27.10.2017

Contribution to Property Will Help to Save on Taxes

Here is a good news for companies: On 22 September 2017, members of the State Duma of the Russian Federation adopted a bill that introduced amendments to the Tax Code of the Russian Federation through third reading. In particular, it follows that renewal of current assets or transfer of property to the company led the profit tax exemption exempted from profit tax. The purpose of the bill is to avoid double taxation.

In accordance with Article 66.1 of the Civil Code of the Russian Federation, a participant can make contributions with money, objects, shares, bonds. Contributions to the property of an LLC are made in the procedure specified by the charter of the company. However, before amendments to the legislation, when contributing money, objects, shares, bonds, they were subject to taxation as a profit of the company. Now, if the owner transfers the property to replenish the net assets of the legal entity (Article 251.1.3.4 of the Tax Code), they will not be considered as a profit of the company and, therefore, will not be taxed.

Previously, the Ministry of Finance instructed to charge VAT on the value of transferred assets (letters No. 03-07-14/27452 dated 15 July 2013 and  No. 03-07-08/34198, dated 21 August 2013).

To prevent disputes with the FTS, it is necessary to indicate the obligation of participants to contribute property to the charter of the company.

The amendments will become effective on 1 January 2018.

The bill also provides for the regulation of issues related to the establishment of a tax deduction for a mineral extraction tax, changes in the procedure for confirming tax benefits for personal property tax, land tax and transport tax, and changes in the application of an increasing depreciation factor.