Companies working with foreigners will retain tax benefits

Nov, 15 2023

In the second reading, a bill was adopted that allows organizations to apply tax benefits when working with foreign counterparties. Now, if the contract was concluded with a foreign company before March 5, 2022, it will be possible to apply the same benefits that were previously available under double taxation avoidance agreements.

Tax benefits will be resumed if they were previously stipulated in agreements with unfriendly countries, but were suspended. They will be valid when paying for goods and services of foreign companies. This will allow Russian companies to save significantly.

Tax benefits will apply to:

  • Interest payments to foreign banking and credit organizations.
  • To pay for software licenses under existing contracts and any other intangible assets that do not have an analogue on the Russian market.
  • To pay for international content and receive information that is only available abroad.

Also, the benefits will be extended when paying for transport leased, as well as when receiving royalties for the rights to stream sports events.

The new law will be another measure to support foreign businesses and Russian companies working with foreign counterparties. Previously, foreign companies operating in Russia and receiving income in the country retained part of their tax benefits. In particular, the law proposed to reduce the tax rate or exempt from tax altogether in areas related to insurance and lending.

The tax benefits adopted for Russian businesses will almost completely coincide with the benefits for foreign companies. According to the government, this will help reduce the negative impact on the economy. The laws will help reduce the burden – now most payments will go only in favor of Russia.

However, it is also necessary to understand that tax incentives will be able to work correctly only if the countries in which foreign companies and counterparties are registered do not introduce the same measures. If similar benefits to Russian ones are introduced in the countries of registration of companies, this can only aggravate the situation. First of all, it will affect foreign businesses operating in Russia and receiving passive income here.

And yet the innovations have a positive effect – as mentioned earlier, it will help in the recovery of the country’s economy and in the resumption of the work of companies that previously suspended their activities. It is expected that the interest in working between international companies will gradually grow.

Author of the article
Companies working with foreigners will retain tax benefits
Valentina Khlavich
Managing Partner
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