In the first newsletter published on 27 January 2026, we addressed the key developments involving tax administration and exercising tax control. In the newsletter of 5 February 2026, we reviewed the key changes related to the taxation of legal entities.
1 Determining the value of the share of a withdrawn shareholder to determine taxable income
At the end of March 2026, Federal Law No. 70-FZ was adopted. The law defined the procedure for establishing the value of the share of a withdrawing shareholder being transferred to the organisation itself. The foregoing changes were introduced in pursuance of a landmark Ruling of the Russian Constitutional Court of 21 January 2025 in respect of the case of Uspekh and N. company.Federal Law No. 70-FZ amended article 346.17 of the Russian Tax Code by adding a new clause 1.1. thereto. According to the new provisions, if an organisation transfers assets to a withdrawing shareholder in consideration for the actual value of the withdrawing shareholder’s share, the actual value of such share received from the withdrawing shareholder shall be recognised as taxable income of such organisation. The actual value of the received share shall be determined in accordance with the Federal Law “On Limited Liability Companies” based on the size of the organisation’s net assets on the day following the day of the transfer of assets to the withdrawn shareholder.
These changes reflect the approach of the Russian Constitutional CourtDecision of the Moscow Arbitrazh Court of 17 September 2025 in respect of case No. A40-244851/22-99-4741, Decision of the Arbitrazh Court of the Republic of Tatarstan of 29 September 2025 in respect of case No. A65-16913/2023. and case law shaped after the adoption of Ruling of the Russian Constitutional Court No. 2-P.
Law No. 70-FZ specifically sets out that such changes are introduced for the purposes of chapter 26.2 of the Russian Tax Code “Simplified Taxation System.” However, we expect that if similar disputes arise in relation to profits tax, the tax authorities and courts will take the same approach.
As a side note: these changes will become effective on 1 January 2027. However, given that the approach to assessing the actual value of a share is established in Ruling of the Russian Constitutional Court No. 2-P, as a matter of fact, the new rules have been in effect since 2025.
2 PIT
2.1 The changes clarify the procedure for determining income represented by material gain generated from the acquisition of shares/interest when making a contribution to the share capital of an organisation.Law No. 425-FZ introduced changes to article 212, clause 4 of the Russian Tax Code. According to these changes, if shares/interest are transferred to the share capital of an organisation and the income from their sale is exempt on the basis of the “five-year exemption” under article 217, clause 17.2 of the Russian Tax Code, the material gain shall be defined as the excess of the market value of the acquired shares/interest in the organisation over the market value of the shares/interest transferred as a contribution.
This provision is in line with the effective rule of determining income represented by material gain originating from the acquisition of shares.
2.2 Clarification of the procedure for determining expenses on the acquisition of shares of economically significant organisations and a foreign holding company or a foreign organisation through which the taxpayer indirectly owns a foreign holding company.
As we addressed earlier, an economically significant organisation may decide to determine the share of the book value of its shares owned by a foreign holding company based on an independent market appraisal. These changes were made to article 214.1, clause 10.1 of the Russian Tax Code and they apply for the purpose of determining the expenses for the acquisition of shares of economically significant organisations by individuals when paying PIT.
In addition, changes have been made to article 214.1, clause 10.1 of the Russian Tax Code. These changes set out that expenses related to the acquisition of shares in a foreign holding company or another foreign organisation through which the taxpayer indirectly owns a foreign holding company are recognised, including the actual expenses of the donor or testator for the acquisition of such shares, if upon receipt of these shares the taxpayer was exempt from paying PIT on the basis of article 217, clauses 18 and 18.1 of the Russian Tax Code. If a taxpayer paid PIT when acquiring shares in a foreign holding company or another foreign organisation through which the taxpayer indirectly holds a foreign holding company, the amounts of such tax paid shall be deemed the expenses incurred in acquiring the shares.
2.3 The changes clarify the procedure for recognising expenses constituting the cost of acquiring securities and derivative financial instruments
First of all, these changes added provisions stating that the FIFO rule applies, among other things, to transactions in derivative financial instruments to article 214.1, clause 13, paragraph 3 of the Russian Tax CodeFIFO rule as amended by article 214.1, clause 3, paragraph 13 of the Russian Tax Code applies only to operations with securities.
