Investors asked the Ministry of Finance to clarify the issue of tax benefits for stock splits

The Russian Union of Industrialists and Entrepreneurs (RSPP) and the Association of Retail Investors (ARI) asked the Ministry of Finance to resolve the issue of tax benefits for investors when splitting shares. This is reported “Vedomosti” with reference to letters from organizations. During a split, the number of the issuer’s securities traded on the market increases due to a decrease in their value while maintaining capitalization at the same level.

President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin notes that, in accordance with the Civil Code, a split should not lead to the interruption of ownership of the paper. Businesses ask for this to be confirmed in the explanations provided by the Ministry of Finance. ARI Executive Director Ilya Khersontsev, in turn, indicated that the current position of government agencies implies a denial of benefits in the event of a split. In support, he cites two letters from the Ministry of Finance and judicial practice.

In his letter, the executive director of ARI drew attention to two companies, the splitting of shares of which, in his opinion, makes the problem “severe” – Norilsk Nickel and Transneft. In November, the board of directors of Norilsk Nickel recommended decide to split the shares with a ratio of 100:1. Board of Directors of Transneft recommended stock split with a similar ratio in September. In November, Rosimushchestvo (the sole shareholder of Transneft) approved stock splitting.

The Tax Code does not directly regulate the issue of taxation of investors when splitting company shares. However, it contains two benefits for long-term investors. The first allows you to receive a deduction from income from the sale of securities if the investor has continuously owned them for more than three years (3 million rubles for each year; valid for purchases since 2014). The second allows the investor not to pay tax on all income in case of continuous ownership of shares for more than five years (the benefit is not tied to the date of purchase of the securities). In this case, a stock split may be regarded as an interruption of the three-year or five-year period of ownership of securities, which leads to a refusal to receive benefits.

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