The Government Commission for the Control of Foreign Investment in Russia (the Government Commission) decided to increase the tax on the exit of foreign companies to 35%, and the mandatory discount on the sale of assets has been increased from 50% to 60% of their estimated value.
In March 2022, the President’s Decree No. 81 introduced a special procedure for transactions with residents of “unfriendly” countries.
To exit the Russian market, foreign companies must go through a certain procedure. To formalize transactions for the alienation of assets, companies from “unfriendly” countries are required to obtain permission from the Government Commission. This procedure is accompanied by a payment to the federal budget of funds – until quite recently in the amount of at least 15% of the market value of the relevant assets, as indicated in the independent assessment report.
On 30 October 2024 the Ministry of Finance published an extract from the minutes of the meeting of the subcommittee of the Government Commission for Control over the Implementation of Foreign Investments in the Russian Federation dated 15 October 2024, No. 268/1 (Extract). In accordance with it, the authorities increase the “exit tax” from the Russian market for foreign companies and specify the deadlines for sending deductions to the federal budget. The amount of the contribution has been increased to 35%, and the mandatory discount on the sale of assets has been increased from 50% to 60% of their estimated value.
According to the commission’s decision, 25% of the transaction amount must be transferred to the budget within the first month after the conclusion, another 5% within a year, and the remaining 5% within two years, sources say.
The new rules apply to both future transactions and applications already submitted but not yet reviewed.
The full text of the Extract is provided below.
MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION
EXTRACT
FROM THE MINUTES OF THE MEETING OF THE SUB-COMMISSION OF THE GOVERNMENT
COMMISSION FOR CONTROL OF FOREIGN
INVESTMENTS IN THE RUSSIAN FEDERATION
DATED 15 OCTOBER 2024 N 268/1
“1. Taking into account the discussion that took place, pursuant to the instruction of the President of the Russian Federation dated October 2, 2024 N Pr-2051, as well as in addition to the minutes of the meeting of the Sub-Commission dated 14 June 2023 N 171/5, the Sub-Commission adopted a unanimous decision when considering the issue of issuing permits by the Sub-Commission for the implementation (execution) of transactions (operations) aimed at the alienation of securities, including shares, stakes (contributions) in authorized (contributed) capital of Russian legal entities (hereinafter referred to as assets) by foreign persons associated with foreign states that commit unfriendly acts against the Russian Federation, Russian legal entities and individuals (including if such foreign persons have citizenship of these states, the place of their registration, the place of their predominant conduct of business activities or the place of their predominant extraction of profit from activities are these states), or persons who are under the control of the said foreign persons, regardless of the place of their registration or the place of their predominant conduct of business activities, proceed, as a rule, from the expediency of establishing the following conditions for the implementation (performance) of such transactions (operations):
1) sale of assets with a discount of at least 60% of the market value of the relevant assets, specified in the report on an independent valuation of the market value of the assets, carried out by an appraiser engaged in private practice and included in the list of appraisers (appraisal organizations) recommended by the Sub commission to carry out such valuation, or by an appraiser who has entered into an employment contract with a legal entity included in this list (hereinafter referred to as the report on an independent assessment);
2) the existence of an obligation to voluntarily transfer funds to the federal budget in the amount of at least 35% of the market value of the relevant assets specified in the independent assessment report, according to the following schedule:
25% of the market value of the relevant assets specified in the independent assessment report shall be transferred within one month from the date of the transaction (operation);
5% of the market value of the relevant assets specified in the independent assessment report shall be transferred within one year from the date of the transaction (operation);
5% of the market value of the relevant assets specified in the independent assessment report shall be transferred within two years from the date of the transaction (operation);
3) obtaining the consent of the President of the Russian Federation to the implementation (execution) of a transaction (operation) with assets whose market value exceeds 50 billion rubles.
2. To declare subparagraph 3 of paragraph 1 of the minutes of the Sub-Commission meeting of 14.06.2023 No. 171/5 and paragraph 1 of the minutes of the Sub-Commission meeting of 26.09.2023 No. 193/4 to be no longer in force.”