Russia plans tech firm tax breaks to break fossil fuel dependency

21 Jul 20

Russia is looking to lure tech companies to headquarter themselves there by granting them more than $1bn in tax breaks.


The government hopes to diversify its economy away from fossil fuel production, which provides nearly half of federal budget revenue, following the collapse of oil prices earlier this year, a draft law indicates.

The law proposes slashing taxes on corporate profit by removing the element that goes to municipalities – cutting the rate from 20% to just 3%.

This will apply to software profits made from software sales and electronics developers, who will also benefit from social security and pensions contributions being halved.

The Russian government revealed in a document accompanying the draft law that it believes the new tax will be “better [for companies] than some other attractive jurisdictions such as India and Ireland”.

“In fact, it will be one of the lowest tax rates in the world for this field,” it continued.

The government expects to miss out on 32bn rubles ($450bn) in corporation tax and around 45bn rubles ($630bn) in other payments each year.

The international community is currently in talks hosted by the OECD to try to come up with a solution to global corporate tax problems, with discussions including the possibility of a uniform rate of tax of about 20% – much higher than these proposals.

Russia’s economy has been hit hard by lockdown measures and the drop in fuel prices associated with Covid-19.

Earlier this year, chairman of the country’s national audit office Alexei Kudrin urged the government to use up half of its 12.2trn ruble ($157bn) National Wealth Fund of saved oil and gas revenues to deal with the crisis.

At the time, finance minister Anton Siluanov said he believed the government had adequate reserves to deal with the pandemic and its effects.

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