Starting from January 1, 2025, significant changes in tax legislation have come into effect in Russia, affecting both individuals and legal entities. A progressive personal income tax scale, an increase in corporate profit taxes, new deductions, changes in the taxation system for small and medium-sized businesses, as well as the introduction of a tourist tax—all of these factors will have a significant impact on financial planning and tax obligations. In this article, we’ll take a closer look at the key changes to the tax system that will take effect in 2025 and explain how they may impact taxpayers.

Personal income tax

Starting from 01.01.2025, the progressive personal income tax scale has been significantly expanded.

Instead of the two rates—13% and 15%—for the main types of income of Russian tax residents, five different rates are being introduced, each applied to the amount exceeding the threshold of the previous one (Article 224(1) of the Russian Tax Code):

• 13% on income up to RUB 2.4 million inclusive;
• 15% on income from RUB 2.4 million to RUB 5 million per year inclusive;
• 18% on income from RUB 5 million to RUB 20 million per year inclusive;
• 20% on income from RUB 20 million to RUB 50 million per year inclusive;
• 22% on income more than RUB 50 million per year (Article 210(2.1) of the Russian Tax Code).

For income in the form of remuneration paid to persons working in the Far North, and participants in the Special Military Operation, the current tax rates will remain: 13% on income up to RUB 5 million inclusive; 15% on income more than this amount (Articles 224(1.2), 210(6.1) and 210(6.2) of the Russian Tax Code).

Furthermore, for certain types of income of tax residents of Russia, such as income from the sale of property; insurance income; income from equity participation (dividends); income from transactions with securities, shares, and derivative financial instruments; certain types of financial benefits; income from REPO transactions and interest on deposits, the following rates have been established  (Article 210(6) of the Russian Tax Code):

• 13% on income up to RUB 2.4 million inclusive;
• 15% on income over that amount (Article 224(1.1) of the Russian Tax Code).

The tax rates on the income of certain tax non-residents of Russia have also been changed. Thus, the income of highly-qualified specialists, foreign citizens employed, ship crews, and refugees will be taxed according to the five main tax rates. These same rates will apply to the income of employees working remotely from abroad, as well as individuals providing online services from abroad using Russian domain names.

Starting from 01.01.2025, the amount of the standard tax deduction for the second and subsequent children has been increased

The tax deduction for the second child has been increased from RUB 1,400 to RUB 2,800. For the third and each subsequent child, it has been raised from 3,000 to 6,000 rubles. Additionally, the deduction for each disabled child has been increased from 6,000 to 12,000 rubles. The total income threshold at which the deduction ceases to apply has also been raised from 350,000 to 450,000 rubles. The deduction will be provided by the employer (as the tax agent) without requiring a formal request from the taxpayer-employee (Article 218(1)(4) of the Russian Tax Code).

A new standard tax deduction introduced from January 1, 2025

A tax deduction of 18,000 rubles per tax period will be granted to individuals who have passed the GTO (Ready for Labor and Defense) physical fitness standards and have confirmed their awarded distinction, provided they have also undergone a medical examination.

Changes in Personal Income Tax Calculation by Tax Agents

When calculating personal income tax, the tax agent considers the actual expenses incurred and documented by the individual taxpayer based on their application (Article 266(11) of the Russian Tax Code). The deadline for notifying the tax authorities about the inability to withhold PIT has been extended until January 31 of the year following the reporting tax period (Article 266(5) of the Russian Tax Code).

Additionally, the list of tax agents has been expanded. It now includes:

• Foreign organizations that pay income to taxpayers providing online services from abroad using Russian domain names (the requirement to tax such income also comes into effect on 01.01.2025).
• Russian organizations that provide technical capabilities for rendering such services (Article 266(1.1) of the Russian Tax Code).

Mining Income is Subject to Personal Income Tax

Income from Russian sources includes earnings in the form of digital currency obtained through cryptocurrency mining in Russia (Article 208(1)(9.3) of the Russian Tax Code).

Such income is recognized as in-kind income, and the value of the digital currency is determined based on its market quotation on the date the income is actually received (Article 211(1) of the Russian Tax Code).

At the same time, a tax deduction is provided for documented expenses related to cryptocurrency mining (Article 220(1)(5) of the Russian Tax Code).

Changes to Personal Income Tax exemptions

Starting from January 1, 2025, the exemption from personal income tax (PIT) on income from the sale of shares or stakes in the authorized capital, due to ownership for more than five years, will only apply to taxpayers who are tax residents of Russia (Article 217(17.2) of the Russian Tax Code). A limit of RUB 50 million has also been set for the amount of exemption. Furthermore, the method for calculating the tax-free severance pay (equivalent to three months’ salary) has been modified. It will now be calculated in the same manner as maternity benefits and monthly childcare allowances (Article 217(1) of the Russian Tax Code).

