Russia to start taxing sale of businesses after five years of ownership if proceeds top 50 mln rubles/year

MOSCOW. June 4 (Interfax) - Individuals who are tax residents of Russia will have to pay personal income tax on the sale of stakes in Russian companies even after five years of ownership if they earned over 50 million rubles in a year from the sale of shares, bonds, investment units and stakes in legal entities under a bill the government has submitted to the State Duma.

The same rule will apply when individuals sell shares in companies they have owned for more than five years if the value of the real estate these companies directly or indirectly own amounts to no more than 50% of the value of all their assets.

The bill submitted to the Duma (No. 639663-8) will make amendments to Article 217 of Russia's Tax Code (income not subject to taxation), which now provides a tax break for such transactions, exempting them from the personal income tax regardless of the amount of income earned by the former owners.

The bill sets a limit for this tax break, capping an individual's annual income from all transactions to sell shares, bonds, investment units and stakes in legal entities at 50 million rubles. If this threshold is exceeded, the individual will have to pay income tax of 13% on earnings of up to 2.4 million rubles and 15% on income in excess of this amount. The bill does not propose the application of higher progressive tax rates.