X5 investors will face higher taxes due to company relocation

The increase in tax is associated with a special procedure for accounting for the costs of purchasing shares of companies moving to Russia within the framework of Law No. 470-FZ on forced redomiciliation, the publication writes.

For investors who purchased X5 receipts before redomiciliation and will sell shares of the Russian PJSC “Corporate Center X5” after completing this procedure, the tax base will increase by 42.4% of the purchase price of the securities.

On December 26, the broker Aton in its client newsletter (available at RBC Investments) indicated that owners of X5 shares, once the redomiciliation is completed and the start of trading in securities, will have tax consequences when selling them. The broker’s message says that this is due to the special cost accounting procedure established by the Tax Code.

Thus, 57.6% was transferred to new shares of PJSC “Corporate Center ICS 5” and 42.4% remained to depositary receipts of X5 Retail Group, as specified in the Aton bulletin. Brokers BCS, Sberbank and Gazprombank also warned their clients about the tax consequences of selling X5 shares.

The tax base changed due to an amendment that was introduced into the Tax Code in accordance with Federal Law No. 470-FZ of August 4, 2023, according to which the ownership structure of X5 Retail Group was transferred from the Netherlands to Russia .

This amendment describes a mechanism for allocating the costs an investor incurs to purchase a Dutch receipt between the receipt and the share received. X5 did not have a receipt converted into action; In fact, investors now own two securities.

Ugryumova told RBC Investments that the costs of acquiring the credited shares were distributed in proportion to the share of the book value of the shares in the book value of the assets of X5 Retail Group, which amounted to 57.6%. This means that 42.4% of the value of the paper will be added to the tax base after the first sale of X5 securities on the market and the withdrawal of money. Other purchases and sales of X5 shares do not fall into this article, Ugryumova added.

• At the end of March, the Ministry of Industry and Trade began the process of forcibly relocating the Dutch retail group X5 to Russia.
• In mid-September, ICS 5 completed the collection of applications from holders of X5 Retail Group warehouse receipts stored in foreign warehouses for the distribution of ICS 5 shares.
• It later became known that X5 shares will be traded on the Moscow Stock Exchange starting January 9 under the new symbol X5. Previously, X5 Retail Group had the symbol CINCO, but now there is no trading due to redomiciliation.