From January 1, 2020, investment tax deduction is to take effect in Moscow.
“Since 2023, due to federal law amendments, the preferential profit tax rates set by the regional regulations, will no longer be valid. Therefore, the Moscow city government has designed an alternative support option, an investment tax deduction from profit tax,” Vladimir Efimov, Moscow Vice-Mayor for Economic Policy and Property and Land Relations, said.
The right to an investment deduction will be granted to companies that are located in Moscow and have received a Moscow Investor status. The scope of the investment tax deduction is dependent on the income tax rate payable to the municipal budget, at 12.5% for entities that have received the first grade Moscow Investor status, and at 8% for entities that have received the second grade Moscow Investor status. A standard income tax rate payable to the municipal budget is 17%.
Eligibility for the Moscow Investor status and the procedure for obtaining it shall be elaborated by local authorities. The new mechanism will ensure support to active investors in real economy.
The tax relief envisages a significant reduction in the income tax payable to a constituent entity of the Russian Federation over a period of up to seven years. The tax payable to the federal budget can be as low as zero.
Up to 90% of the costs increasing the initial value of fixed assets, may be offset over the specified period of time, against the tax payable to the regional budget.
“The adoption of the law On Investment Tax Deduction will promote favorable environment for implementing priority targets for Moscow’s industrial development, designing and effecting innovative technologies, overhauling fixed assets and stimulating investment activity,” Leonid Kostroma, Director of Moscow Investment Agency, noted.
In 2016, the capital city launched a program to support investors in the real sector of the economy. Under the program, local authorities assign to investors a status of an industrial complex, an industrial park, a technology park anchor resident, or a priority investment project. To date, 105 companies (49 industrial complexes, 36 industrial parks, 10 anchor residents, 9 priority investment projects, 1 carmaker) have been granted a status making them eligible for respective benefits. Over five years, investments by industrial complex, industrial park, and anchor resident entities amounted to RUB 91 bln ($1.6 bln) while the number of their employees exceeded 100K.