Russia's Econ Ministry backs "tax neutrality" for Russians taking direct ownership of major cos - source

MOSCOW. Nov 8 (Interfax) - Russia's Economic Development Ministry has backed the concept of a proposal from the Russian Union of Industrialists and Entrepreneurs (RSPP) to grant a tax exemption for the transfer of shares and stakes in so-called economically significant organizations (ESO) to the direct ownership of Russian beneficiaries in the process of excluding foreign holding companies from "unfriendly" jurisdictions from the chain of ownership, a source familiar with the ministry's position told Interfax.

This is the ministry's position on amendments to the Tax Code drafted by the RSPP that would exempt such transactions from personal income tax and the tax on profit, the source said.

The bill is also intended to ensure "continuity" of expenditures on the acquisition of shares and stakes upon the creation of an ESO. For this purpose, the RSPP proposed two options for reducing the taxable income by the amount of expenses that the taxpayer can choose. Under the first option, upon the sale of such assets, the initial expenditures on the acquisition of foreign holding companies' securities, exchange-traded funds on them and so on will be counted as expenses. In the second option, the taxpayer can count as expenses an amount equal to the value of the shares and stakes in the ESO on the date they were transferred to direct ownership but not greater than the market value.

The government is supposed to compile a list of Russian ESOs after the passage of law No. 470-FZ, which introduce the concept of ESOs. Inclusion in this list allows Russian beneficiaries to acquire direct ownership of shares and stakes in such companies through the courts, or transfer the rights to them to someone else.