CFC fixed profits changed for 2025

For one CFC, fixed profits are set at RUB 27,990,000, for two CFCs, at RUB 52,718,000, for three CFCs, at RUB 75,445,300, four CFCs, at RUB 98,172,600, and five or more CFCs, at RUB 120,899,900 (Article 227.2(2) of the Russian Tax Code).

Corporate Income tax

Income tax rates will go up

Ef Starting from January 1, 2025, the general corporate income tax rate has been raised from 20% to 25% (Article 284(1) of the Russian Tax Code). The additional 5% will be allocated to the federal budget: instead of the previous 2%, 7% will now be directed to the federal budget (8% from 2025 to 2030).

The tax rate for IT companies has also increased by 5%, from 0% to 5%. The additional 5% will also be allocated to the federal budget. Furthermore, a limitation has been introduced – this rate will only apply until 2030. After 2030, IT companies will be required to apply the general rate of 25% (Article 284(1.15) of the Russian Tax Code). Additionally, a 5% increase has been introduced for Russian organizations engaged in the radio-electronics industry, raising the rate to 8%. This rate will only be applicable until 2027, and the tax will be allocated to the federal budget (Article 284(1.16) of the Russian Tax Code). Moreover, the tax rate on interest income from government and municipal securities, as well as mortgage-backed bonds, has been increased by 5% to 20% (Article 218(4)(1) of the Russian Tax Code).

Other Changes in Specific Corporate Income Tax Rates

For organizations included in the register of small technology companies, regional laws may establish a reduced corporate income tax rate for the portion allocated to regional budgets in the period from 2025 to 2030 (Articles 284(1.85) to 284(5) of the Russian Tax Code). The tax rate on income from hydrocarbon extraction at new offshore fields has been reduced from 50% to 40%. This rate applies from the 8th to the 12th tax period from the start date of extraction (Articles 284(1.4) of the Russian Tax Code Income from the development of subsurface resources, under certain conditions, is taxed at a 20% rate (Articles 284(1.17) to 284(1) of the Russian Tax Code). Income from oil transportation in the tax periods from 2025 to 2030 will be subject to a 40% tax rate (Articles 284(1.19) of the Russian Tax Code).

A federal investment deduction introduced

In addition to the existing regional investment tax deduction, a federal investment deduction has been introduced (Article 286.2 of the Russian Tax Code). Taxpayers can choose only one of these deductions.

The federal deduction allows companies to reduce their corporate income tax (or advance payments) allocated to the federal budget by covering specific expenses, including:

Acquisition, construction, manufacturing, and delivery of certain fixed assets, as well as bringing them to a usable condition.

Completion, retrofitting, reconstruction, modernization, or technical re-equipment of such fixed assets and/or intangible assets (IA).

This deduction is available to taxpayers whose primary business activity (as listed in the Unified State Register of Legal Entities, EGRUL) falls under one of the following categories:

• Mining
• Manufacturing industries
• Electricity, gas, and steam supply; air conditioning
• Hotel and food service activities
• Scientific research and development
• Telecommunications
• Information technology

A participant in the ERA Technopolis exempted from tax

An entity that has been granted the status of a participant in the ERA Technopolis is entitled to exemption from the duties of an income taxpayer for 10 years (Article 246.1-1 of the Russian Tax Code).

Increased Adjustment Coefficients

The adjustment coefficient applied to expenses related to acquiring the right to use software (SW) and databases has been increased from 1.5 to 2. Additionally, the scope of this coefficient has been expanded to include expenses for acquiring software-hardware systems, as well as for adapting and modifying software and databases (Article 264(1)(26) of the Russian Tax Code). In addition, the coefficient applied to R&D expenses has been increased from 1.5 to 2 (Article 262(1)(4) of the Russian Tax Code).

Extended Exchange Rate Difference Accounting Rules

The current rules for accounting for exchange rate differences have been extended until 2027. Under this rule, exchange rate differences arising at the end of the month are included in expenses/income only at the date of debt repayment (Article 272(7)(6.1) of the Russian Tax Code).

Expanded 0% Tax Rate for Publicly Traded Shares

Effective from January 1, 2025, the 0% rate applies to transactions in traded shares, regardless of the composition of the issuer’s assets, if the taxpayer sells no more than 1% of the total number of shares. Previously, this 0% tax rate was applied only if Russian real estate accounted for no more than 50% of the organization’s assets (Articles 284.2(2) of the Russian Tax Code).

