The Russian Ministry of Justice and the cabinet approved the draft law proposed by the Ministry of Finance "On tax on excess profits of previous years", or the so-called one-time “voluntary” windfall tax on the real sector, the Vedomosti daily reported.

To remind, in February Finance Minister Anton Siluanov confirmed previous reports that the government is planning to tap the real sector for a “one-time” and “voluntary” extra budget contribution worth a total RUB300bn ($4bn), while adding that it would not affect the oil and gas sector or the SMEs.

The Ministry of Agriculture has reportedly managed to exempt agricultural companies from paying the windfall tax, arguing that they are already paying an industry-specific unified agricultural tax. This is in line with most recent reports of the government stepping up state support for the sector, and agricultural exports in particular.

At the same time, the arguments of other ministries that requested exemptions for the IT sector, medical and educational companies and defence enterprises were rejected as they violated the concept of the bill, according to Vedomosti.

The previous parameters of the windfall tax are confirmed. The FinMin is setting a January 28, 2024 deadline for the collection of the tax, which is set at 10% of the amount of excess profit for the years 2021-2022 over the profit for 2018-2019. FinMin will slash the “windfall tax” rate to 5% for those companies that will pay it ahead of the schedule in the window from October 1 to November 30, 2023.

The tax will apply to Russian companies and foreign companies with permanent operations in Russia. Companies averaging less than RUB1bn profit for the 2021-2022 period are exempt from the payment. Oil, gas and coal mining companies, oil refineries, liquefied natural gas (LNG) producers with active production and exports will be exempt, as well as all officially registered SMEs (small- and medium-sized companies).

Notably, the Ministry of Justice has raised concerns about the bill, particularly regarding the exemption of the extraction industries from the tax and the retroactive effect of the tax base. The ministry reportedly argued that retroactive taxation is unconstitutional. “However, the Ministry of Justice's comments were resolved before the bill was considered by the government committee,” according to Vedomosti.