Prior period expenses for income tax purposes

Dear colleagues,

we would like to inform you of the planned changes in the tax accounting which are expected in the nearest time.

As a general rule, according to the Article 54 of the Tax Code of the Russian Federation, if in the current tax period expenses relating to past periods are identified, they can be recognized in the current period.

However, according to the position of the Ministry of Finance, reflected in the Letter dated 15.05.2025 № 03-03-06/1/47786, the expenses of previous years cannot be recognized in the calculation of income tax for the current period if in the previous period the tax rate was lower as this will lead to an artificial understatement of current tax liabilities. Where errors (misstatements) in the calculation of the tax base relating to previous tax (accounting) periods are identified in the current tax (accounting) period, the tax base and the amount of tax should be recalculated for the period in which these errors (misstatements) were made.

The position of the Ministry of Finance is also confirmed by the latest bill 02/04/01-25/00154001, which amends the Article 54 of the Tax Code of the Russian Federation. The bill completes the Article 54 of the Tax Code with a provision prohibiting the recognition of expenses of previous periods in the current period if the tax rate of the current period is higher than the rate applicable in the period to which the errors relate.

With great probability the bill will be adopted in the nearest time, in such case the approach described by the Ministry of Finance will be established at the level of the Tax Code of the Russian Federation.

The planned date of coming into force of the amendments to Article 54 of the Tax Code of the Russian Federation is 1 January 2026. At the moment, when the amendments have not yet come into force, we recommend to follow the approach set out in the letter of the Ministry of Finance of Russia and include all expenses relating to periods earlier than 01.01.2025 in the adjusted declaration, rather than recognize them in the current period.

We will be glad to answer questions arising from the specified changes.