In addition, the amendments clarify that if transactions in securities and/or derivative financial instruments are carried out for the taxpayer’s benefit by a broker, then the expenses are recognised based on the cost of the first acquisitions (derivative financial instruments) (FIFO) under the relevant brokerage service agreement (reflected in the relevant brokerage account).
We note that these changes enter into force on 1 January 2027.
In addition, Law No. 425-FZ introduced corrections to the procedure for recognising expenses when shares in companies incorporated as a result of reorganisation are sold. We remind you that costs incurred in acquiring shares received by a taxpayer during the reorganisation of organisations are recognised as the cost determined in accordance with article 277, clauses 4-6 of the Russian Tax Code. In this case, the taxpayer should document the expenses incurred in acquiring shares (interest, stakes) of the reorganised organisations. Law No. 425-FZ clarified that shares are understood to mean participating interest in the share capital of an organisation.
2.4 Law No. 425-FZ significantly limited the right to apply the “five-year exemption.”
Further changes have been made to article 217, clause 17.2 of the Russian Tax Code, whereby the “five-year exemption” no longer applies to income received by a taxpayer upon (i) withdrawal from the membership of an organisation, as well as (ii) to income from the sale of shares in the share capital of an organisation where more than 50% of assets consist of real estate.
Commenting on the foregoing changes, the Russian Ministry of Finance noted that the taxpayer’s right to take advantage of the exemption may be exercised only if there is confirmation of an organisation’s asset breakdownLetter of the Russian Ministry of Finance No. 03-00-08/5827 of 28 January 2026 and recommended to follow its clarification of 2021Letter of the Russian Ministry of Finance No. 03-0306/1/79628 of 1 October 2021. Therefore, the description of an organisation’s assets should be confirmed by accounting (financial) statements prepared in accordance with the requirements of Russian laws on accounting on the last day of the month preceding the month of the sale of shares.
These changes support the trend of consistently limiting applications of the “five-year exemption” for PIT. For example, previously individuals recognised as non-tax residents of the Russian Federation were excluded from the list of subjects eligible for the exemption. In addition, a limit was established on the amount (not exceeding RUB 50 million) that is exempt from PIT under the “five-year exemption.” The changes prohibited the application of the exemption to income represented by the actual value of a share received as a result of withdrawal from an organisation, although relatively recently the Russian Ministry of Finance still confirmed the admissibility of such income’s exemption from taxation if the terms and conditionsSee, for example, Letter of the Russian Ministry of Finance No. 03-04-05/97211 of 8 October 2024 stipulated article 217, clause 17.2 of the Russian Tax Code are met. The legislator has made the rulesIn the previously effective version of article 217, clause 17.2 of the Russian Tax Code, the rule on the real estate share in the assets of an organisation applied only to the sale of shares. the same for applying the exemption to income from the sale of interest and from the sale of shares.
In addition, the foregoing clause was amended by Federal Law No. 15-FZ of 30 January 2026. For example, if securities were withdrawn from the taxpayer’s possession under a securities loan agreement or a repurchase agreement, the period of such withdrawal is included in the period of ownership of the securities for the purposes of the “five-year exemption.”
The same law amended article 217, clause 17.2-1 of the Russian Tax Code. The changes add a new criterion for exempting income from the sale of certain securities from taxation. Initially, shares, bonds of Russian organisations, and investment units should have been classified as securities traded on the established securities market. According to the new version, the exemption applies to marketable securities, i.e. those related to the high-tech (innovative) economic sector on the date of their sale by the taxpayer or redemption, as well as for at least 365 consecutive calendar days preceding the date of their sale by the taxpayer or redemption.
2.5 Amendment of the procedure for determining the value of property used to acquire shares in the share capital of an organisation for the purposes of determining the amount of expenses incurred when selling such shares.
Law No. 425-FZ amended the provision of article 220, clause 2, paragraph 2 of the Russian Tax Code and clarified that the value of shares, the income from the sale of which is exempt under article 217, clause 17.2 of the Russian Tax Code, previously contributed to the share capital of an organisation or transferred to the seller, is reflected among expenses incurred during the sale of shares in such an organisation as documented actual expenses for the acquisition of such shares.
