flag Russia Russia: Tax System

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

 

Corporate Taxes

Tax Base For Resident and Foreign Companies
A company is deemed to be resident in Russia for taxation purposes if the place of effective management is in Russia (i.e. if the executive body or chief executive officers regularly carry out management activities in the country), if it is incorporated in Russia, or if it is deemed to be a Russian resident under an applicable tax treaty.
 

Tax Rate

Standard corporation tax Generally 20%: 3% of revenues is allocated to the federal budget, whereas 17% is allocated to the budgets of the relevant constituent regions (the regions may reduce such allocation to 13.5%)
Additional withholding tax for foreign companies on their income that is not obtained by their permanent establishment in Russia from 10% to 20%, depending on the type of income and the method used to calculate it
Dividends received by a Russian entity 13%
 
Tax Rate For Foreign Companies
Russian legal entities pay tax on their worldwide income. Foreign legal entities pay tax on Russia-source income derived through a permanent establishment at the standard 20% rate. Furthermore, they are subject to withholding tax on Russian-source income not related to a permanent establishment (from 10% to 20%, depending on the type of income and the calculation method).

Foreign tax credit is available but may not exceed the amount of Russian tax payable on the foreign income.

Capital Gains Taxation
Capital gains are treated as ordinary business income and taxed at the standard corporate tax rate of 20%.
Capital gains received from 2018 derived from the sale of (i) unlisted shares or participations in Russian companies, and (ii) shares in Russian companies held for more than five years, can be subject to a participation exemption, provided that real estate properties located in Russia represent less than 50% of the companies’ directly or indirectly held assets.
A participation exemption also is available for capital gains on the sale of listed shares in high-technology Russian companies that are held for more than one year.
Main Allowable Deductions and Tax Credits
Expenses are deducted on an accrual basis and have to be properly documented and aimed at generating income to be tax-deductible.
Expenses related to all types of mandatory insurance are deductible and subject to government tariff limitations, wherever established. Voluntary insurance expenses are deductible to the extent that they relate to the insurance of damage and losses related to certain classes of assets, and the insurance of construction activity risks. The deductibility of long-term life and pension insurance is limited to 12% of the payroll fund, the one for voluntary medical insurance to 6% of the payroll fund.

R&D expenses are deductible within one year after completion (in some cases they can be multiplied by a coefficient of 1.5). Furthermore, a provision for future R&D expenses may be accrued for tax purposes.
Losses in the form of bad debts that are written off are usually deductible. Charitable contributions deductibility is capped at 1% of revenues (conditions apply). Taxes are generally deductible, fines are not.

Regarding net operating and capital losses, starting from 1 January 2017, the amount of a recognised loss of prior periods cannot exceed 50% of the current year tax base for corporate income taxation purposes. Starting from 2021, recognition of the entire amount of losses will become possible again. The carryback of losses is not permitted.

Numerous tax incentives are available, including regional tax reductions for investment projects, tax reductions for technology and software companies, a ten-year tax holiday for the Skolkovo Innovation Centre, a 0% profits tax rate for specific educational and medical services and a 150% profits tax deduction for qualifying R&D expenditure. Since 1 January 2021, regions may also establish investment tax credits for R&D activities. Other special tax regimes (e.g., regional investment projects, special investment contracts, or “territories of advanced social and economic growth”) grant a 0% profit tax rate, property tax reduction, and other benefits.

Other Corporate Taxes
Regional authorities set taxes including property tax (it cannot exceed 2.2%), transport tax and gambling tax.
Stamp duty is applied for state registration of certain rights and contracts. A Mineral Resources Extraction Tax (MRET) is levied on coal, oil, gas, and gas condensate and is calculated using the extracted volume of the relevant resource (the tax rate varies from 3.8% to 8%; reduced MRET rates apply to investors in the Russian Far East). A water tax is levied on taxpayers consuming water for specific purposes.
Moscow applies a trade levy on the assets used in retail and wholesale trade.

For 2022, social security contributions amount to:
- pension: 22% of an employee’s remuneration up to RUB 1,565,000, plus 10% of amounts exceeding this limit
- social insurance: 2.9% of remuneration up to RUB 1,032,000
- medical insurance: 5.1% of the full remuneration
- mandatory accident insurance: from 0.2% to 8.5% of the full remuneration, depending on the degree of inherent risk.

