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NAUFOR Proposes Tax Benefits for Investments

13.02.2013 13:40 / Interfax

National Stock Market Participants Association (NAUFOR) has drafted tax benefit proposals for local Russian investors, CEO Alexey Timofeev told the press Wednesday.

"We have already discussed these proposals with the President’s Executive Office and got their support", he said, adding that details are currently being negotiated with Minfin.

According to him, the private individuals tax benefit act has been drafted. "The President’s Executive Office has set the deadline for the passing of the act in the Spring parliamentary session", said Timofeev.

He stated that the bill features two private investor benefit schemes.

NAUFOR CEO said that private individuals’ earnings (RUB 3mln maximum) from the sale of listed shares owned for 3+ years will be exempt from income tax. Shares owned for over 5 years will be exempt from income tax regardless of the earned amount.

According to him, with a 15% annual investment yield (median RTS index growth rate for the past 10 years), a RUB 6mn investment will bring RUB 3mn income in three years.

Timofeev thinks that the tax benefit will result in tax harmonization for Russian assets. He noted that the benefits will cover Rouble and foreign currency bank deposits as well as real estate investments.

Another key tax improvement, said NAUFOR CEO, is the introduction of type A and B individual investment accounts. Brokers or trustees can open these accounts for private individuals. You will have to choose one account type only.

Timofeev said that maximum deposit amount for A type accounts is RUB 400-600k per year depending on age. Annual deposits are eligible for a 13% income tax rebate. Funds will be invested in financial instruments, with investment policy statement details still to follow. After a five-year period, individuals can withdraw cash, paying 13% income tax, while in the event of broker or asset manager contract termination, the tax rate will rise to 35%.

There will be a RUB 1mn maximum deposit for type B accounts, and the private individual will not be entitled to the annual 13% tax rebate. After five years of investment, the income will be eligible to the income tax benefit. In the event of termination, the tax rate will amount to 13%.

Timofeev said that the investment accounts will also service private pension plans and life insurance, currently eligible for social tax deduction.

Taxation of financial transactionsProject Group №3Alexey Timofeev