Base rate of windfall tax in Russia will be 10%, but 5% with early payment in 2023 - bill

MOSCOW. April 17 (Interfax) - Amendments to the Russian Tax Code introducing a one-time fee to the state budget from the excess profits of Russian business for 2021-2022, as expected, will formally enter into force starting January 1, 2024, but the draft law prepared by the Finance Ministry contains a serious incentive for early payment of the so-called windfall tax, several sources familiar with the document told Interfax.

The bill has not yet been published. Interested parties have just received it and are still studying it, the ministry said.

The fact that it will be more financially beneficial to pay the fee in 2023, without waiting for the legal entry into force of the amendments, has already been discussed by Finance Minister Anton Siluanov, yet he has not specified how this mechanism will be formalized.

Several Interfax sources reported that if paid early, the tax rate would be 5% of profits for 2021-2022 in excess of the same indicator for 2018-2019. When making the payment in 2024, a company would have to pay double, namely 10%. 10% will be the real tax rate, and the "discount" is prescribed as a tax deduction in the amount of funds transferred free of charge to the federal budget from October 1 through November 30, 2023, multiplied by two, one source explained, clarifying the incentive mechanism for early payment.

The Ministry of Finance previously estimated potential revenues from the windfall tax at nearly 300 billion rubles, and, according to Siluanov, is expecting the money this year. That is, the ministry expects that all major taxpayers will use the "early payment" option.

As expected, the bill on a one-time fee makes exceptions for oil, coal companies, and LNG producers, one of the agency's sources said.

Officials are waiting for comments on the bill from companies by the middle of the week; the RSPP will consolidate business proposals.