On 26 March 2022, Russia’s President signed Federal Law 67-FZ* introducing an anti-crisis package of tax support measures for businesses and individuals.
Below is our overview of the main changes relevant to individuals. Earlier, we have circulated our overview of corporate tax changes.
Personal income tax
Taxation of interest on bank deposits
The new Law exempts individuals from taxation on income received in 2021 and 2022 in the form of interest on deposits (i.e. account balances) with banks located in Russia.
The Law also adjusts the procedure for calculating the amount of interest subject to personal income tax in future periods. For instance, the highest of the key rates of the Central Bank of the Russian Federation (CBR) set on the first day of each month in a tax period will be used to calculate the non-taxable threshold for each tax period, rather than the CBR key rate set on the first day of such a tax period as applicable before adoption of the Law.
These measures are aimed at reducing the tax burden on individuals due to a significant increase in the CBR key rate in 2022 and are also designed to encourage the public to hold their monies on bank deposits with Russian banks.
Income in the form of material gain received in 2021-2023 is now exempt from personal income tax.
Note that this refers to any material gain, although in its original version the bill exempted only material gain from savings on interest for using funds borrowed from employers.
Receiving assets from controlled foreign companies (CFCs)
Personal income tax will not apply to income in the form of assets (excluding cash) and/or property rights received in 2022 from a foreign company or unincorporated entity in relation to which the taxpayer is a controlling person and/or participant as of 31 December 2021. The exemption will apply to the assets or property rights that were owned by a foreign company (entity) as of 1 March 2022.
Individuals are therefore given the opportunity for a tax-free transfer of assets from CFCs. When transacting in the received assets at a later stage, an individual will be able to recognise the expenses for receiving such assets according to their CFC’s accounting data, but up to the market value of the assets received.
The following measures related to property tax, land tax, transport tax and tax administration are identical to those applied to companies:
Property tax and land tax
Cadastral value as of 1 January 2022 will be used to calculate personal property tax and land tax for the 2023 tax period.
However, this rule will not apply if the cadastral value decreases in 2023, or if the increase in the cadastral value is due to a change in the characteristics of a property. Therefore, the effect of inflation on the tax base is eliminated.
The Law has abolished the multipliers 1.1 and 2 where transport tax is calculated for 2022 for vehicles worth between RUB 3m (EUR 32,472**) and RUB 10m (EUR 108,240).
Therefore, the multipliers will only apply to vehicles worth over RUB 10m (EUR 108,240).
According to the Law, there will be no fines for failure to provide documents confirming the amount of CFC profits, or for providing documents containing false information for the 2020 and 2021 financial years (i.e. the 2021 and 2022 tax periods).
Note that fines for failure to provide such documents under the general procedure or at the tax authorities’ request amount to RUB 500,000 (EUR 5,412) and RUB 1m (EUR 10,824), respectively. It is likely that the cancellation of fines for the 2021-2022 tax periods is attributable to the potential difficulties that controlling persons may face in obtaining financial statements due to the restrictions imposed.
* In Russian
** As of 5 April 2022