Russia will abolish the institution of consolidated groups of taxpayers

© Depositphotos / nito103Бизнесмен checks accounts. archival photoRussia will abolish the institution of consolidated groups of taxpayers© Depositphotos / nito103

The government proposes from 2023 to abandon the institution of consolidated groups of taxpayers, said Prime Minister of Russia Dmitry Medvedev at a Cabinet meeting on Thursday.

Institute the CTG allows for the holding, created such a group, to unify the tax base for the profit of all its companies, with major tax amounts appear in the budget of the constituent entity of the Russian Federation, where it creates profit, not where the parent company. REAG also solves the problem of understating the tax base of companies through the mechanism of transfer prices and saves the company from control over transfer pricing.

In practice, however, the establishment of such groups leads to the loss of income for income tax regions: the tax base is often redistributed to those regions where the lower tax rate on profits, in addition, the overall tax base is reduced through inclusion of the losses of loss-making companies.

«Starting in 2016, let me remind you that we have suspended the creation of new groups and banned the expansion of previously existing, has introduced a series of restrictive measures. And in 2023 this institution at the Federal level will generally be eliminated,» — said Medvedev.

«Taking this decision in advance we should make taxpayers and regional authorities had time to prepare for the change in tax rules in the consolidated group of taxpayers», — said the Prime Minister.

A CTG was such holding companies, as «Rosneft», «Severstal», «Gazprom», «LUKOIL», «NOVATEK», «Mechel». A moratorium on the creation of the CTG has been introduced in 2015, it expires in 2018. During this time, the authorities intended to clarify the rules on the CTG that the law did not lead to the loss of regions.