Goltsblat BLP advises that Federal Law No. 132-FZ “On amendment of article 95, part one and part two of the Tax Code of the Russian Federation in relation to creating favourable tax terms for innovative activities and article 5 of the Federal Law “On amendment of part two of the Tax Code of the Russian Federation and certain legislative acts of the Russian Federation”” (the Law) was passed on 7 June 2011.
Most of the Law’s provisions come into effect on 1 January 2012, while a few of them apply from 8 June 2011 or retrospectively.
The Law specifies the procedure for deducting the costs of scientific research and (or) experimental development work (R&D) from the profit tax base.
First, there is a precise list of R&D costs, including depreciation of fixed and material assets (apart from buildings and structures) used for R&D purposes, salary payments to R&D personnel, material costs directly connected with R&D, costs under contracts for R&D works – for taxpayers ordering R&D, etc.
Irrespective of the R&D results, the associated costs are now to be included by taxpayers in their other costs in the amount actually spent during the reporting (tax) period during which the given R&D work is performed. Previously, such costs were to be deducted in equal instalments over the year following completion of the relevant R&D.
Beneficial terms are retained for deducting costs for specific types of R&D. If, for instance, the taxpayer incurs costs in performing certain R&D works listed by the Russian Government, a coefficient of 1.5 may be applied to the actual costs. Now, however, if a taxpayer exercises this right, it will have to present an R&D report to its local tax office, at the same time as it files its tax declaration for the tax period during which the given R&D work or stages thereof are carried out.
The Law does not make clear whether the current R&D list established by resolution of the RF Government on 24 December 2008 No. 988 is to be modified. Currently, the R&D list includes work in the following areas in particular:
Bio-catalytic, bio-synthetic and bio-sensor technologies
Nanotechnologies and nanomaterials
Nuclear power, nuclear fuel cycle, etc. technologies.
The amendments entitle the taxpayer to choose how to book costs incurred in purchasing, as a result of R&D, the exclusive rights to intellectual property recognised as intangible assets. The taxpayer may either depreciate these costs in the usual manner or book them as other costs over a period of two years.
The Law also allows the taxpayer to set up reserves for future R&D costs, booking the relevant allocations as other costs on the last date of the reporting (tax) period. If such a reserve is, indeed, set up, the taxpayer books all current R&D costs against the given reserve.
A separate article is added to regulate the specific tax accounting of R&D costs (article 332.1 of the RF Tax Code).
In addition, a more precise definition is given of costs associated with acquiring rights to computer software and databases and with improving technology, organising production and management (subclauses 26 and 35, clause 1, article 264 of the Russian Tax Code).
Apart from booking of R&D costs, the Law also concerns taxation of income received by a foreign organisation from selling shares in Russian companies in which real estate in the Russian Federation accounts for more than 50% of their assets. It is stipulated that revenues of the foreign organisation from selling such shares, provided they are traded on the organised securities market, will not constitute taxable income.
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