Restrictions on Deductible Expenses for Corporate Income Tax

Expenses on online advertising can no longer be deducted if:

• The advertising information was not submitted to Roskomnadzor.
• The ad was placed on a restricted access resource.
• The ad was placed by a foreign entity that has not complied with Russian legal requirements. (Articles 270(44) of the Russian Tax Code).

Simplified tax system

• Increased Limits for Using the Simplified Tax System (STS)

 

• The income threshold for switching to the simplified tax system has been increased from RUB 12.5 million to RUB 337.5 million (Articles 364.12(2) of the Russian Tax Code). If a taxpayer lost the right to use STS in 2024 due to exceeding the income limit, they may reapply for STS from January 1, 2025, provided their total income for the first nine months of 2024 did not exceed 337.5 million RUB.
• The maximum average number of employees for STS eligibility has been increased from 100 to 130 (Article 346.12(3)(15) of the Russian Tax Code).
• The residual value of fixed assets has been raised from 150 million RUB to 200 million RUB. The value of Russian high-tech equipment is not included in this limit (Article 346.12(3)(16) of the Russian Tax Code).
• The income threshold for continuing to use STS has been increased from 200 million RUB to 450 million RUB (Articles 346.13(4) of the Russian Tax Code). If a taxpayer exceeds this threshold, the STS status will be lost at the beginning of the following month rather than at the beginning of the next quarter as was the case before January 1, 2025 (Article 346.13 of the Russian Tax Code).

Payment of VAT

Starting from January 1, 2025, Simplified Tax System (STS) taxpayers are required to pay VAT if their income exceeds 60 million RUB. Previously, STS taxpayers were exempt from VAT payments regardless of income level (Articles 145(1) of the Russian Tax Code). Now, taxpayers have the option to choose between:

• Applying standard VAT rates, which allows them to claim VAT deductions, or
• Applying reduced VAT rates (5% for income between 60 million to 250 million RUB per year, and 7% for income between 250 million to 450 million RUB per year), but losing the right to claim VAT deductions.

The previously used increased STS rates have been canceled. The standard rates are:

• 6% for the “income” tax base,
• 15% for the “income minus expenses” tax base

(Article 346.20 of the Russian Tax Code).

Other taxes and contributions

Tourist Tax Across Russia

Starting in 2025, a tourist tax will be introduced across all of Russia, replacing the previously existing resort fee, which applied only in certain resort regions. The new tax will apply to both organizations and individuals providing accommodation services to people in establishments listed in a special registry.

• Tax base: The cost of the service excluding VAT.
• The tax rates will be set by municipalities and may vary depending on seasonality and/or the category of accommodation.
• Certain exemptions are provided in the Tax Code for disabled individuals and veterans, and additional exemptions may be determined by municipalities.
• In 2025, the rate cannot exceed 1%. Gradual increases are planned as follows:
  • 2026 – 2%
  • 2027 – 3%
  • 2028 – 4%
  • 2029 and beyond – 5%
• A minimum tax of 100 RUB per day will apply.
• The tax will be paid quarterly, not based on the taxpayer’s registration location, but at the location of the accommodation (property).

Automated STS

The possibility of using the automated simplified tax system has been extended to all regions and will remain in effect until 2027 (Article 6 of Federal Law No. 362-FZ dated October 29, 2024).

Property tax and land tax on high-value properties

For properties taxed based on cadastre value that exceed 300 million RUB, a higher tax rate of 2.5% is introduced (Article 380(1.3) of the Russian Tax Code). Similarly, for land plots with a cadastre value exceeding 300 million RUB, the tax rate has been increased to 1.5% (Article 394(1)(1) of the Russian Tax Code).

Insurance contributions

The limit for applying reduced insurance contribution rates for small and medium-sized enterprises (SMEs) has been raised. The new limit will be 1.5 times the minimum wage (MW), instead of just the single MW (Article 427(1)(17) of the Russian Tax Code).

For SMEs in the manufacturing sector, a unified reduced insurance contribution rate of 7.6% will apply to the portion of salaries exceeding 1.5 times the MW. Centralized religious organizations will be exempt from insurance contributions (Articles 427(1)(23) and 427(2.6) of the Russian Tax Code).

Various types of state fees significantly increased

For transactions involving expensive real estate, the duty will depend on the cadaster value of the property. For legal entities, the fee may be up to 1 million RUB, and for individuals, it may be up to 500,000 RUB.

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On December 5, 2024, an annual awards ceremony for the leaders of the Pravo-300 Legal Ranking, the Oscar of the legal world, was held in Moscow. This research is the most authoritative among Russian rankings of law firms. The research is conducted annually. This year, Forte Tax & Law has received an award already for the seventh time.

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On November 21, 2024, the U.S. Office of Foreign Assets Control (OFAC) added more than 30 registrars[1] and several Russian banks, including Gazprombank and its subsidiaries, to the sanctions list (SDN List). Please read our comments below to find out what it means for you.

