Corporate income tax : deductibility of expenditures.

Expenses necessarily incurred by a company for the conduct of its business are, subject to several restrictions, deducted against taxable income.

Most assets, including intellectual property, may be depreciated over a period of up to 30 years. Property may be depreciated using the straight-line method, where the property is written off in equal parts through the entire period of its use, or using the declining balance depreciation method, where depreciation is applied to the declining book value of the assets. Property with an economic life of 20 years and more may be depreciated by the straight-line method only. From 2009 capital assets with lifetime between 3 and 20 years can be depreciated for tax purposes for up to 30% of the total value at the moment of acquisition.

Interests can be deducted from taxable income provided that the interest does not exceed 20 per cent of the interest established by arm's-length parties in similar circumstances for the same period of time. If similar examples in the same accounting period are unavailable, the maximum deductible interest is regarded as equal to the rate of Central Bank multiplied by 1.1 for rouble loans, and 15 per cent for loans denominated in a foreign currency. In 2009 the assumed maximum armРІР‚?s length interests will be the Central Bank's rate multiplied by 1.5 for the rouble loans, and 22 per cent for the loans denominated in foreign currency.

Tuition payments to licensed educational institutions are deductible and from 2009 this includes not only educational programmes aimed at improving the professional skills but tuition fees paid to colleges and universities.

The deduction of advertising expenses, other than for mass media and outdoor advertising, is restricted to 1 per cent of the annual revenue of the company.

From 2009 Research and development expenditures are deductible at 150 per cent of the actual cost (with certain restrictions established by the Government) regardless of whether the result has been utilised by the company or not.

In general, premiums for "obligatory" (according to the law) and certain voluntary" insurance are fully deductible.

Out-of-pocket expenses up to 700 roubles ($20) for domestic and 2,500 roubles ($80) for international trips per day are deductible.

A net operating loss of a business for a particular tax year can be carried forward for 10 years. However, only 30 per cent of the loss for such a year can be used during each of the subsequent years. There is no inflation adjustment.