Duma considers tax concessions for NGOs
The State Duma has introduced a draft bill on tax support for NGOs
The State Duma Committee on Budget and Taxes (the Committee) suggests that the Duma consider the bill on 21 May.
On 19 May the State Duma of the Russian Federation introduced a draft bill suggesting tax breaks for NGOs and other businesses which support them. On the same day, the Committee approved the draft law (called “On amendments to part two of the Tax Code of the Russian Federation, regarding tax support measures in relation to the new Coronavirus infection”). The Committee decided to send the bill for its first reading, scheduled for 21 May.
As noted in the explanatory note, the project “is aimed at reducing tax costs for organisations and individuals engaged in the unpaid provision of property used for (or intended to be used for) preventing the spread of coronavirus, as well as testing and treatment of new coronavirus infections”.
Earlier, President Vladimir Putin approved a list of instructions following a meeting on 30 April with participants of the all-Russian volunteer campaign, #MyVmeste (#WeareTogether). In these instructions the President also ordered support for social service volunteers and providers.
Taxes for NGOs
Thus, according to the draft bill, organisations from the register of socially-orientated NGOs (which have since 2017 received presidential grants and subsidies under programmes implemented by Federal Executive authorities and local governments) and providers of other social services are exempt from some taxes.
In particular, the Government wants NGOs to be exempt from corporate income tax in relation to:
- Pre-payments due in the second quarter of 2020
- Pre-payments due for the 4th/5th/6th months of 2020 financial year, “deducting earlier accrued pre-payments in the financial year’s first quarter”
- Pre-payments to be paid for the first half of 2020, also deducting pre-payments accrued for the first quarter
Therefore, corporate income tax for the first half of the 2020 financial year is calculated taking into account the deducted pre-payments mentioned above.
Furthermore, the state plans to exempt NGOs, along with self-employed individuals operating in the areas most affected by the pandemic from the following taxes:
- Excise duties for the second quarter of 2020
- Water tax for the second quarter of 2020
- Mineral extraction tax for the second quarter of 2020
- Unified agricultural tax for the six-month period of 2020.
The State plans to exempt tax payments that are paid under the simplified tax system “in relation to pre-payments for the first half of the 2020 financial year which were reduced by the amount of the pre-payment for the first quarter of the 2020 financial year.” This will be taken into account when calculating the pre-payments for the nine month period of 2020 and when the final tax is due for 2020.
The amendments will also affect transport tax, corporate and personal asset tax, and land tax — all with the same terms: for the second quarter of 2020, NGOs will be exempt from these taxes.
Another exemption is in relation to personal income taxes: it concerns the pre-payments due for the first half of 2020. These exemptions will be finalised when calculating the pre-payments for the ten month period of 2020 and when the final tax is due for 2020
Employers’ contributions for NGOs
According to the draft bill, there are plans to lower the rates of employers’ contributions, including for socially-oriented NGOs. In particular, the rates for payments accrued for second quarter are to be reduced to the following levels:
- 0.0% for mandatory pension insurance
- 0.0% for mandatory social insurance, for temporary disability and maternity payments
- 0.0% for mandatory medical insurance.
Tax exemptions for businesses
According to the draft bill, non-operating expenses will include the value of current assets, which businesses transfer to medical non-profit organisations and socially oriented NGOs from Ministry of Energy’s approved list. These expenses should not exceed 1% of gross revenue for tax purposes.