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The Ozon marketplace has decided to launch its own customs broker and enter a list of participants in foreign trade that are engaged in the delivery and declaration of individuals’ express shipments, the company’s representative told Vedomosti. The goal is to speed up deliveries from China, reduce costs, and improve the transparency of the movement of goods. Ozon is now using the services of other customs brokers.

Companies on the list of participants in foreign trade that deliver and declare individuals’ express shipments may declare goods for personal use purchased as part of online trade and delivered as express shipments.

Operators on this list import goods into Russia, send them to specialized customs warehouses, clear goods, pay customs duties, and then deliver the goods to buyers, Julia Talagaeva, Senior Associated, told the newspaper.

For more information, click here (in Russian).

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Article by Artem Eretenko for the Clerk Magazine

Federal Laws Nos. 287-FZ and 305-FZ[1] introduced several key changes in corporate laws, some of which took effect as early as September 1, 2024. The changes, among other things, have affected the mandatory notarization of corporate resolutions adopted by an LLC on the appointment of a permanent executive body, the holding of remote meetings, and the redistribution of powers between the management bodies in an LLC and a non-public JSC. Since the legislative changes are aimed at improving corporate governance mechanisms, it is necessary to pay special attention to correct paperwork in order to avoid corporate conflicts and difficulties that may arise with the registration authority. However, the new rules will inevitably raise new questions relating to the preparation of corporate documents, and we will try to come up with answers to those questions below.

To what situations do the new rules for executing resolutions on the appointment of the CEO of an LLC apply?

Important changes in the procedure for appointing the CEO of an LLC took effect on September 1, 2024. From now on a resolution on the election or appointment of the CEO of a company requires mandatory notarization[2]. These rules will apply regardless of who adopts a resolution—whether the general meeting of members or the board of directors—and of the form in which a resolution on the appointment of the CEO is adopted. Notarization of resolutions on the appointment of the CEO of an LLC is required even if the company’s articles of association do not require notarization of the adoption of a resolution. The requirements for notarization apply only to the appointment of the CEO—i.e., an individual. These rules will not apply to appointing a collegial executive body or transferring powers to a manager. In practice, this may raise several questions about how the new rules for executing resolutions on the appointment of the CEO of an LLC will apply to various situations.

1. Notarization of a resolution on the appointment of the CEO. First of all, the question remains whether resolutions on the appointment of the CEO upon the formation of an LLC should be notarized, and whether this implies mandatory notarization of any resolutions on the formation of an LLC. On the one hand, applicable laws formally require this, without making exceptions for a resolution on the formation of a company. On the other hand, notaries do not currently require notarization of a resolution on the formation of an LLC, at the time when a resolution on the appointment of the CEO is adopted. One can agree with their approach, because at the time of the adoption of a resolution, a company is not yet considered formed. The notary cannot certify the adoption of such a resolution. This problem also poses a question of whether corporate resolutions can be executed abroad. Notaries, the registration authority, and banks may have questions about a resolution of the general meeting of members that is de facto adopted in the presence of a foreign notary outside Russia. Foreign notaries do not certify the adoption of a resolution, but as a rule, they only certify the authenticity of the signatures affixed by the members to the minutes. Furthermore, the legislation on notaries provides that a certificate[3] is to be issued evidencing the legitimacy of a resolution. Applicable laws do not provide for any alternative methods of certifying resolutions. Therefore, it appears impossible to execute corporate resolutions abroad, including at consulates that do not perform notarial acts to certify corporate resolutions[4].
2. Form of adoption of a resolution on the appointment of the CEO. The notarization requirement applies regardless of form. It should be emphasized that in practice, notarization of the adoption of a resolution at a meeting in the form of absentee voting is not possible, because to perform this notarial act, the notary needs the members to be physically present[5]. However, this does not exclude the possibility of establishing in the future the procedure for notarization of the adoption of a resolution at the meeting in the form of absentee voting.
3. Notarization where the CEO’s powers are extended. In addition, there is another practical question: Will notarization be required to have the CEO’s powers extended? Considering that the extension of powers actually means the re-election of the executive body for a new term, and applicable laws do not recognize the extension of powers as a separate action, the provision on mandatory notarization should also apply to such re-election.
4. Changes in filing applications. In conclusion, as regards the provisions on the election of the CEO, it should be noted that changes have been made to the procedure for filing applications for the state registration of the change of the CEO. While previously, it was the CEO to be appointed that acted as an applicant who would sign an application to be filed with Russian tax authorities, from now on, starting from September 1, 2024, this duty has passed to the notary that acts as an applicant filing documents with Russian tax authorities necessary for the registration of relevant changes in the Unified State Register of Legal Entities (“USRLE”)[6]. It is understood that these changes will help reduce the incidence of illegal appointments in companies, preventing the so-called ‘hostile takeovers’ of companies. However, it remains unclear how to avoid abuse by persons (potential participants/members of management bodies) who may appoint new managers without their knowledge, especially given the fact that starting from September 1, 2024, a new manager is no longer an applicant—i.e., he is not required to visit a notary. In practice, this can create difficulties for persons appointed as CEOs without their consent. These persons will at least need to inform the registration authority that inaccurate data have been entered into the USRLE. Additionally, the risk of emerging so-called ‘abandoned’ companies due to the appointment of nominal directors in them is increasing. As a result, these changes to the procedure for filing applications for state registration are aimed at protecting companies from illegal actions by third parties. However, the new rules raise some questions about the risk of abuse in appointing CEOs without their consent, which requires increased attention to the procedure for appointing such CEOs.

