Business & Investment News Digest

#MOSCOW. Aug 4 ( Interfax ) - Russian President Vladimir Putin has signed the law to introduce a tax on windfall profits for past years. The tax is expected to generate about 300 billion rubles of additional revenue for the federal budget. The document establishes a one-off tax for large companies whose average profit for 2021 and 2022 was more than 1 billion rubles. The tax rate will be 10% of the amount of excess profit for 2021-2022 over the same figure for 2018-2019. The tax must be paid no later than January 28, 2024 and its amount is calculated by taxpayers themselves. The amount of tax can be halved to an effective rate of 5% if a deposit is paid between October 1 and November 30, 2023. The tax will be paid by Russian companies, as well as foreign companies operating in Russia through a representative office, while foreign organizations recognized as tax residents of the Russian Federation are treated as Russian ones The tax will not apply to companies established after January 1, 2021 except for those formed through reorganization; to small and medium-sized businesses; to organizations paying the single agricultural tax; to companies in the oil and gas sector, as well as organizations that have a stake in such companies of at least 75%, and members of consolidated tax groups which include such companies; coal companies; LNG producers; and companies that had no sales revenue in 2018-2019. Banks and non-credit financial organizations involved in bankruptcy prevention measures as of January 1, 2023 with the participation of the Central Bank of Russia or the Deposit Insurance Agency will not pay the tax. Also exempt from the tax are property developers that are implementing projects with citizens' funds through escrow accounts, and did not pay dividends in 2021-2022. Taxable income for the purposes of the windfall tax will be the monetary value of the excess profits of previous years, which is defined as the excess of the arithmetic mean of profits for 2021 and 2022 over profits for 2018 and 2019. Profit will be calculated as the sum of taxable income for corporate income tax, taking into account the losses carried forward from previous periods. At the same time, certain taxable income will not be taken into account, including income from dividends, from transactions with securities, from the sale of participation interests or shares, the financial results of the activities of the Central Bank under the Law on the Bank of Russia, profit from controlled foreign corporations, profits of participants in special investment contracts, and income of international holding companies from the use of intellectual property rights. For companies participating in agreements on the protection and promotion of capital investments, taxable income from activities related to the implementation of an investment project under this agreement will not be taken into account when determining profits. Taxable income is assumed to be zero if the arithmetic mean of profit for 2021 and profit for 2022 was no more than the amount of profit for 2018 and profit for 2019, and also if it was no more than 1 billion rubles - this provision will not apply to participants of consolidated tax groups. The Finance Ministry has estimated how the windfall tax burden will be distributed among the top 50 taxpayers: 20% will be paid by enterprises in solid minerals extraction, 19% by mineral fertilizer producers, 13% by metallurgical companies, and 12% by wholesale and retail trade enterprises, and 9% by banks, 5% by petrochemical enterprises, power generation, construction companies, manufacturing, logistics and less than 1% by other sectors. The total number of taxpayers will be about 2,500, or less than 3% of the total number of organizations, the ministry estimates.

#BAKU. August 1 ( Interfax ) - The Finance Ministry of Azerbaijan predicts the country's public debt in 2023 will reach 17.536 billion manat, or $10.3 billion at the current exchange rate. The Finance Ministry did not disclose the country's public debt at the end of 2022. As of June 30, 2023, Azerbaijan's public debt was estimated at 16.151 billion manat, or 14.5% of GDP projected for the current year. The Ministry estimates that, as of January 1, 2024, foreign debt will reach $6.381 billion, or 10.847 billion manat. As of July 1, 2023, it was 11.181 billion manat ($6.577 billion), or 10% of GDP, the Finance Ministry told Interfax. Domestic public debt by the end of 2023 will reach 6.689 billion manat. As of June 30, it stood at 4.97 billion manat, or 4.5% of GDP. The structure of foreign debt at the end of 2023 will consist of 49% from loans raised for a period of up to five years, 42.6% for loans from 5-10 years, and 8.4% for loans of 10 or more years, the Finance Ministry said. The Finance Ministry said that expenditures from the state budget for servicing the public debt in H1 2023 totaled 430.8 million manat, or 3.1% of budget expenditures for the current period. This consisted of 352.7 million manat for foreign debt, and 78.1 million manat for domestic. The Finance Ministry attracted 724.1 million manat in the domestic market in H1 2023 by placing bonds, funds from which went to pay down foreign and domestic public debt.

#MOSCOW. Aug 3 ( Interfax ) - The Russian government could consider reducing the use of funds from the National Wealth Fund (NWF) in order to finance additional federal budget expenditures in the transition period of 2023-2024, taking into account the situation in the economy and the financial system, the Finance Ministry's press service said in a statement. The Finance Ministry recalls that it has been envisaged to utilize the NWF in order to finance additional federal budget expenditures in excess of the rule, as part of the transitional provisions of the budget rule. The rules have also established a cut in the maximum amount of allocated funds from 2.9 trillion rubles this year to 1.3 trillion rubles in 2024, with a gradual transition toward normalizing budget policy in 2025. The approach is intended to assist in ensuring economic and financial stability, according to the statement.

