Russian Federation

Corporate - Deductions

Last reviewed - 12 February 2021

Expenses are deducted on an accrual basis. The main criteria for deductibility of expenses is that the expense is properly documented, aimed at generating income, and not specified in the RTC as non-deductible for tax purposes.

Depreciation and amortisation

Two methods of depreciation are allowed: the straight-line method and the declining-balance method. The useful lifespans of assets for tax purposes are established in the Classification of Fixed Assets, which was approved by the Russian government, for example:

Fixed asset Useful life (years)
Personal computer 2 to 3
Automobile 3 to 5
Truck (capacity above five tonnes) 7 to 10
Aircraft 10 to 15
Blast furnace 20 to 25

Accelerated depreciation is permitted in respect to some types of property (a special ratio of up to three may be applied). It is prohibited to apply several special coefficients to a normal rate of depreciation.

An upfront premium is allowed, which means that a taxpayer has the right to deduct 10% (or 30% for certain categories of fixed assets) of the cost of fixed assets purchased (or built) in the month when the depreciation started. The balance is depreciated over the useful life of the asset. A premium must be recaptured if a relevant asset is sold within five years of its acquisition (the requirement to recapture has not applied to sales to unrelated parties since 2013).

Intangible assets are amortised over their useful life, or over ten years (two years for certain types of intangible assets) if their useful life cannot be determined.


Under Russian tax law, a mark-up (the difference between the acquisition value and net assets of the business [property complex] purchased) should be recognised as goodwill for tax purposes and may be amortised by a buyer over five years. However, this tax regime often does not apply since a business (subject of a deal) needs to be registered as a property complex with the government authorities. However, sellers almost never do this.

Start-up expenses

Russian tax law does not contain specific provisions on the deductibility of start-up expenses. In some cases, they may not be deducted by either a parent company or a subsidiary for tax purposes.

Interest expenses

The tax authorities can audit interest income and expenses only for transactions that are deemed as controlled under the Russian transfer pricing rules (this means transactions with related parties in most cases) and only in accordance with these rules.

The following table shows how the market corridors (safe harbours) are applied to interest accrued:

Debt currency Type of loan Safe harbour rates (from … to) in 2020-2021 Safe harbour rates (from … to) before 2020 and after 2022
Russian rubles (RUB) Ruble-denominated loans between Russian entities 0% to 180% of the Central Bank of Russia (CBR) key rate 75% to 125% of the CBR key rate
Other ruble-denominated loans 75% to 180% of the CBR key rate 75% to 125% of the CBR key rate
Euros (EUR) Foreign currency-denominated loans EURIBOR 0% to EURIBOR +7% EURIBOR +4% to EURIBOR +7%
Chinese renminbi (CNY) SHIBOR 0% to SHIBOR +7% SHIBOR +4% to SHIBOR +7%
British pounds (GBP) LIBOR 0% to LIBOR in GBP +7% LIBOR +4% to LIBOR +7%
Swiss francs (CHF) or Japanese yen (JPY) LIBOR 0% to LIBOR in relevant currency +5% LIBOR +2% to LIBOR +5%
Other LIBOR 0% to LIBOR in United States dollars (USD) +7% LIBOR +4% to LIBOR +7%

The CBR’s key rate has been established at the level of 4.25% since 27 July 2020.

Free-of-charge loans between Russian related parties are not controlled under transfer pricing rules.

Bad debt

Losses in the form of bad debts written off are usually deductible. Companies may create a bad debt provision. The method of accrual for the provision for tax purposes may differ from that in financial accounting, as it is based only on the overdue payment period (i.e. if the delay exceeds 90 days, the full amount of the account receivable is included in the reserve).

A tax deductible bad debt provision can be created only to the extent of the excess of amounts receivable over amounts payable (if any) to the same counterparty.

Charitable contributions

Entities may deduct expenditures in the form of property (including cash) donated as charity for tax purposes. Deductions may not exceed 1% of revenues. For this purpose, a new sub-clause was added to Article 265 of the Russian Tax Code.

The new provisions cover relationships that arose on or after 1 January 2020.

Taxpayers may deduct these expenditures if the receiving party (non-profit organisation) falls into one of the following categories:

  • Non-profit organisation is included in the Register of Socially Oriented Non-Profit Organisations and has received grants and subsidies since 2017.
  • Non-profit organisation is a faith-based organisation.
  • Non-profit organisation has been affected by the COVID-19 crisis.

The rules for creating the Register of Socially Oriented Non-Profit Organisations are to be approved by the Russian government, so this mechanism will work only after the government passes a set of bylaws and regulations.

Research and development (R&D) expenses

R&D expenses (including R&D with a negative result) are deductible within one year after completion. Certain R&D expenses may be deducted using a coefficient of 1.5. The list of R&D categories eligible for super deduction is determined by the Russian government. A provision for future R&D expenses may be created for tax purposes.

Insurance premiums

Expenses related to all types of obligatory insurance are deductible and subject to government tariff limitations, wherever established. Voluntary insurance expenses are deductible to the extent that they relate to the insurance of damage and losses related to certain classes of assets, and the insurance of construction activity risks. Contract liability insurance expenses are deductible to the extent that such insurance is required by an international treaty to which Russia is a party or a generally accepted international trade custom.

Long-term life and pension insurance is deductible within a limit of 12% of the payroll fund. Voluntary medical insurance is deductible within a limit of 6% of the payroll fund.

Fines and penalties

Fines and penalties paid to contractors for violating contractual terms may be deducted for tax purposes.

Fines and penalties paid to a government budget are not deductible.


Taxes paid by a taxpayer, as well as social contributions of employers, are deductible for tax purposes. Trade levies are credited against CIT.

Net operating and capital losses

The amount of a recognised loss of prior periods cannot exceed 50% of the current year tax base for CIT purposes. This limitation applies from 1 January 2017 up to 31 December 2021.

The loss may be carried forward until fully utilised. Carryback of losses is not allowed.

Losses from the sale of fixed assets are recognised evenly during the remaining useful life.

Losses and income from different tax baskets are determined separately (see Capital gains in the Income determination section for more details).

In order to utilise losses upon reorganisations, a business purpose test should be met. If the test fails, the losses available at the level of the merged company should be written off and could be used for tax purposes.

Payments to foreign affiliates

There are no special tax provisions with respect to the deductibility of payments to foreign affiliates for services provided. They may be deducted in full if general deductibility criteria are met. Charges with respect to administrative support provided by foreign affiliates may be deductible. However, due care should be taken with regard to the documents used to support the nature and actual receipt of service.