What do you need to know about holding meetings remotely and doing related paperwork?

The changes related to holding general meetings of shareholders (members) remotely will take effect on March 1, 2025. Effectively, these changes will incorporate in the Law On Limited Liability Companies[7] and the Law On Joint-Stock Companies[8] the provisions that have previously existed in the general civil law provisions, but in a more detailed form. As you may remember, now a company may hold a general meeting of members (shareholders) remotely, if that is provided for by law or its articles of association. This option is now available to all companies, regardless of their legal form. Furthermore, LLCs and non-public JSCs have the right to set out in their articles of association their own rules for holding general meetings remotely that may differ from generally accepted statutory rules, provided that those rules do not deprive eligible voters of the opportunity to participate in adopting resolutions and receive information about the meeting[9]. The key adopted provisions governing holding general meetings remotely include:

1. Identification of participants (members) of a body of a legal entity. From now on the articles of association may provide for methods of identification of participants in the bodies of a legal entity and for methods of signing ballots for electronic voting as long as these measures do not impose any restrictions on persons who have a right to vote as regards participation in adopting resolutions and receiving information about meetings to be held. Effective from March 1, 2025, a notice of a meeting must, among other things, include information on the procedure for accessing remote participation, including methods of identification. Effective from September 1, 2027, remote participants may be identified using an enhanced qualified electronic signature (EQES). However, before that date, the articles of association can provide for the use of an enhanced unqualified signature, identification through the Russian Public Services Portal (Gosuslugi) or the Unified Biometric System. Proxies will be required to be identified and present a power of attorney or another document of his authority in electronic form in machine-readable form. The law provides that in case of remote participation in a meeting, the notary will confirm the identity with the use of an EQES with trusted timestamping, and the powers of a proxy and his right to participate in a meeting, through the verification of electronic documents signed with an EQES that are sent to the notary through the notary’s unified information system[10]. This brings up a question: Will the notary be able to notarize a resolution adopted at a remote meeting, if the participants do not have an EQES? It is understood that the notary will not be able to do so, because now the law does not provide for any other methods of identification and submission of documents (without the use of an EQES).
2. Broadcasting of meetings. All persons who have a right to vote should be able to participate in a meeting in real time via broadcast.
3. Voting information. The company’s articles of association may provide for mandatory access to information about the voting process in real time to all participants in a meeting.
4. Keeping of records. Companies are required to keep records of broadcasts of meetings along with their minutes, and the law does not establish requirements for any medium on which to keep such records. It should be noted separately that the rules for holding general meetings remotely will also apply to meetings of the board of directors and the management board.

Transfer of powers in LLCs and non-public JSCs: What is important to know and how to formalize it correctly?

As you may remember, as set forth in the JSC Law, as a general rule, matters that fall within the competence of the general meeting of shareholders may not be transferred to the executive body (management board) for consideration. However, the Russian Civil Code allows certain powers to be transferred to the board of directors or the management board. The latest changes are aimed at eliminating it, allowing the delegation of some of the powers to the board, including:

• Paying (declaring) dividends based on the results of the first quarter, the first six months, and the first nine months of the reporting year;
• Approving the company’s annual report and annual financial statements;
• Adopting a resolution for the company to participate in financial and industrial groups, associations, or other groupings of commercial organizations.

The changes also establish that the delegation of powers to the board of directors or the management board will deprive shareholders of the right to demand the redemption of their shares by the company. As you may remember, shareholders will have this right, e.g., if changes are made to the company’s articles of association that restrict the rights of shareholders, and where the general meeting of shareholders adopts resolutions on the reorganization of the company, the approval of a major transaction, the delisting of shares in the company or the termination of the public status of the company. In relation to an LLC, the changes have expanded a list of powers that may not be transferred to the board of directors, including, inter alia:

• Transferring additional rights and additional obligations for participants (including their termination);
• Approving monetary valuation as part of paying for interests in the statutory capital;
• Approving a major transaction if the value of the assets under such a transaction exceeds 50% of the company’s assets.

