A draft law: what’s new in the taxation on philanthropy and charity
On May 22, 2020, the State Duma adopted in the third reading amendments to the Tax code of the Russian Federation concerning the taxation of company expenses on charity, in terms of tax support measures within the spread of a new coronavirus infection.
Previously it was not possible to include expenses on donated commodities (monetary funds) in the taxable base for profit tax, after approval and signing of the law on these amendments, it will be possible to book expenses on charity and philanthropy in the amount of 1% of revenue for profit tax purposes.
The amendments to paragraph 1 of article 265 of the tax code of the Russian Federation establish that charitable activities of a business are recognized for tax purposes, if such donations do not exceed 1% of company’s revenue. These changes will affect organizations that made expenditures:
- in the form of the value of property (including monetary funds) intended for use in the prevention and obviation of the spread, as well as the diagnosis and treatment of a new coronavirus infection, donated to medical organizations which are non-profit organizations, public authorities and management and (or) local governments, state and municipal institutions;
- in the form of the value of property (including monetary funds) donated to certain categories of non-profit organizations, including those listed in the register of non-profit organizations most affected by the deterioration of the situation as a result of the spread of a new coronavirus infection.
Moreover the draft law provides amendments to article 146 of the tax code of the Russian Federation, according to which the transfer of property intended for use in preventing and obviation of the spread, as well as the diagnosis and treatment of a new coronavirus infection, to state authorities and management and (or) local government institutions, state and municipal institutions, state and municipal unitary enterprises will not be recognized as an object of VAT taxation.
These amendments will apply to legal relations arising from January 1, 2020.
It is assumed that the new rules will have a positive impact on the activities of non-profit organizations in Russia, as well as help in developing a socially active business position.