State Duma withdraws personal income tax exemption for long-term ownership of foreign securities

MOSCOW. March 19 (Interfax) - The State Duma has passed in the third reading a law which abolishes the three-year investment tax exemption for the sale by investors of foreign securities traded on Russian stock exchanges, with the exception of securities of EAEU countries.

The government introduced the bill (N462670-8) to the parliament in October 2023.

According to the legislation in force since January 1, 2014, profits from the sale of securities can be exempt from tax if the investor has owned them for three years or more. This instrument is referred to as a three-year tax relief for investors. The relief applies to the sale of Russian stocks, bonds, exchange-traded mutual funds that are traded on Russian stock exchanges; the sale of foreign stocks, bonds, ETFs that are traded on Russian stock exchanges; and the sale of open-end mutual funds that are managed by Russian companies.

The deduction applies only to a brokerage account. A deduction may be claimed for any year in which securities were sold at a profit. The maximum amount of the deduction is 3 million rubles per year, i.e. for three years of ownership the deduction will amount to 9 million rubles. It is by this maximum amount that the tax base can be reduced.

The law adopted by the Duma establishes that the three-year tax investment benefit applies only to securities of Russian organizations that are traded on Russian stock exchanges and securities of foreign organizations that are traded on Russian exchanges and the place of registration of which is located in the territory of a member state of the EAEU. Thus, foreign stocks, bonds and ETFs traded on Russian stock exchanges are excluded from the benefit.

The new rule will enter into force one month after the official publication of the law, but no earlier than the first day of the next personal income tax period (calendar year).