The Russian Ministry of Finance has prepared amendments to draft Federal Law No. 727330-8. The main changes reflected in the document concern the taxation procedure for the replacement of sovereign Eurobonds. Tax Compliance lawyers have studied the draft amendments and tell about the main changes planned in the Tax Code of the Russian Federation. 

The amendments to the draft law regulate how the taxable base will be determined in case of exchange of Eurobonds for Russian Federation securities, as well as in case of subsequent sale (redemption) of securities: 

• the owner of the substituted securities will not have to pay tax on the currency revaluation from the difference between the purchase price of the Eurobond and the price of the substituted bond;
• when selling substituted RF Eurobonds, the taxpayer will be able to reduce income from such sale by the amount of expenses incurred for the purchase of the substituted Eurobonds;
• the amendments also provide for the procedure for determining the holding period of securities so that the investment deduction can be applied to them. The document states that the holding period of securities will be calculated from the initial purchase of the Eurobond;
• the amendments and tax relief will apply to sovereign Eurobonds of the Russian Federation purchased before March 1, 2022.

What other amendments are to be introduced to the Tax Code of the Russian Federation

Other planned innovations include the following individual changes to the tax legislation: 

• application of a 10% VAT (Value Added Tax) rate for the sale of certain breeding animals;
• a new approach to the imposition of excise duties on sugar-containing drinks (in particular, it is determined what is to be considered a sugar-containing drink for the purposes of Article 181 of the Tax Code “Excisable Goods”);
• the procedure of taxation in case of partial receipt of shares of an economically significant organization by a person;
• lump-sum compensation payments to cultural workers will be treated as non-taxable income;
• now the tax agent, when determining the base for income from securities transactions (before the taxpayer submits an application), will take into account the taxpayer actual expenses related to the acquisition and storage of securities on the basis of information transmitted to it by another professional participant of the securities market;
• the parameters for conducting an experiment to establish a special tax regime “Automated Simplified Taxation System” are provided for;
• income in the form of material benefit received from savings on interest for the use of borrowed funds under a loan agreement concluded before 31. 12. 12. 2024, are exempt from personal income taxation, provided that the material benefit is received from the use by the person of funds provided for new construction or acquisition of certain categories of real estate, as well as provided that the person has the right to receive a property deduction under subpar. 3 p. 1. Art. 220 OF THE TAX CODE OF THE RUSSIAN FEDERATION.