New Tax and Investment benefits in the Moscow Region.

03.04.2009

LEGAL UPDATE No. 16.

Goltsblat BLP advises that new Law No. 10/2009-ОZ dated 12 February 2009 “On Supplementing the Law of the Moscow Region “On Preferential Taxation in the Moscow Region”” with Article 26.3 “Incentives granted to the companies owning the intangible assets” and Article 26.4 “Benefits to Investors Carrying out Real Estate Capital Investment Activities” (hereinafter referred to as the “Law”) has been enacted. The Law came into effect on 21 February 2009 and will remain in force until 31 December 2011.

The Law provides for tax benefits to companies owning intangible assets. Taxpayers registered, including for tax purposes, in the Moscow Region are granted a reduced profit tax rate. The reduction is calculated as 20% of the actual value of the intangible assets booked in the accounting in the current tax period (i.e., fiscal year), but limited to 4 percentage points.

After application of the maximum tax reduction, the taxpayer will thus pay profit tax at a reduced rate of 14 % to the regional budget and at the standard rate of 2 % to the federal budget.

To obtain the benefit, a company should comply with the following requirements:

  • be registered in the Moscow Region;
  • be registered with a tax inspectorate in the Moscow Region;
  • acquire (produce) intangible assets (except for exclusive rights to trade marks, service marks, firm names and appellations of origin);
  • book the intangible assets in its accounting books in the current tax period (fiscal year);
  • not assign the intangible assets to third parties (write them off from accounting books) within 12 months of their being booked in the accounting;
  • allocate the funds gained (saved) from applying the benefit for the company’s development. Activities considered as company development are listed in clause 10, Article 4 of Law No. 151/2004-OZ dated 24 November 2004 “On Preferential Taxation in the Moscow Region”;
  • furnish the tax authorities (together with tax declarations) documents proving that the funds gained (saved) from applying the benefit have been used for company development.

The Law also provides for tax benefits to investors carrying out real estate capital investment activities. The benefit is granted in the form of a reduction in the profit tax rate by 4 points when real estate worth at least 500 m roubles is commissioned. According to the Law, this reduction should not exceed 2.2 % of the total capital investment in the real estate during the fiscal year in which the real estate item is commissioned. The benefit is applied on the basis of the results  of the tax period (fiscal year).

  • To obtain the benefit, a company should comply with the following requirements:
    be registered in the Moscow Region;
  • be registered with a tax inspectorate in the Moscow Region;
  • carry out real estate capital investment activities (residential construction not included);
  • carry out the above-mentioned activity in the Moscow Region;
  • commission real estate worth at least 500 m roubles in the current fiscal year;
  • transfer the funds gained (saved) from applying the benefit for the company’s development. Activities considered as company development are listed in clause 10, Article 4 of Law No. 151/2004-OZ dated 24 November 2004 “On Preferential Taxation in the Moscow Region”.

Companies are entitled to only one benefit, even if they meet the criteria for obtaining both kinds of benefit.

For more information, please contact:

Andrey Shpak,
Head of Tax Group,
Goltsblat BLP
Tel: +7 (495) 287 44 44,
Email: info@gblplaw.com

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