Russia considers implementing tax incentives for businesses that contribute towards employees' Personal Pension Savings (PPS) plans.
💬 Stimulating Employee Savings with Tax Incentives: Putin's Proposal
Get ready, business owners! A groundbreaking tax break could be on the horizon if you're looking to help your employees plan for their long-term financial future. Back in the swanky confines of the St. Petersburg International Economic Forum in 2024, none other than Vladimir Putin had the brilliant idea to motivate businesses to co-fund their employees' long-term savings accounts. And, it seems, the government is agreeing with him!
A recent approval from the legislative commission confirms this game-changer. According to Sergei Beliakov, president of the National Association of Non-State Pension Funds (NAPF), companies could soon be permitted to co-fund savings up to a whopping 12% of their payroll fund. Best part? These contributions would count as part of your corporate expenses, reducing your taxable profits!
The tax incentive idea has gained support from big names like NAPF, Sberbank, VTB, and NPF "Gazfond". If you're thinking, "That's all well and good, but what about the reality?" fear not! VTB reckons businesses should have the flexibility to set their own co-funding percentage based on their workforce needs. Sberbank's Senior Vice President, Ruslan Vesterovskiy, is even more optimistic, believing this move could accelerate the growth of participants and investments in the program, giving a substantial boost during Russia's tight labor market.
So, how many companies are ready to contribute to their employees' savings? A study by SberNPF and "Rabota.ru" reveals that 46% are willing to take part in the game, with half stating they'd need tax incentives before saying yes.
The Personal Long-Term Savings program has been operating in Russia since 2024. The goal? To attract at least 250 billion rubles in 2024 and 1% of the country's GDP in 2026. Employees can enjoy state co-financing on their contributions for 10 years, up to 36,000 rubles each year, as well as a tax deduction. The funds can be accessed after 15 years, or when individuals reach 55 years old for women and 60 for men. Worried about risk? Don't be – contributions are insured up to an impressive 2.8 million rubles!
As of 2024, the program has already attracted 220 billion rubles. In 2025, the target is a mind-boggling 750 billion rubles.
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🔗 References
- Backing the savings plan: Government supports tax incentives for employer contributions to employee long-term savings programs
- The Ultimate Guide to Employee Long-Term Savings Programs in Russia
- Boosting the Russian Economy: The Expected Impact of Tax Incentives for Employee Long-Term Savings Programs
The tax incentive approval for co-funding employee long-term savings could potentially significantly impact the banking-and-insurance industry and finance sector, as companies might choose to invest a portion of their payroll fund (up to 12%) in these savings accounts. The reduction in taxable profits due to corporate expenses related to these contributions could also positively affect the business landscape. This proposed change, part of the Personal Long-Term Savings program, is expected to attract a substantial amount of money, with a target of 750 billion rubles in 2025.
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