Russian govt proposes to limit windfall tax for companies whose profits dropped sharply in 2022, paid no dividends - amendments

MOSCOW. July 13 (Interfax) - The Russian government proposes to limit the amount of the windfall tax from previous years to 10% of profits for this year for those companies whose profits dropped over 50% in 2022, on the condition that these companies did not pay dividends in 2021 and 2022.

The Russian government during a meeting on Thursday approved these amendments to the second reading of bill No. 379248-8 on implementing a windfall tax on previous years, the Finance Ministry said in a statement.

The government also proposes to exclude from the list of taxpayers those companies that in 2018 and 2019 had no sales revenues; credit organizations and non-credit financial organizations involved in bankruptcy prevention measures; and property developers that are implementing projects with citizens' funds through escrow accounts, and did not pay dividends in 2021-2022.

The Finance Ministry clarified that, with regard to credit and non-credit financial organizations, this refers to those in respect of which measures were taken as of January 1, 2023.

The mechanism for reorganizing financial organizations is legally valid for banks, insurers and non-state pension funds, but only credit organizations are currently undergoing financial rehabilitation.

For example, two credit institutions, Promsvyazbank and Trust Bank, are undergoing reorganization with the participation of the Russian Central Bank. There are 13 credit institutions in financial recovery with the participation of the Deposit Insurance Agency and through the attraction of investors: banks Uralsib , Peresvet, Solidarity, Tavrichesky, Timer, BM-bank, Econombank, VUZ Bank, Moscow Regional Bank , Genbank, Investtorgbank, Baltic Investment Bank and Gazenergobank.

Trust had 1.3 billion rubles net profit under RAS in 2022 and 50.7 billion rubles in 2021. Uralsib in 2022 increased its RAS net profit to 12.4 billion rubles in 2022 from 7.5 billion rubles in 2021, and Solidarity to 2.5 billion rubles from 615 million rubles a year earlier.

Promsvyazbank made 22.7 billion rubles profit in 2021, Peresvet - 7.8 billion rubles, BM-bank - 5.3 billion rubles and Genbank - 2.3 billion rubles. , Moscow Regional Bank had a loss of 2.8 billion rubles in 2021, Investtorgbank - 669 million rubles and Baltinvestbank - 438 million rubles. These banks have not disclosed financial statements for 2022.

The leader by losses among the banks being rehabilitated and which have disclosed financial results for 2022 is Tavrichesky Bank - last year it had 63.5 billion rubles net loss under RAS against 220 million rubles profit in 2021. Gazenergobank increased its loss to 1.2 billion rubles in 2022 from 919 million rubles in 2021, and Timer Bank to 565 million rubles from 455 million rubles a year earlier. VUZ-Bank had losses of 3.9 billion rubles in 2022 against 567 million rubles profit a year earlier, and Econombank 415 million rubles losses compared with 176 million rubles of profit.

The bill was submitted to the State Duma on June 13, together with corresponding amendments to the Tax Code.

The document establishes a one-off tax for large companies whose average profit for 2021 and 2022 was more than 1 billion rubles.

The tax will not apply to companies established after 2020, to small and medium-sized businesses, to organizations paying the single agricultural tax, or to companies in the oil and gas sector and coal companies, since additional tax exemptions for mineral extraction tax and a fuel damper MET and damper have already been stipulated for them this year.

The tax rate will be 10% of the amount of excess profit for 2021-2022 over the same figure for 2018-2019. The tax must be paid no later than January 28, 2024 and its amount is calculated by taxpayers themselves. At the same time, the amount of tax can be halved to an effective rate of 5% if a deposit is paid between October 1 and November 30, 2023.

The Finance Ministry announced how the windfall tax burden would be distributed among the top 50 taxpayers. "If we take the top 50 payers, then 20% will be paid by enterprises in solid minerals extraction, 19% by mineral fertilizer producers, 13% by metallurgical companies, and 12% by wholesale and retail trade enterprises, I mean of the total amount of payments by the top 50 payers, and 9% by banks and 5% by all other sectors - petrochemical enterprises, power generation, construction companies, manufacturing, logistics," Deputy Finance Minister Alexei Sazanov has said.

"Regarding the number of payers, the total number will be about 2,500, and this is less than 3% of the total number of organizations," he said.

It is envisaged that the tax will generate around 300 billion rubles of additional budget revenue.