The matters that may not be transferred to the board of directors in accordance with the amendments may not be transferred to the collegial executive body of the company, either. It is planned that certain powers may be transferred to the board of directors (management board) of LLCs and non-public JSCs or excluded from the competence of those management bodies under a resolution adopted by the general meeting of members (shareholders) of the company unanimously. Furthermore, the provisions related to such a transfer may be provided for by company’s articles of association upon its formation or included in the articles of association by making appropriate amendments.

Conclusion

There has been a positive trend in the development of corporate laws. The changes are aimed at adapting the laws to modern realities. The regulation of remote meetings should clarify the procedure for decision-making by the management bodies of the legal entity. The delegation of certain powers at non-public companies should make it more flexible to take managerial decisions and to provide for the mandatory notarization of resolutions on the appointment of executive bodies at LLCs. At the same time, special attention should be paid to the preparation of documents taking into account the above changes so as to mitigate potential risks that may arise if documents are executed incorrectly.

[1] Federal Law No. 287-FZ dated August 8, 2024 On the Introduction of Amendments to the Federal Law On Joint-Stock Companies and Certain Legislative Acts of the Russian Federation and Federal Law No. 305- FZ dated August 8, 2024 On the Introduction of Amendments to Articles 48 and 66 of the Federal Law On Joint-Stock Companies and Certain Legislative Acts of the Russian Federation.

[2] This provision does not apply to companies that are lending institutions, non-lending financial institutions, or specialized companies formed under the applicable Russian laws on securities (para. 2 of Article 40(1) of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies).

[3] para. 1 of Article 103.10, para. 1 of Article 103.10-1 of The Fundamentals of the Notarial Legislation of the Russian Federation.

[4] para. 2 of Order No. 20795 of the Russian Ministry of Foreign Affairs, Order No. 209 of the Russian Ministry of Justice dated September 29, 2022 On the Approval of Instructions for Consular Officials on How to Perform Notarial Acts.

[5] Article 67.1(3)(2) of the Russian Civil Code and para. 6.1 of Letter No. 2405/03-16-3 of the Russian Federal Chamber of Notaries dated September 1, 2014 On the Distribution of the Guidelines on the Notarization by a Notary of the Adoption by a General Meeting of Members of a Company of a Resolution and of the Composition of the Members of the Company who were Present at the Time of Adoption Thereof.

[6] para. 13 of Article 103.10, para. 3 of Article 103.10-1 of The Fundamentals of the Notarial Legislation of the Russian Federation.

[7] Federal Law No. 208-FZ dated December 26, 1995 On Joint-Stock Companies.

[8] Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[9] Articles 52(5) and 66.3(3)(5) of the Russian Civil Code, Article 32(1) of Federal Law No. 14-FZ dated February 8, 1998 On Limited Liability Companies.

[10] para. 1 of Article 103.10 of The Fundamentals of the Notarial Legislation of the Russian Federation.

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Generally, the M&A market of Saint Petersburg and Leningrad Region has been following all-Russian trends. Regional businesses are looking for access to international markets, adapting to local demand, and are expanding to other Russian regions.

Businesses are also developing and redistributing the assets inherited from the foreign companies that have left and are still leaving the Russian market, but this is rather a fading trend. Modern challenges have also had their impact on the M&A market—e.g., digitalization, which manifests itself, in particular, in the interest in IT companies that has sparked in recent years.

Among the notable transactions in the M&A market in Saint Petersburg and Leningrad Region, experts name the purchase of the assets of the Finnish Metsä Group by Vologodskiye Lesopromyshlenniki Group. As Delovoy Peterburg reported in May, the transaction encompassed the lease base of Metsä Forest Podporozhye LLC with logging operations and a sawmill, Metsä Svir LLC, and Metsä Forest Podporozhye LLC. The new owner’s plan is to restart the Metsä regional plant. According to experts, the transaction value, with account taken of the discount, could be up to €10 million.

Traditionally, a significant number of Finnish, German, and Swedish investors were present in the forestry industry of Russia’s North-West.

“The sale of Russian assets by these investors reached its peak in 2023,” said Julia Talagaeva. “But even now, the remaining foreign holdings may decide to leave due to increased pressure on them from the European Union and the United States, and the risk of introducing external administration on their Russian assets.”

