Forte Tax & Law tax initiatives were reviewed by the Governor of St. Petersburg

The Governor of St. Petersburg chaired on Friday September 28, 2018 a meeting of the Group for Improvement of Business Environment, also attended by Anton Kabakov, Partner at Forte Tax & Law. One of the roles fulfilled by this Group is to prepare decisions on current issues involving the city and St. Petersburg business community. The meeting attendees went over what specialized working groups did over the past year and also set the main tasks and objectives for the long run. Among other things, proposals for tax incentives for investment in St. Petersburg prepared with the direct involvement of the Forte Tax & Law team were also reviewed during the meeting.

We presented our proposals for tax legislation improvement for the first time in June 2018 at a meeting of the Working Group for Improvement of Investment Climate. We then put forward two major initiatives at regional level, namely: exemption of tax on movable property and the introduction of investment tax deduction. Since the same fixed assets will actually be eligible for both tax benefits, it was decided at the working group meetings to determine which of the two initiatives is of higher priority for the region and business. This dilemma resolved itself, however, when the President of Russia signed in August a law abolishing taxation on movable property owned by organizations. This law will enter into force in 2019.

From then on, we have continued promoting the idea of investment tax deduction, discussing it at meetings of the Working Group for Improvement of Investment Climate as well as with representatives of St. Petersburg Investment Committee. As a result of concerted effort and effective teamwork, our initiative reached the head of the region with real prospects of implementation. In our opinion, the introduction of this measure would result in production modernization, re-equipment and renewal of industry.

As part of the working group, we also pointed out and delved into another tax issue. The regions of Russia will be entitled from 2019 onwards to offer only the benefits for the regional part of profit tax that are expressly listed in the Tax Code. And these are few and far between so current regional tax benefits will cease to exist. Such restriction on the tax benefits that can be offered by the regions will be deleterious as the regions will no longer be able to decide on their own which incentives is better for business in light of the socio-economic situation in a particular region. It is gratifying to see that our request to continue working on this issue found an echo at the meeting of the Group.

Our initiative at federal level consisting in amending the Tax Code by introducing a rule on the “succession” of maximum base for accrual of social insurance contributions upon reorganization of companies was also considered at the meeting. This issue gives rise to undue challenges for companies subject to reorganization and adversely affects investment opportunities so it needs to be considered very closely.

If you would like to discuss these initiatives or suggest your own, please contact Anton Kabakov.