CBR proposes tax breaks for Russian, foreign investors to encourage IPOs in Russia
MOSCOW. May 19 (Interfax) - The Central Bank of Russia (CBR) and the Finance Ministry are discussing proposals to boost the number of initial public offerings in Russia, such as granting dividend tax breaks for a certain period to both Russian and foreign investors, CBR first deputy chairman Sergei Shvetsov said.
If a company that does an IPO becomes public, then its owners, who acquire shares, could be granted preferences on taxation of dividends for some period. In other words, I bought some shares in a Russian IPO, without an individual investment account, perhaps I'm even a foreign investor, and I'm exempt from paying tax on dividends for some period of time," Shvetsov said.
He said the Finance Ministry is now discussing a package of proposals to stimulate the growth of the number of initial offerings in Russia, and a meeting on this was recently held with Finance Minister Anton Siluanov.
The CBR's proposals also include exempting retail investors from paying personal income on the sale of shares purchased in an IPO, Central Bank chief Elvira Nabiullina said last week.
However, the Finance Ministry does not support this proposal, Deputy Finance Minister Alexei Moiseyev said later. "At this point we have doubts about the necessity," he said.
At present, personal income tax is withheld on dividend payments to individuals on shares in Russian companies. In regard to joint-stock companies, this is supposed to be done by the organization that actually pays out the dividends: the issuer, if it pays dividends to individuals directly, or a broker, trust manager or depository if the issuer transfers dividends to shareholders through such entities.
The personal income tax rate depends on the tax residency of the individual. Under the general rule, if the recipient is a resident of Russia, the rate is 13%. If the tax base for income from a shareholding exceeds 5 million rubles in the tax period, the amount above this figure is taxed at 15%. If the recipient is a non-resident, the rate is 15%. These rates are applied if other rates are not specified in double taxation agreements with other countries.
If dividends are paid several times in the course of a year, the tax must be calculated for each payment separately, not cumulatively.
