On 4 August 2023, the President of the Russian Federation signed Federal Law No. 414-FZ "On Excess Profits Tax" (the so-called “Windfall Tax”) (hereinafter - the "Law").
Based on the Law, the legislator has the right to introduce the Windfall Tax as a one-time tax.
Subject of the Windfall Tax are excess profits of businesses. Basis for the Windfall Tax is the amount by which the average profit of 2021 and 2022 exceeds the average profit of 2018 and 2019 when average profit of 2021 and 2022 exceeds RUB 1 billion.
The rate of the Windfall Tax is 10%. It can be reduced to 5% if a company voluntarily pays a security payment on account of tax from 01.10.2023 to 30.11.2023. The security deposit if paid in the period from 1 October 2023 until 30 November 2023 is offset against the tax payments with simultaneous discount of 5%.
Payers of the Windfall Tax are Russian entities, as well as permanent establishments of foreign entities, and foreign entities directly recognised as tax residents of the Russian Federation.
The following legal entities will be exempted from the Windfall Tax:
Legal entities included in the SME register after 31.12.2022;
Russian legal entities established after 01.01.2021, except for those established as a result of reorganisation of entities with the date of incorporation before 01.01.2021;
Foreign legal entities that started operating in Russia through permanent representative offices after 31.12.2020;
Legal entities paying the Unified Agricultural Tax from 01.01.2018;
The companies which did not have the sales income in 2018 and 2019
Some other legal entities (in particular, from the oil and gas sector) named in the Law.
The tax return for the Windfall Tax must be filed by 25.01.2024 and the Windfall Tax shall be paid no later than 28.01.2024.