The activity of foreign sellers is affected by the tightened conditions for obtaining authorizations from the Russian Government Commission for transactions. In October, the minimum discount for the sale of a company was once again upped from 50% to 60% of the market value, and a voluntary contribution payable for the sale of a company was increased to 35% of its market value, as compared to 15% earlier.

“In view of this, foreign sellers, in addition to the financial terms of transactions, are paying more and more attention to a potential buyer’s ability to obtain authorization from the Russian Government Commission (the buyer is more likely to obtain such authorization, if the buyer operates in in the same or related industry) and the buyer’s waiver of the seller’s guarantees in relation to the company after the closing of the transaction,” said Julia Talagaeva.

For more information, click here (in Russian).

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The Russian Federal Tax Service has published Methodical Recommendations on the Tax Amnesty for Business Splitting (in Russian) that explain how the tax amnesty will work by answering FAQs.

As you may remember, Law No. 176-FZ dated July 12, 2024[1] granted an amnesty to taxpayers that are willing to abandon business splitting schemes—i.e., dividing a single business activity among several formally independent persons, which will be controlled by the same persons, that is solely or primarily aimed at understating taxes by applying special tax regimes. It is understood that the tax amnesty will apply to the obligation to pay taxes for the tax periods of 2022 to 2024, the relevant penalties and fines for offenses related to business splitting, provided that the taxpayer abandons its intention to split the business in relation to the tax periods of 2025 to 2026. In simple terms, if the taxpayer is applying a business splitting scheme now, then, subject to abandonment of its intention to split the business, starting from 2025, the past periods—i.e., 2022 to 2024—will fall under the amnesty.

Russian courts and tax authorities often qualify splitting a business as one of the ways to obtain an unjustified tax benefit (Article 54.1 of the Russian Tax Code). This risk arises when a single business is divided into several non-independent legal entities so that all or some of the participants in the ‘splitting’ scheme can retain the right to apply a special tax regime. According to the Russian Federal Tax Service, in the period from 2018 to 2023, Russian courts heard 643 cases of business splitting for the purpose of tax evasion, with additional tax assessments totaling RUB 506 billion. Considering that not all cases end up in the court, actual additional tax assessments for this reason were even higher.

If Russian tax authorities discover a business splitting for the purpose of tax evasion, the taxpayer will be additionally assessed:

• taxes under the general taxation system (income tax at a rate of 20%, VAT at a rate of 20%) based on the amount of income of the participants in the splitting;
• late fees for the years, for which additional taxes are assessed; and
• a fine at 40% of the amount of additional tax assessments.

Accordingly, the tax amnesty mechanism provided for in Law No. 176-FZ dated July 12, 2024 enables the taxpayer to abandon its effort to split the business without suffering any tax losses.

A list of ways to voluntarily abandon to split a business is not limited. Importantly, a voluntary abandonment will not entail a mandatory tax audit.

Such a voluntary abandonment may be carried out without changing the business structure or by refusing to apply any special tax regimes or transferring activities to one of the persons of the group. Abandonment may also be carried out by changing the business structure through merging or selling companies. In our practice, we encounter situations where business splitting is used not to devise any tax optimization schemes. Sometimes, as the business grows, companies are set up that are responsible for certain lines of business activities, but have a single decision-making center, and they often share their staff. And for ‘historical reasons’, companies are not always willing to revise their approach to doing business, even if they understand the tax risks involved. That is why we hope that the tax amnesty for business splitting will enable us to safely abandon complex structures both in terms of management and tax administration, and continue to develop the business without fear of claims from the Russian tax authorities.

We would be pleased to help you assess your tax risks and the possibility of applying the tax amnesty. Please send an email to Anton Kabakov or Robert Gurdyumov.

[1]Federal Law No. 176- FZ dated July 12, 2024 On the Introduction of Amendments to Parts I and II of the Russian Tax Code, Certain Legislative Acts of the Russian Federation, and the Invalidation of Certain Provisions of Legislative Acts of the Russian Federation.

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As expected, the Russian Government Commission has tightened the conditions for issuing authorizations for transactions with respect to shares/interests in companies.

Now, the discount must be at least 60% of the market value of an asset. Previously, it was at least 50%.

A voluntary contribution has been increased to 35% of the appraised market value of shares/interests and will have to be paid as follows:

• 25% within one (1) month from the transaction date;
• 5% within one (1) year from the transaction date; and
• 5% within two (2) years from the transaction date.

Previously, a voluntary contribution was 15% of the appraised market value of shares/interests.

Furthermore, selling or buying any assets valued at more than RUB 50 billion will require approval from the Russian President.

As you may remember, some transactions, such as the sale of interests in limited liability companies or shares in joint-stock companies where one of the parties is a person, whether an individual or a legal entity, from the approved list of ‘unfriendly’ countries, will require an authorization from the Russian Government Commission on Control over Foreign Investments in the Russian Federation that is issued subject to a number of conditions.