Social contributions are reduced for SMEs and for IT and technology companies.

Other Domestic Resources
Federal Tax Service of the Russian Federation
Consult the "Doing Business" website, to obtain a summary of the taxes and mandatory contributions.
 

Country Comparison For Corporate Taxation

  Russia Eastern Europe & Central Asia United States Germany
Number of Payments of Taxes per Year 9.0 13.9 10.6 9.0
Time Taken For Administrative Formalities (Hours) 159.0 226.2 175.0 218.0
Total Share of Taxes (% of Profit) 46.2 36.5 36.6 48.8

Source: Doing Business - Latest available data.

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Accounting Rules

 

Accounting System

Accounting Standards
In Russia, accountancy is mainly interpreted as the rules defining the way of keeping accounts books. IFRS Standards became mandatory for the filing of consolidated financial statements by domestic and foreign companies in 2012. Russian Accounting Standards (RAS), which are converged to a great extent with IFRS, are required for standalone statements. SMEs currently use accounting standards issued by the Ministry of Finance.
For further information, consult the ICAEW website.
Accounting Regulation Bodies
Ministry of Finance
Russian Central Bank
Accounting Law
Accountancy is defined in Russia by the State rather than by professional organizations.

The Russian accounting framework is defined at three levels:
- The Federal Law on Accounting, Federal Law on Consolidated Financial Statements and Federal Law on Introducing Changes to the Separate Legislative Acts
- The Russian Accounting Standards (RAS) defined by the Ministry of Finance and the Chart of Accounts ;
- The accounting standards governing the banking and finance sectors developed by the Central Bank.
Difference Between National and International Standards (IAS/IFRS)
IFRS Standards are required for listed companies, financial institutions and some government-owned companies. Russian accounting standards (RAS), which are required for standalone financial statements, are largely converged with IFRS. Furthermore, the latter applies automatically in areas not covered by RAS (including Joint Arrangements, Hedging, Pension Plans, Share-Based Payments).
 

Accounting Practices

Tax Year
From 1 January to 31 December.
Accounting Reports
Company annual accounts must be composed of:
- a balance sheet,
- a profit and loss account,
- notes.
Small companies can produce simplified accounts.
Publication Requirements
Only certain companies, such as insurance or joint-stock companies, are requested to publish their accounts with an audit.
 

Accountancy Profession

Accountants
The term accountant is generally applied to those working inside the company. Outside contributors are called auditors and regulated at the state level. The Ministry of Finance has overall responsibility for the regulation of the auditing profession under the Federal Law on Auditing Activities. The Federal Treasury conducts quality control review of auditors providing services to public-interest entities (PIEs) such as listed companies, financial institutions and state corporations. Accountants are self-regulated through the membership requirements of the Institute of Professional Accountants of Russia (IPAR) (membership is voluntary).
Professional Accountancy Bodies
IPBR, Russian Institute of Professional Accountants
Member of the International Federation of Accountants (IFAC)
Russia is a member of the International Federation of Accountants (IFAC).
Member of Other Federation of Accountants
Russia is a member of the European Accounting Association.
Audit Bodies
Companies with an annual turnover greater than RUB 400 million or total balance sheet assets exceeding RUB 60 million in the previous year must have their financial statements audited annually. You can contact the Russian Institute of Internal Auditors.
 
 

