Tax deduction for import substitution – Kommersant

The White House has begun the promised reform of the system of distribution of tax breaks in exchange for investment in the regions. The Ministry of Economy has prepared the first package of amendments to tax legislation designed to unify the rules for granting investment tax deductions for the regional part of income tax in all regions and focus the mechanism on priority investment projects. It is assumed that the “project” approach will allow shifting the focus from supporting the operating activities of companies to launching and modernizing production facilities that can close the deficits that have arisen after the departure of foreign suppliers.

The Ministry of Economy published on regulation.gov.ru a draft amendment to Art. 286.1 of the Tax Code on the application of the investment tax deduction (INV). Let us remind you that the mechanism allows companies to reduce the amount of income tax paid to the budget of a constituent entity of the Russian Federation by up to 90% of the volume of investments (the volume and conditions depend on the region). It was expected that benefits would stimulate the modernization of production in the regions, but due to the reluctance to increase costs, some regions did not implement them, therefore, from 2021, the government will compensate them for up to two-thirds of the costs, subject to the implementation of the regional investment standard. However, this did not spur interest in INV: in 2022, 19 regions received subsidies, and the volume of INV amounted to 27 billion rubles. with investments in the amount of 30 trillion rubles, said First Deputy Prime Minister Andrei Belousov. It turned out that in practice, the INV is aimed at supporting the current activities of companies and does not correspond to the goals of modernizing production. Therefore, it was proposed to transfer the INV to the project approach (see Kommersant dated March 1).

The draft law of the Ministry of Economy provides for this: now at the federal level there is no mandatory condition for the provision of INV in relation to investment projects, but according to the document, companies will be able to reimburse up to 25% of the costs of creating, acquiring, upgrading fixed assets when implementing investment projects that are of interest to the state, they should be investment agreements with the regions on mutual obligations have been concluded, and the projects themselves must be included in the unified register of the Treasury. Potentially interesting projects for the state will be those that meet the requirements of the taxonomy of technological sovereignty (see Kommersant of April 18). The decision on INV for projects beyond the perimeter of the taxonomy descends to the level of the subjects of the Russian Federation – they will determine their priorities themselves. The authors hope that this approach will make it possible to concentrate INV on the tasks of economic restructuring. De facto, we are talking about projects that can close the deficits that have arisen due to sanctions and the withdrawal of foreign suppliers and technologies from the Russian Federation.

The document also fixes uniform conditions for the application of INV at the federal level. The term for applying the deduction will be no more than five years from the date of conclusion of the investment agreement, the corporate income tax rate for companies applying the deduction cannot exceed 10% (now it can vary from 0% to 17%). The project also imposes restrictions on other benefits: for example, companies are not entitled to apply a deduction for other reasons in addition to the INV. Companies that have entered into an agreement on the protection and promotion of capital investments cannot receive compensation under the INV.

At the same time, the project also reduces the powers of the regions to “adjust” the deduction: they will not be able to limit the amount of capital expenditures included in the deduction, the categories of fixed assets to which it applies, the ability to transfer the unused balance of the deduction to subsequent periods, and the categories of taxpayers who are entitled to use the project INV . Now it is the unpredictable conditions of taxation at the regional level and the inability to predict the return on investment that are considered the reason for the low demand of investors for INV.

It is expected that the new conditions for granting the deduction will begin to work from 2024. At the same time, the authors acknowledge that the amendments may lead to a reduction in regional budget revenues, but it is impossible to calculate the losses, since the use of INV in the regions is now voluntary. It should be noted that when discussing the reform, the White House proposed to reform not only the rules for granting the deduction itself, but also the mechanism for compensating for shortfalls in regional incomes. It was planned that instead of direct subsidies, a mechanism of long-term stimulating budget loans would be created. The secretariat of First Deputy Prime Minister Andrey Belousov said that the topic of budget loans is being worked out further and will require a separate decision.

Diana Galieva