Nikita Deynega has commented for Pravo.ru on the Finance Ministry’s intention to raise profit tax to 30% for companies that shifting profit abroad

The Ministry of Finance of the Russian Federation is considering the option of raising the profit tax from 20% to 25-30% for companies “abusing” the withdrawal of profits to foreign jurisdictions. According to the Ministry, this would encourage businesses to reinvest their profits domestically.

Nikita Deynega, Head of Tax & Administrative Law Practice at Maxima Legal, has commented on the initiative for Pravo.ru legal portal, stressing that attributing a particular business activity to abuse and malpractice is largely subjective.

“In my view, receiving even 100% of net profit as dividends cannot be qualified as abuse. Business itself is free to decide which share of earnings should be paid to shareholders and which should be reinvested,” Nikita explained. He also clarified that this issue is within the broad discretion of the individual and the decision taken cannot be “subject to control for expediency”.

According to the expert, the implementation of such proposals will impact on business behaviour. At the same time, the Ministry of Finance of the Russian Federation may achieve just the opposite effect and the last remaining foreign investors will depart from the Russian economy instesd of reinvestment in the country, Nikita Deynega concluded.

To read the full article (in Russian), please see Pravo.ru website >>>