#MOSCOW. Aug 1 ( Interfax ) - Russian suppliers of goods under intergovernmental agreements will be permitted to deposit their respective forex earnings in banks located outside the Russian Federation in addition to authorized banks, without the mandatory sale of forex earnings. President Vladimir Putin's decree, dated February 6, 2023, "On the special procedure for rendering settlements between certain legal entities-residents during foreign economic activity" has been amended accordingly. The amendments were signed on July 31 and go into effect on the day of their official publication. In addition, Russian contractors who, under foreign trade contracts, directly conduct foreign trade in services or work provided or executed by Russian co-contractors based on contract pursuant to intergovernmental agreements will also be permitted to deposit forex earnings to the accounts of these Russian co-contractors in authorized banks and foreign banks, without the mandatory sale of forex earnings. The February decree initially stipulated that corporate exporters who directly transfer goods to nonresidents under foreign trade contracts signed pursuant to intergovernmental agreements can transfer earned forex to the accounts of suppliers without mandatory sale of the forex. But the decree also specified that the transfer can be made in a currency other than the one specified in the contract if the supplier agrees to this. This option also applies to contracts to provide services and work if the co-contract consents to this. Suppliers and co-contractors must also grant preliminary consent to the procedure and terms of conversion if it is necessary.

MOSCOW. Aug 2 ( Interfax ) - The Russian government has forwarded a proposal to President Vladimir Putin on setting up a special investment fund for supporting Russian investors in Africa, Economic Development Minister Maxim Reshetnikov said at Putin's conference with government members on Wednesday. "Deputy Prime Minister Alexei Overchuk has forwarded to you proposals on setting up a special investment fund that would support private investments of our companies," Reshetnikov said in reviewing the outcomes of the 2nd Russia-Africa summit held last week. "We should be developing investment support mechanisms, including concessions and industrial clusters," he said. "We are preparing all decisions only on the condition that investments are protected and have additional security guarantees. At present, we have concluded six interstate agreements on encouraging and mutually protecting investments with [African] countries [Angola, Equatorial Guinea, Egypt, Libya, the South African Republic, and Zimbabwe]. But indeed, this is not enough, we now have two agreements in the works [with Congo and Morocco], and we'll be stepping up this practice. We also need to accelerate work on concluding double taxation avoidance agreements," he said.

#MOSCOW. Aug 4 ( Interfax ) - Russian Prime Minister Mikhail Mishustin has signed an instruction on establishing the Unity Park innovative science and technology center. The corresponding document was published on Thursday on the official internet portal of legal information. The instruction defines the directions of scientific and technological activities conducted at Unity Park. These are developing technologies in the area of energy security, protecting the health and maintaining the quality of life of the population, as well as developing advanced engineering technologies and new materials adapted to the conditions of the North and the Arctic. According to the instruction, Surgut State University has been proposed as the initiator of the project for the functioning of the center. The instruction also establishes the rules for legal entities to apply in order to obtain participant status in the project to create Unity Park; the procedure to conduct scientific and technological activities; as well as the specifics to conduct certain types of activities at Unity Park.

#ASTANA. July 31 ( Interfax ) - The government of Kazakhstan will organize a limited liability partnership (LLP) called Recovered Assets Management Company, Interfax is reporting. A draft resolution from the Finance Ministry for the creation of this company has been published on the Open Online Legal Database website for public debate until August 14, 2023. The new LLP will be 100% government-owned. "The goal of the partnership is to manage, to ensure the security of, and to sell the assets that have been recovered in accordance with the legislation, and other normative acts of the Republic of Kazakhstan," the document says. The objectives of the new company will include the following: to assume ownership of recovered assets on behalf of the government, to ensure the security and safety of the assets that have been passed into public ownership, to manage these assets, and to transfer the proceeds from the sale of the assets to the government fund, according to the draft resolution. Based on the appendix to the draft resolution, property on the balance sheet of the Finance Ministry's State Property and Privatization Committee will be transferred to the LLP's charter capital. These are three system power units and three monitors with a value of 687,960 tenge. The official exchange rate on July 31 is 445.68 tenge per $1.

MOSCOW. Aug 4 ( Interfax ) - The OPEC+ Joint Ministerial Monitoring Committee (JMMC) has completed its regular meeting, and has scheduled the next meeting for October 4, OPEC said in a press release. "The committee will continue to assess market conditions closely, noting the willingness of the DoC [Declaration of Cooperation] countries [member countries of the alliance] to address market developments, and stand ready to take additional measures at any time, building on the strong cohesion of OPEC and participating non-OPEC oil-producing countries," according to the press release. The committee also expressed its full recognition and support for Saudi Arabia's efforts aimed at supporting the stability of the oil market, and the committee reiterated its appreciation for Saudi Arabia's additional voluntary cut of one million barrels per day, as well as for extending the cut for September. The committee also acknowledged Russia for its additional voluntary reduction in exports by 300,000 bpd for September, the JMMC said. The committee reaffirmed the commitment of its member countries to the DoC which extends to the end of 2024 as agreed on June 4. Thus, the committee did not recommend altering quotas for oil production. Saudi Arabia said on Thursday, ahead of the meeting, that it would extend its voluntary cut in oil production by 1 million bpd into September and thus continue to produce 9 million bpd. Russia said it intended to extend its cut in oil supplies to the market in September, but less than in August. For August, Russia set a reduction in exports by 500,000 board of directors from an unspecified base, but in September the reduction will be 300,000 bpd. OPEC+ ministers did not change the quotas for the current year at their last meeting in early June, but changed them for 2024. Voluntary production restrictions imposed by nine OPEC+ countries, including Russia, were also extended for the whole of 2024. In addition, Saudi Arabia further reduced its production by 1 million bpd for July, then for August, and now for September. The price of oil has been trending upwards since the end of June, since when it has risen from $73/bbl. It is now holding above $83/bbl.

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