We note that in the previous version of the Russian Tax Code, the value of such “initial” shares was determined and included in expenses as the market value.
2.6 Clarification of the procedure for reflecting expenses incurred when selling property received as fulfilment of an obligation in kind. Law No. 425-FZ amended article 220, clause 2 of the Russian Tax Code.
According to these amendments, expenses related to acquiring property received as the fulfilment of an obligation in kind is recognised as the value of such property if the following conditions are met: (i) this value was recognised as the taxpayer’s income and was reflected by him/her when determining the tax base, and (ii) tax was paid on the specified amount upon receipt of such property.
2.7 Clarification of the procedure for independent PIT calculation in terms of the possibility of offsetting tax withheld by a tax agent.
The changes were reflected in the amended version of article 228, clause 1, paragraph 4 of the Russian Tax Code. It has been clarified that the taxpayer independently calculates PIT in the event that the tax was not withheld in full or in part by the tax agent. If the tax agent has not withheld PIT in full, then the previously withheld portion of PIT is subject to offset by the taxpayer, and the amount of tax payable is reduced accordingly.
2.8 At the beginning of 2026, the Russian Ministry of Finance issued several clarifications regarding the procedure for calculating and paying PIT.
- In order to determine income as material gain from the acquisition of securities, the procedure for determining market prices should be established by the Bank of Russia subject to approval of the Russian Ministry of Finance. Until that time, it is necessary to be guided by Order of the Federal Financial Markets Service of Russia No. 10-65/pz-n of 9 November 2010 (Letter of the Russian Ministry of Finance No. 03-04-05/20000 of 12 March 2026).
- The period of ownership of a land plot determined for the purposes of PIT exemption in respect of income from the sale of a land plot formed from another plot, includes the period of ownership of such second plot (Letter of the Russian Ministry of Finance No. 03-04-05/12690 of 19 February 2026).
- Payments of interest (discount) income when a taxpayer presents bills of exchange of such bank to a commercial bank for redemption are classified as income from transactions in securities. The taxpayer independently calculates, declares and pays PIT on such income (Letter of the Russian Ministry of Finance No. 03-04-06/6850 of 2 February 2026).
- Expenses associated with the acquisition of securities include, among other things, coupon amounts or other property in the amount of expenses for their acquisition, paid (transferred) to the issuer as a payment for the securities being placed and in accordance with agreements for the sale and purchase and exchange of securities (Letter of the Russian Ministry of Finance No. 03-04-05/5062 of 26 January 2026).
- Income in the form of material gain received from savings on interest for the taxpayer’s use of borrowed funds under an assignment agreement with the transfer of a lender’s rights under a loan agreement concluded before 31 December 2024 (inclusive) is exempt from taxation on the basis of article 212, clause 1, paragraph 1 of the Russian Tax Code, provided that the taxpayer has the right to receive a property-related tax deduction established by article 220, clause 1, paragraph 3 of the Russian Tax Code. In this case, the foregoing right of the taxpayer is confirmed by a corresponding document issued by the original organisation (Lender) (Letter of the Federal Tax Service of Russia No. BS-36-11/222@ of 19 January 2026).
3 STS (Simplified Taxation System)
3.1 Changes establish an obligation to pay PIT on interest on deposits (account balances) in banks located in the Russian Federation by sole traders taking advantage of the STS.Law No. 425-FZ amended article 346.11 of the Russian Tax Code, which established the obligation of those sole trader taxpayers who take advantage of the STS to pay PIT on income in the form of interest on deposits (account balance).
We note that previously, interest on deposits and account balances is includedSee, for example, Letter of the Russian Ministry of Finance No. 03-04-05/35254 of 20 April 2022 in the tax base under the STS and was exempt from PIT, accordingly.
Consequently, the provisions of article 214.2 of the Russian Tax Code apply to income in the form of interest on deposits (account balances) received from 1 January 2026, and such income is subject to PIT irrespective of the availability of the sole trader status and the date of opening the deposit (account).
In addition, Law No. 425-FZ amended article 346/12 of the Russian Tax Code. The new version establishes that restrictions on the use of the STS by attorneys do not apply to their entrepreneurial activities not related to advocacy that they carry out as sole traders.
