Expenses of a free-of-charge transfer to not-for-profit and religious organisations

Russian lawmakers continue to adopt regulations aimed at clearly defining the circle of not-for-profit and religious organisations to which property can be transferred for no fee and when relevant costs can be deducted for profit tax purposes.

Please be reminded that in accordance with the amendments introduced into the Russian Tax Code by Federal Law No. 172-FZ dated 8 June 2020, there will be three categories of such organisations.

A) Socially-oriented not-for-profit organisations that receive state and municipal support

We reported earlier[1] that the Russian Ministry of Economic Development had set up a register of such socially-oriented not-for-profit organisations. However, in accordance with the law, the procedure for maintaining this register and the executive body that will maintain the register must be determined by the Russian Government. To date, there is no such regulation, and therefore the legal significance of the existing version of the register has yet to be determined.

B) Centralised religious organisations and related religious and not-for-profit organisations

By the Russian Government’s Resolution No. 850 dated 11 June 2020, the Russian Ministry of Justice has been identified as the federal executive authority responsible for collecting information from centralised religious organisations[2] in electronic form (indicating their taxpayer’s identification numbers) regarding:

• religious organisations included in their structure;
• socially-oriented not-for-profit organisations founded by a centralised organisation or by an organisation from its structure.

The regulations do not provide for such information to be published or for a public register of such information to be established.

C) not-for-profit organisations included in the Register of not-for-profit organisations that were hit hardest by the deteriorating situation caused by the spread of the new coronavirus infection.

By the Russian Government’s Resolution No. 847 dated 11 June 2020 the Regulation on the procedure for maintaining the register of not-for-profit organisations most affected against the backdrop of deteriorating situation caused by the spread of the new coronavirus infection.

The Russian Ministry of Economic Development has been identified as the authority responsible for setting up and maintaining the register.

The register should include:

• private educational organisations;
• charity organisations that apply a simplified taxation system and reduced tariffs of insurance contributions;
• not-for-profit organisations that receive grants to support science and education, culture and arts and that are tax exempt;
• not-for-profit organisations engaged in providing social services to the public, research and development, education, healthcare, culture and arts, and mass sport (other than professional sport), and applying reduced tariffs of insurance contributions.

The Federal Service for Supervision in Education and Science and the Federal Tax Service will provide information for the register.

The Ministry of Economic Development is to issue a regulation determining the procedure for submitting information to the register and set up a register. As at 16 June 2020, no such regulation has been issued, nor has the register itself been established.