Tax incentives for energy efficiency

Companies that buy energy efficient equipment may be exempt from property tax for one year. A new law to this effect will be proposed by the government, Elvira Nabiullina, Russia’s Minister for Economic Development said on Friday.

Unlike most other countries Russia did almost nothing to stimulate consumption but has laid emphasis on the reduction of direct taxes.

From January 1, 2009 business is allowed to use the accelerated depreciation on new equipment: assets with lifetime between 3 to 20 years can be depreciated for a third of its value in the tax period when it was acquired (in 2008 the threshold was 10%).

The amount of interest that can be deducted from taxable income has been increased nearly one-half, to 19% for the rouble loans (against 13.2% in 2008) and to 22% for loans nominated in the foreign currency (in 2008 - 15%).

The income tax rate has been cut to 20% instead of 24% the previous year.

Also the threshold to use the simplified system of taxation has been lowered. Now companies with annual revenues up to 57 million roubles (USD$1.7 million), almost twice as much as before, can benefit from the system.

However, the procedure for tax-free import of technological equipment as the contribution into the share capital of domestic companies has become more difficult.

Although the list of the ant-crisis measures looks impressive, so far it largely missed the target. The country’s GDP has plummeted more than in most European countries, and so did the tax revenues.

Russian business is struggling to break even, paying income tax or making capital investments does not appear in its priority list.



September 28, 2009