Page 69 - RusRPTNov20
P. 69
6.1.2 Budget dynamics - specific issues...
Russian Finance Ministry intends to expand the tax breaks and other incentives for domestically-registered holdings, in an effort to repatriate more capital, RBC business portal reported on October 5. The Finance Ministry is blocking the tax-free capital transfers to Cyprus, Malta, Luxembourg, and other offshore destinations. Reportedly, the ministry now proposes to simplify VAT payments in Russia, as well as to lower the base for capital calculations for dividend taxes payments. Another proposition is cutting the minimum period of holding the shares/equity that allows waving the sales tax from five to three years. The analysts surveyed by RBC welcome the initiatives, but do not see those as game changers and note that so far the government has been betting on punitive and restrictive measures to repatriate capital into domestic registration. As reported by bne IntelliNews, the latest round of capital repatriation efforts in 2019, or Amnesty 3.0, is especially designed to boost special zones in Russia's Kaliningrad Region and Primorsky Region, or so called SARs, recently established domestic offshore zones. SARs would propose 0% on dividends for Russian residents and 5% for non-residents. Currently about 30 companies are registered in the new domestic offshore zones.
The government is watering down its proposal to hike income taxes on the wealthy. In June, Putin announced plans to scrap Russia’s flat income tax by increasing the tax rate for individuals who earn over RUB5mn ($65,000) from 13% to 15%. The Duma approved the new tax bill in its first reading on October 22, but suggested a change for future iterations: it should only apply to regular income. The Ministry of Finance agreed to this proposal, writing that it would be unfair to apply the increased tax rate to individuals whose annual salary is below the RUB5mn threshold but who receive one-off payments from the sale of personal property (like real estate or other belongings) or from insurance benefits. The tax hike was never expected to bring the budget much revenue, with estimates at just RUB60bn ($784mn) per year. But the new amendments lend father credence to the argument that the tax hikes were a populist ploy ahead of the constitutional reform vote rather than a serious macroeconomic proposal.
Russian government to extend subsidized mortgage program until 2021.
Although not entirely unexpected, the news should remove a significant amount of uncertainty over the market outlook for 2021 and be positive for all listed real estate names, in our view. The Russian government has decided to extend its subsidized mortgage program until year end of 2021 from its initial end date of 1 November, and the size of the program will increase from RUB900bn to RUB2.8trillion. The number of people able to take advantage of the program is expected to rise from 310,000 to 877,000 as a result of the program’s extension. The program currently covers apartments worth up to RUB12mn in Moscow and St. Petersburg and up to RUB6mn in other regions.
69 RUSSIA Country Report November 2020 www.intellinews.com
