Skip to comments.Russia Income Taxes and Tax Laws
Posted on 01/03/2010 9:50:30 AM PST by Flavius
Last partial update, April 2009
* The tax system in Russia underwent a comprehensive reform in the year 2001. This reform is designed, in principle, to ease the tax burden on individuals and companies and to simplify the classes of payments for national insurance. * Russia has a uniform rate of tax on the income of individuals. As of 2009 tax in Russia is payable at the rate of 13% for an individual on most income. (non-residents 30%). Russian residents pay 9% on dividend income. (Deduction at source). Non-residents pay 15% on dividend income. * Exemptions are granted to certain income earners. * The standard rate of Russia corporate profit tax in 2009 is 20%%. * Companies pay 9% tax on dividend income. Under certain terms dividend income received by companies with holding of 50% or more is entitled to participation exemption.
Russia Income Tax for an Individual
* An individual is liable for tax on his income as an employee and on income as a self-employed person. Tax will be payable on income earned in Russia and overseas by an individual who meets the test of a "permanent resident" of Russia. A foreign resident who is employed in Russia pays tax only on income earned in Russia. * To be considered a Russian resident, residence must be established of at least 183 days in Russia during 12 months. * An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance due from a salaried worker. * A self-employed individual is obligated to make advance payments on income tax that will be offset on filing an annual report. In the case of a new business, the advance payments will be calculated on the basis of the business owner's estimate. The advance payments will be made at least 3 times in each year. * Certain payments are deductible from taxable income as detailed below.
Russia Corporate Tax
* The tax on company profits is made up of 2 rates: - Federal tax - -2.5%. - Regional tax - 17.5% (with a possible incentive reduction of up to 4%). * The maximum profit tax is 20%.
Russia Capital Gains
Capital Gains (for an individual)
* The standard rate of tax is 13% for a resident and 30% for a foreign resident. * The profit on the sale of real estate or other asset that has been held for 3 years is exempt from tax. * The maximum deduction on the sale of residential real estate is RUR 1 million. On the sale of another asset it is RUR 125,000.
Capital Gains (for a corporation) in Russia
* The standard rate of tax for a corporation is identical to the tax on its regular income. * A capital loss on the sale of a fixed asset may be offset against income in the following years. The offset is spread over the remaining useful life of the asset that has been sold. * There is no cost inflation adjustment for capital gains.
Reporting Dates and Payment in Russia The tax year in Russia is the year ending on December 31. Advance payments of income tax are made as specified below:
* An Individual - An individual whose income is only from a wage is not obligated to file an annual return. The employer deducts tax from the employee and transfers it to the Tax Authority every month. - An individual who is self-employed is obligated to make 3 advance payments: on July 15, August 15 and November 15. - A self-employed individual must file a return by the end of the month of April following the end of the tax year. The balance of the tax due, after filing the annual return, is to be paid by July 15 * A Limited Company - It is compulsory for a limited company to submit the financial statements by March 30. - During the course of the year, the company is obligated to made advance payments on a monthly basis. These prepayments are based on the profit in the previous quarter. - Small businesses are not obliged to make advance payments. - Fines are imposed on the submission of returns after the date prescribed.
Withholding Taxes in Russia The tax withholding rates for payments in Russia are:
Dividends 9% (15% when the recipient is a foreign entity). Interest 20%. Royalties 20%.
UST -Unified Social Tax in Russia The UST rate for employers is 26%,up to an annual ceiling of RUR 280,000. For income of RUR 280,001-RUR 600,000 the employer pays additional 10%. For income above RUR 600,000 the employer pays additional 2%.
What is the Unified Social Tax? It sounds like a payroll tax? The low tax rates in Russia are falsely advertised if this UST is included.
Luvverly. But keep in mind if you’re a foreign investor, you may expect to be strong-armed and fleeced if you start making money.
Recent history with BP and Royal Dutch Shell joint ventures bears this out.
Ooooh! Didn’t you read? The EMPLOYER is supposed to pay the extra 26%!
The UST is Russia’s version of an Obamacare tax. It pays for you “free” health care.
UST (YeeSeN in Russian) is actually not an extra 26% tax on your company income, but an extra 26% for your employees’ salary, an extra paid directly to the government. Not a big deal, you just have to keep it in mind setting salaries.
You are paying 26% for any annual salary below rur280 000 which is about us$13 900 for 2008. If you pay more than that you pay less than 26%.
Btw, UST is abolished since this month.