“Patent box” will increase in size – Newspaper Kommersant No. 31 (7476) dated 20.02.

The government has submitted a draft law to the State Duma, designed to encourage companies to more effectively manage the exclusive rights to the results of their intellectual activity (RIA). It is proposed to extend the income tax rate, reduced to 3%, not only to domestic royalties for the use of patents, but also to those that come from abroad. Only Russian companies will be eligible to receive the exemption, the authorities believe that this will motivate foreign companies interested in low taxes to register their business in the Russian Federation and transfer intellectual property rights to such branches.

The bill prepared by the Ministry of Economy and submitted to the State Duma is about expanding the regime of the so-called patent box – a tax benefit used in many countries to support scientific developments due to a reduced fiscal burden on income from the use of patents. As explained in the department, in the UK such a preferential rate is 10%, in Belgium – 6.8%, in Austria – 12.5%. Note, however, that in recent years this exemption has raised questions from the OECD (especially with regard to attracting international IT companies to Ireland) as part of the organization’s fight against the “erosion” of the tax base (the BEPS initiative).

The amendments to the Ministry of Economy propose to expand the list of RIA, in respect of which the regions will be able to reduce the income tax rate from 20% down to 3% – on royalties received by organizations from abroad. A reduced rate will be available to Russian companies that have patented inventions, utility models and industrial designs registered by international organizations (provided they operate on the territory of the Russian Federation) or foreign patent offices.

The Ministry of Economy explains that, for example, regional development companies that have created a unique material and patented it in the Russian Federation and abroad, as well as earning by granting a license not only to domestic, but also to foreign manufacturers, will be able to count on such a benefit. According to a source close to the agency, for example, the recipients of such royalties are likely to be the creators of the Sputnik V vaccine, which has patented it in many jurisdictions.

Note that this exemption is already in place for domestic license payments. The law adopted in 2021 gave the regions the right to set a reduced tax rate on the results of RIA if the rights are registered with Rospatent. However, the subjects of the Russian Federation are in no hurry to exercise this right. The head of Rospatent, Yuri Zubov, noted in November 2022 that at that time only the Khanty-Mansiysk Autonomous Okrug used the “patent box” mechanism. According to Ildar Shaikhutdinov, a member of the General Council of Delovaya Rossiya, the adopted law hardly works, as the regions fear that their budgets will receive less taxes. “But they do not understand that there is no turnover from these transactions, and the tax from them still does not generate revenue,” the expert complains.

According to First Deputy Prime Minister Andrey Belousov, the government “consistently expands this regime and plans to improve it further.” It should be noted that the establishment of incentives for the growth of the turnover of intellectual property objects is among the conditions for increasing the supply of innovative products based on domestic technologies – these conditions are provided for by the draft Concept of Technological Development of the Russian Federation until 2030 (Kommersant has it). According to Deputy Minister of Economy Maxim Kolesnikov, the expansion of the exemption will motivate foreign companies interested in low taxes to register their business in the Russian Federation and transfer intellectual property rights to such branches.

Opora Rossii vice-president Natalya Zolotykh calls the bill long-awaited. According to her, both business associations and Rospatent supported its appearance. According to Ildar Shaikhutdinov, it is necessary to reduce the income tax rate to 3% for both exclusive and non-exclusive intellectual property rights. “The current wording of the law and the proposed wording speak only of licenses,” the expert notes. In addition, in his opinion, the tax rate should be fixed by the Tax Code at the level of 3% without the possibility of the regions to introduce it in a different amount.

Venera Petrova