New changes in Tax Regulations about selling and purchasing shares

From January 1st, 2025, all dealings with shares were changed by Tax Regulations. New rules will be applied for both: owners who want to sell their shares and clients who are going to purchase them.

The rules before January 1st, 2025:

Sellers:

• Payed the taxes for personal income from selling shares by themselves. The legal Entity was not a tax agent (Tax Law of The Russian Federation, Letter from the Russian Ministry of Finance)
• Not obliged to pay if the ownership was more than 5 years
• If the ownership was partial all this 5 years, the tax reduction will be applied only for this part (Letter from the Russian Ministry of Finance)
• Example: if in 2019 someone sold 5% and than in 2023 another 10%, the tax redaction will be applied only for the income from selling this 5%.

Clients:

• Not a personal income taxpayer
• The purchase of the share lower that the market price will not be taken as a pecuniary advantage and will not be included into tax payment for the personal income.
• A pecuniary advantage will be included into tax payment for the personal income only in case of gift

The rules after January 1st, 2025:

Sellers:

Exemption from the tax payment for the personal income will be only:

• If the seller has a tax residence in Russia (on territory of the Russian Federation not less then 183 days per year). Non-residents always must pay this tax.
• If the total income from the shares selling procedure must be lower than 50 million Rubles. All, that is higher, will be taxed.

Clients:

• Thepurchase of the share lower than the market price will be interpretated as a pecuniary advantage and will be taxed (Tax Law of The Russian Federation redacted in Federal Law N259)
• A pecuniary advantage is the difference between market price and the price of the purchase

How the Federal Tax Service will determine the market value of the share (from 2025):

• Based on the value of the company’s net assets as of the last reporting date (December 31^st  of the year preceding the transaction).
• Net Asset Value = Assets – Liabilities.

Personal income tax rate (on income in the form of material benefits):

• For residents of the Russian Federation: from 13% to 22%.
• For non-residents: 30%.
• Tax deductions are not applied to income in the form of material benefits.