3.2 Income limits for exempting STS taxpayers from VAT have been changed.
As we previously highlighted in our newsletter on changes to the taxation of legal entities, amendments to article 145 of the Russian Tax Code established new annual income limits for the applicability of a VAT exemption for taxpayers using the STS: RUB 20 million for 2025, RUB 15 million for 2026, and RUB 10 million starting in 2027.
The specified changes also apply to individual taxpayers with the status of sole traders who use the STS.
3.3 According to these changes, the list of expenses under the STS is now non-exhaustive.
Therefore, article 346.16, clause 1 of the Russian Tax Code was supplemented with a new paragraph “45” stating that a taxpayer enjoying the STS can reduce generated income by other expenses determined in the manner established by chapter 25 of the Russian Tax Code.
We would like to remind you that reducing income by the amount of expenses incurred under the STS is only possible when selecting the “income less expenses” taxable item.
3.4 Law No. 425-FZ expanded the list of expenses on intangible assets taken into account when calculating tax under the STS.
According to the changes, expenses for fitting-out, further equipping, reconstruction, modernisation, and technical upgrade of intangible assets were added to article 346.16, clause 1, paragraph 2 of the Russian Tax Code in addition to the previously recognised expenses for the creation and acquisition of intangible assets.
Additionally, Law No. 425-FZ clarified the procedure for determining expenses under the STS related to fitting-out, further equipping, reconstruction, modernisation, and technical upgrade of taxable items. We remind you that such expenses are determined subject to article 257 of the Russian Tax Code. In the previously effective version of article 346.16, clause 4 of the Russian Tax Code, the relevant rules were applied only to fixed assets. Law No. 425-FZ expanded this provision to cover intangible assets.
3.5 The amendments provide for a change in the procedure for establishing tax rates under the STS by constituent entities of the Russian Federation.
In accordance with the new version of article 346.20 of the Russian Tax Code, a law of a constituent territory of the Russian Federation may establish tax rates ranging from 1 to 6 percent (if the taxable item is income) and from 5 to 15 percent (if the taxable item is income less expenses) only in relation to those categories of taxpayers who carry out types of activities determined by the Government of the Russian Federation and meet the established criteria.
4 Insurance contributions
4.1 Law No. 425-FZ establishes a new procedure for calculating insurance contributions from the income of a sole executive body.Article 421 of the Russian Tax Code was supplemented with a provision stating that for the purposes of calculating insurance contributions the amount of payments and other remuneration is taken to be equal to the minimum wage if the amount of payments and other remuneration accrued in relation to the general director of a commercial organisation is less than the minimum wage. The Russian Ministry of Finance specifically notesLetter of the Russian Ministry of Finance No. 03-15-05/4098 of 23 January 2026 that there are no exceptions to this rule, including if the head of the organisation works part-time.
The corresponding rule does not apply to managers of organisations using the special automated simplified tax system regime, according to which the insurance contribution rate is setLetter of the Russian Ministry of Finance No. 03-15-05/121062 of 12 January 2025 at 0%.
4.2 Change of the procedure for applying reduced rates of insurance contributions by small and medium-sized enterprises (SMEs).
The amendments supplemented article 427 of the Russian Tax Code with a new clause 13.3 setting out that a reduced rate of insurance contributions for SMEs is applied subject to the simultaneous fulfilment of the following conditions:
- the main type of activity according to the Unified State Register of Legal Entities (USRLE) is included in the list approved by the Government of the Russian FederationApproved by Order of the Russian Government No. 4125-r of 27 December 2025;
- at the end of the reporting period, at least 70% of all income consists of income from the main type of activity.
The list includes such areas of the economy as (i) crop production, livestock farming, hunting, fishing and aquaculture, (ii) production of food products, beverages, clothing, electronics, medicines, (iii) information technology, telecommunications, (iv) education, sport, culture and science and others (information available on the official website of the Federal Tax Service of Russia of 3 February 2026).
The reduced rate for SMEs is set at 15% and applies to the portion of payment that exceeds the minimum wages by 1.5 times.
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The Denuo team would be pleased to provide assistance in connection with the implementation of these and other new amendments in the context of the current business processes, including assessing tax risks, giving recommendations on business structuring and other matters.
