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Taxation in Russia

Taxation in Russia

Updated on Monday 09th January 2017

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The Russian taxation system falls under the Tax Code. The income tax may be regarded as a federal tax that can also be regulated by the regional legal frameworks. Corporate taxes can also be divided at federal or local level.

The Russian corporate tax is 20% and it is split in two: 2% goes to the government and the rest of 18% - to the regional administration. However, the regional administration is allowed to reduce the rate with 4%. Capital gains are taxed at the full rate of 20%.

There are also withholding taxes for:

-dividends that are taxed at 9% for residents and 15% for foreign companies;
-interests that are taxed with 0% for inland payments and 20% for countries that do not have double taxation treaties with Russia;
- freight expenses are taxed 10% for payers with no establishment in Russia;
- royalties are taxed with 20% for countries that do not have double taxation treaties with Russia;
-foreign companies must pay 20% of their earnings made from other sources in Russia.

The profit tax is applied to Russian companies as well as to foreign companies conducting their business in Russia or that make income on Russian territory.

Our lawyers in Russia can offer full information on the Russian Tax Law.

Social security contributions in Russia

Social security contributions are paid to the federal budget, the Social Insurance Fund and Medical Insurance Fund. The rates for these contributions are 30% for an income until 67,000 RUB per year and 10% for incomes exceeding 67,000 RUB and they are paid by the employers. Employers must also pay between 0.2% and 8.5% for injuries and professional illness.

The income tax is applied to employees and self-employed persons and it is set at 13%. For non-residents, the income tax is set at 30%.

The value added tax in Russia

The value added tax (VAT) in Russia is set at 18% for imported goods or services. A reduced VAT rate of 10% is applied to foods, medical products and printed materials.

Financial services, education, cultural services and some medical services are exempt from paying VAT.

The asset tax in Russia is applied to properties that belong to Russian companies and offices of foreign companies. The rate is set at 2.2 % and the tax is collected by the regional administration. The advertising tax is applied to advertising costs, it excludes VAT and it is set at 5%. The advertising tax is levied by the local authorities.

Filing tax returns in Russia

The tax year ends on the 31st of December for individuals who must file their tax returns for the precedent year by the 30th of April. Foreign citizens working in Russia for a limited period of time may file their tax returns earlier and must also submit a declaration for the income they earned. Foreign citizens must file their returns no later than one month after leaving Russia.

In the case of companies and sole traders, the financial year ends on the 31st of December just as in the case of individuals, however companies must file their tax returns by the end of March of the following years, while sole proprietors are required to pay their taxes in advance, as it follows:

  • -       the first payment must be made by the 15th of July;
  • -       the second payment must be made by the 15th of August;
  • -       the last payment must be made by the 15th of November of the same tax year.

Limited companies must file their returns by the end of March of the following year, however they must also pay in advance their taxes which will be assessed based on the income earned in the previous quarter. Russian companies also have to option to file their tax returns electronically. The representatives of the companies must also file a declaration on the correctness of the information submitted with the local tax offices.

Foreign companies doing business in Russia can also invoke the double tax treaties their home countries signed with Russia in order to deduct some of the taxes paid in Russia.

If you want to start a business and you need assistance, our law firm in Russia can provide you the legal expertise you require.

 

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