Russian govt wants to expand application of tax benefits on Kuril Islands

MOSCOW. Feb 4 (Interfax) - The government commission on legislative activities has approved a bill to extend the application of tax benefits currently available to organizations registered in the South Kuril, Kuril or North Kuril districts after January 1, 2022, to a broader range of legal entities, the Finance Ministry said.

Companies registered on the Kuril Islands since 2022 are exempt from corporate income tax and property taxes (transport, land, and real estate taxes) for 20 years from the date of registration, with the benefit period limited until December 31, 2046. Such organizations also pay reduced insurance contributions at a rate of 7.6%.

At the same time, according to the Russian Tax Code, a newly created organization cannot be a resident of a special economic zone (SEZ) if 50% or more of its shares are directly or indirectly owned by an entity and its affiliated party that directly or indirectly hold at least 50% in another participant that previously lost its right to benefits or in another organization registered on the Kuril Islands before January 1, 2022.

The bill proposes allowing such legal entities to take advantage of tax benefits. To qualify, they must implement a new investment project that meets the criteria set by the Russian government and which is approved by the presidium of the government commission on the Far East's socio-economic development.

In addition, the bill proposes extending the reduced 7.6% insurance contribution rate to organizations using the simplified taxation system. Currently, companies registered on the Kuril Islands since 2022 and operating under the simplified tax system do not qualify for this benefit.

The law establishing a special economic zone in the South Kuril, Kuril or North Kuril urban districts of the Sakhalin region was passed in March 2023. The SEZ is expected to remain in operation until December 31, 2046.