Proposed profit tax rate for Russian IT cos returns to 5% in 2025

MOSCOW. July 3 (Interfax) - The Russian government has proposed to set the reduced profit tax rate for information technology companies at 5% for the period from 2025 to 2030, the Finance Ministry said, citing amendments submitted to the State Duma for the second reading of a bill to overhaul the tax system.

The bill initially called for setting the reduced rate at 5%, 5 percentage points being the difference between the current base profit tax of 20% and the 25% rate to which it will increase in 2025 under the bill. However, the first version of amendments for the bill's second reading submitted by the government's legislation commission last week proposed to set the rate at 7%, sources familiar with discussions on the changes said earlier.

The Finance Ministry said the bill has been revised taking into account the proposals of parliament and businesses.

The bill also allows for the possibility of applying tax breaks for IT companies in the event of reorganization in the form of a spinoff, as well as the expansion of the list of revenues included for the application of reduced insurance contribution rates for radio and electronics companies.

Furthermore, the bill allows for the application of a higher ratio of 2 to expenditures on rights to use Russian software, which will enable companies to reduce the amount of profit tax they have to pay, the ministry said.

The profit tax rate for IT companies accredited by the Digital Development Ministry was slashed to 3% in 2020 and then reduced to zero from 2022 to the end of 2024.