Financing for federal investment tax deduction could total 150 bln rubles per year, adjusted after 2025 - Novak
MOSCOW. Oct 9 (Interfax) - The Russian government has agreed to finance the federal investment tax deduction (FITD) totaling 150 billion rubles annually, and is ready to amend the amount going forward, Deputy Prime Minister Alexander Novak said.
"A decision has now been reached that the total amount of benefits under the instrument will be 150 billion rubles annually. This is an indefinite instrument, not only for 2025. It could be adjusted in the future," Novak told reporters, following his attendance at a meeting of the management board of the Russian Union of Industrialists and Entrepreneurs (RSPP), in response to the possibility of increasing the amount of FITD financing beyond 2025.
The 150 billion rubles is lower than that indicated in the financial and economic substantiation for the draft resolution of the Russian government on the parameters of the FITD as prepared by the Economic Development Ministry, where the costs of the deduction are estimated at 200 billion rubles, as well as the amount that businesses indicated as sufficient to support the investment activity of companies under the current monetary policy and external restrictions at 500 billion rubles.
RSPP head Alexander Shokhin also told reporters that the agreed amount of funds for the FITD is a compromise.
"The amount of 150 billion rubles, thank you, Alexander Valentinovich [Novak], and your colleagues from the Economic Development Ministry, because we thought that we had a compromise of 200 billion rubles. The Finance Ministry thought that it was 100 billion, so this happy medium for the 2025 'pilot' is, in principle, an acceptable figure, in my opinion," he said.
The topic of maintaining the investment activity of companies in the conditions of tight monetary policy was the subject of discussion at the RSPP board meeting, Novak and Shokhin said without providing any details.
Novak said that in terms of the FITD, the government met businesses halfway on the matter of the possibility of simultaneously receiving a deduction and funds from accelerated depreciation.
"The RSPP proposed not to account for accelerated depreciation. These decisions that we also agreed were adopted, and there should be a good incentive for businesses in addition, so that the benefits do not overlap, ensuring the possibility of using both opportunities to incentivize the acquisition of high-tech equipment," he said.
The government is implementing the FITD along with raising the basic rate on profit tax from 20% to 25% as of 2025 in order to offset the increased burden on companies investing in the purchase of modern technological equipment.
"Five areas of OKVED [Russian Classification of Economic Activities] have even been identified currently, the industries that will be affected in terms of machinery and equipment. This should render it possible to reduce the profit tax by up to 5 absolute percentage rates of profit tax automatically for all industries without considering specific projects," Novak said.
Shokhin noted the importance of the automatic provision of the FITD, while expressing hope that the list of economic activity codes that allow one to claim a deduction would be expanded going forward.
"If the government sees that businesses are responding positively to the mechanism, to the instrument, and investments in the types of activities that were included are quite active, then we could seek to expand them," he said, noting that the RSPP had previously proposed extending the FITD, particularly to projects in the telecommunications industry and housing and communal services.
It is currently assumed that companies operating in five OKVED areas will be able to apply for FITD, namely in mining, manufacturing, supplying electricity, gas and steam, as well as air conditioning, hotel and catering operations, and scientific research and development. The right to apply the investment deduction is granted for investments in "machinery and equipment, including business inventory," as well as "exclusive rights to an invention, utility model or industrial design."
The FITD amount should be 6% of the amount of investment expenses in the specified areas. If the FITD exceeds tax payments in the reporting period, then the excess amount could be used to reduce the amount of profit tax over the next 10 years.
