Russia's MinFin proposes differentiating reverse excise on crude when agreements violated, changes to investment markup

MOSCOW. Nov 19 (Interfax) - Russia's Finance Ministry has proposed a number of amendments to the Tax Code that would ease requirements for fulfilling investment agreements to modernize oil refineries and receive the reserve excise on crude oil, as well as changes regarding processing of ethane and liquefied petroleum gas (LPG).

The ministry proposed to extend the period in which changes can be made to investment agreements that proposed increasing Class 5 gasoline production to 10% of refining volume by one year, until July 1, 2025, the text of the changes seen by Interfax said.

Furthermore, it will be possible to terminate such an investment agreement if production of Class 5 gasoline does not reach 10% in 2029-2031 rather than in 2026-2028 as before. The reverse excise will continue to be paid until 2028. However, for companies that pledged to increase production of AI-95 gasoline but fail to reach this figure, the amount of the excise will 66% in 2026, 33% in 2027 and 100% in 2028.

The ministry also proposed amending the calculation of the investment markup on the reverse excise for modernization agreements. Under current law, if a company does not invest 50 billion rubles in the period from 2020 to the end of 2026, the markup is cancelled (except in cases where the initial value of fixed assets from July 2014 to the end of 2026 was more than 130 billion rubles).

The ministry proposed that if from January 2019 the investor spends less than the lower of two figures - 50 billion rubles or the total amount of the markup over all preceding tax periods since it began to be applied - then the markup will not be accrued in 2025-2028. But starting in 2031 it can be received for as many tax periods as it was not accrued for this period. Companies that invest 100 billion rubles and launch facilities by the end of 2028 will be able to receive this markup starting in 2033.

The ministry also proposed to extend the possibility of amending agreements to modernize ethane and LPG processing plants by a year from the current January 1, 2026, and extend the deadline for investing 65 billion rubles to remain eligible for receiving the reverse excise by one year to the end of 2028.