We would be pleased to advise you on how to obtain authorizations from the Russian Government Commission in more detail.

If you would like to discuss this matter further or have any questions, please write to Anton Kabakov or Alexandra Yudina.

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Extensive changes to Russian migration laws[1] will take effect from February 5, 2025. They will, inter alia, affect the following.

 A register of controlled persons is to be introduced.

 The Russian Ministry of Internal Affairs will maintain a special online register of foreign citizens who are staying in Russia, but do not have any legal grounds for it. The Russian Ministry of Internal Affairs will, inter alia, include a foreign citizen in this register:

 

• where a visa is cancelled;
• where a decision is made on the reduction of the duration of temporary stay, deportation, undesirable stay (residence) in Russia, and the denial of entry to Russia; and
• upon the expiration of 72 hours of a foreign citizen’s stay as a passenger on board a cruise ship or ferry that holds a passenger transportation permit.

 

The Russian Ministry of Internal Affairs will independently identify such citizens and include them in the register. It should be noted that the Russian Ministry of Internal Affairs will not notify foreign citizens of their inclusion in the register. A foreign citizen will be considered to have been notified of his or her inclusion in the register from the time his or her details are entered into the online register. If the grounds for inclusion of a foreign citizen in the register are no longer valid, the Russian Ministry of Internal Affairs will exclude that foreign citizen from the register, of which he or she will not be notified, either.

Please note that from the time a foreign citizen is entered into the register, the following restrictions will apply to that foreign citizen:

• a ban on the state registration of legal entities and individual proprietorships;
• a ban on the purchase of real estate, motor vehicles, self-propelled vehicles, and other types of machinery;
• a ban on the state cadastral registration of real estate and/or the state registration of ownership rights;
• a ban on the state registration of motor vehicles, self-propelled vehicles, and other types of machinery;
• restrictions on the use of the right to drive motor vehicles;
• a refusal to admit to exams for the right to drive motor vehicles, to issue (replace, exchange) of a Russian national or international driver’s license;
• a refusal to open a bank account and make other banking transactions, except for money transfers to make compulsory payments stipulated by Russian laws, and money transfers to the bank account of a controlled person and the withdrawal of cash to a controlled person in the amount of not more than RUB 30,000 per month;
• a ban on marriage;
• a ban on the change of the place of residence or stay in Russian without permission from the Russian Ministry of Internal Affairs;
• a ban on travel outside the constituent entity of Russia, the municipality, in which a controlled person is staying (residing), except for departure from Russia; and
• other restrictions.

We recommend monitoring of whether or not a foreign citizen has been included in this register, especially if any significant events, transactions or other actions are planned that require the involvement of government agencies.

If, for any reason, a foreign citizen has been included in the register, we will be pleased to offer our recommendations on how to exclude that foreign citizen from the register and provide any assistance as may be necessary to do so.

 Procedure for migration registration of foreign citizens is to change (migration registration).

From February 2025, a foreign citizen can be registered with migration authorities for a maximum of 1 year (migration registration). Previously, foreign citizens could be registered with migration authorities for the entire period of validity of their visas (for example, for three (3) years at once). The registration period has now been limited to one (1) year, even if the visa is valid for a longer period.

If you would like to discuss this matter further or have any questions, please write to Julia Talagaeva or Alexandra Yudina.

[1] Federal Law No. 260-FZ dated August 8, 2024 On the Introduction of Amendments to Certain Legislative Acts of the Russian Federation.

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On September 20, 2024, at Hotel Kostas, the Russian-German Chamber of Commerce held one of the key events of the fall—CFO Conference 2024. It brought together leading financial management experts, enabling participants to discuss current trends, innovative approaches, and development strategies in a modern environment.

Key industry speakers spoke at the conference, including CFOs of large Russian and German companies, representatives of consulting firms and government agencies. The topics discussed included digital transformation in the financial sector, risk management, tax reform, and effective budget planning in the face of uncertainty.

Julia Talagaeva, Senior Associate at Forte Tax & Law, took part in the second panel discussion. She covered the topic ‘Current Practice of Customs Inspections: Dividends, Royalties, VAT, and Customs Value’.

“In 2024, customs audits have shown a considerable growth in efficiency, especially when it comes to the understatement of customs value by importers and inaccurate data on the classification code of goods. Among the risk factors are the payment of dividends and license fees and payment for agents’ services to make payments under foreign economic transactions,” Julia pointed out.

During the event, representatives of Forte Tax & Law shared their experience with their colleagues from other organizations, took part in the discussions, and even received some valuable recommendations that they can later use to implement their clients’ financial strategies.

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