related incentives by Skolkovo residents

Extension of the 50% limit on loss carryforwards until 2030

Multiplier for expenses on Russian software

From 1 January 2026, the multiplier may be used only if contracts with rights holders prevent further transfer of the rights to use software, databases and software packages. 

Income tax for Russian members of MNE groups

Russian members of MNE groups will apply an income tax rate of 15% (from 1 January 2026) instead of the standard 25% if the actual effective rate is less than 15%. 

Social security contributions

The proposed changes cancel incentives for some small and medium-sized enterprises (SMEs) and introduce an obligation to pay social security contributions on payments to company executives. 

As for the cancellation of incentives, the amendments require transition to general social security contribution rates for most SMEs. From 1 January 2026, these enterprises will thus have to pay social security contributions at general rates (30% within the contribution cap and 15.1% on amounts exceeding the cap). The provision on the application of the reduced 15% rate remains in effect for SMEs when their principal economic activity indicated in the Unified State Register of Legal Entities or the Unified State Register of Individual Entrepreneurs is included in the Russian Government’s list of priority sectors and income from this activity accounts for at least 70% of total income for the reporting (calculation) period.

The changes also introduce an obligation to pay social security contributions on payments and other remuneration to company executives. 

If the amount of accrued payments and other remuneration to an individual who is the sole executive body (executive) of the company for a calendar month of the calculation period is less than the amount of the federal minimum wage established as at the beginning of the calculation period, the social security contribution base is deemed equal to the amount of the federal minimum wage.

If an executive exercises their powers for a part of the month only, the relevant amount is determined in proportion to the number of calendar days in the month during which such powers were exercised.

Personal income tax (PIT)

• The 5-year ownership exemption for shares in foreign companies will no longer be applied.
• The Bill establishes cost accounting rules for acquisitions of interests in authorized capital as a result of corporate reorganizations.
• The Amendments clarify tax accounting for expenses when selling property whose cost was included in the taxpayer’s taxable income upon purchase.
• The use of tax preferences is restricted for taxpayers designated as foreign agents.
• The procedure to account for expenses representing the cost of acquired securities and derivatives is adjusted – when they are sold, the FIFO method can now be used only within a single brokerage account.
• A restriction is set on the PIT exemption granted for all types of securities and derivative financial instruments when they are received as gifts from individuals. Previously, the exemption applied only to shares.
• Taxpayers are required by law to declare and pay PIT independently where it is only partially withheld by a tax agent. Previously, they were required to do so only when the entire amount of tax was not withheld by a tax agent.

Correcting past errors (misstatements) in the current period

The Bill introduces a rule that errors (misstatements) identified in previous periods cannot be corrected in the current period if the tax rate has increased. 

Tax registration of foreign entities 

Foreign companies paying income to individuals for services provided via the Internet (e.g., payments to bloggers in Russia) are required to obtain tax registration in Russia. The registration is required specifically for PIT purposes even if the company is already registered as a VAT payer (e.g., as a provider of electronic services). The changes will enter into force one month after the official publication of the law.

In a rapidly evolving tax landscape, the B1 team is always ready to provide expert guidance, including methodological support and adjustments to accounting systems, assistance with obtaining private rulings from the tax authorities on complex methodological matters, changes to accounting policies, review of tax returns, etc.

• Natalia Khobrakova, B1 Partner, Tax, Law and Business Support
• Vadim Ilyin, B1 Partner, Tax, Law and Business Support
• Gueladjo Dicko, B1 Partner, Tax, Law and Business Support
• Vladimir Zheltonogov, B1 Partner, Tax, Law and Business Support