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Consumption Taxes

Nature of the Tax
VAT - Nalog na dobalennyu stoimost (NDS)
Standard Rate
20%
Reduced Tax Rate
Electronically supplied services and the transfer of going concern are subject to a reduced rate of 16.7%.
A reduced VAT rate of 10% applies to: basic foodstuffs; certain children’s supplies; medical goods; pedigree cattle.
Several goods and services are zero-rated, including: exports of goods and related services including logistic services; international freight-forwarding services; supplies to diplomats (if reciprocal arrangements apply); foreign passenger transportation services; works (services) performed by Russian rail carriers involving the carriage or transportation of goods that are exported from the territory of the Russian Federation and the removal from the customs territory of the Russian Federation of products of processing in the customs territory of the Russian Federation; works (services) connected with carriage or transportation mentioned in the item above, the cost of which is specified in documents of carriage for the carriage of the goods that are exported (processed products that are removed); the sale of raw hydrocarbons extracted from the continental shelf, exclusive economic zone and the Russian sector of the Caspian Sea to a destination outside Russia and exportation of goods (stores) for further use in extraction of hydrocarbons from offshore hydrocarbon deposits and certain related transportation services.
Exclusion From Taxation
Exempt goods and services include: financial services on granting of loans; rendering of services involving insurance, coinsurance and reinsurance of export credits and investments against entrepreneurial and/or political risks; public transport; medical services; lease of office premises and housing to accredited representative offices of foreign entities (if reciprocal arrangements apply); sale of houses, living accommodation and shares in them; provision of exclusive rights or license rights to use with respect to soft-ware and databases included in the Unified Register of Russian software and databases; services rendered by a developer under a shared-construction agreement for the construction of residential properties (except for services rendered by a developer with respect to the construction; of objects for production needs); various financial services provided by the licensed institution; certain imports (for example goods for commercial and personal use that cost less than EUR 200; goods imported as gratuitous aid according to the government list; medical products according to the government list; cultural property imported as a gift for Russian cultural institutions; periodic materials imported as a gift for Russian libraries).
Method of Calculation, Declaration and Settlement
The tax is applied to the sales price of the supplies of goods and services within Russia; the transfer of property rights by a taxpayer; construction, installation and assembly works for personal consumption; and imports of goods and services into Russia. No registration threshold applies. VAT returns are filed on a quarterly basis, with payments generally made in three equal monthly instalments due no later than the 25th calendar day of each of the three consecutive months following the reporting quarter.
Other Consumption Taxes
There are excise duties on many luxury goods, in particular on cars, motorbikes, alcohol and tobacco. A water tax is levied on taxpayers consuming water for specific purposes.
A customs processing fee applies to goods transported across the Russian Federation’s customs border.

An environmental fee must be paid by manufacturers and importers of goods to be disposed of after they are no longer fit for use or consumption (paper and paper products, rubber and plastic products, textile and leather, metals, and electronics). Other taxes include Water Tax, Transport Tax, Biological Resources Use Fee, Minerals Extraction Tax, and Gambling Tax.

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Individual Taxes

Tax Base For Residents and Non-Residents
An individual who spends at least 183 days in Russia in a given calendar year period is considered as a resident.
 

Tax Rate

Residents and foreign highly skilled specialists 13% for income up to RUB 5 million
15% on the excess
Non-Residents 30% (15% for dividends)
Excess interest income
and
Awards and prizes received during contests, games, and other events conducted for the purpose of advertising goods, work, and services, in excess of set limits
35% of their value
 
Allowable Deductions and Tax Credits
In general, the deductions are available only to tax residents and are usually limited to RUB 120,000 per annum.
An exemption of RUB 1,400 per month is available for a first and second child and RUB 3,000 for a third and each subsequent child (only if the cumulative annual income of the parents is below RUB 350,000).

Tax deductions are available for property-related allowances, social allowances, business expenses and standard allowances. Qualifying gifts and inherited property are tax exempt.

Donations to certain non-commercial organisations and qualifying charities are deductible from taxable income within certain limits. Individuals can deduct from taxable income the costs of their own and their children's education in Russian-licensed institutions (up to RUB 50,000 per child), as well as the costs of medical services (for themselves and close relatives) and medicines.

Expenditures incurred by an individual on the acquisition or construction of an apartment or house and related plot land, as well as payment of interest on the respective loans, are allowed as a deduction of up to RUB 2 million with respect to expenditures plus the amount of interest of up to RUB 3 million (available only to tax residents and only once). Taxable income from the sale of property (except for immovable property) owned for less than three years may be decreased by expenses incurred, or by a minimum deduction of RUB 1 million (for immovable property owned for less than five years), and RUB 250,000 (for other property, except securities).

Special Expatriate Tax Regime
Russian residents are taxed on worldwide income, while non-residents are taxed on Russian-sourced income. In order to benefit from the resident rate, a taxpayer should spend at least 183 days in Russia in a given calendar year.
A Highly qualified specialist (HQS) is a foreign national with work experience, skills, or accomplishments in a specific field who is employed in Russia at a monthly salary of RUB 167,000 minimum (with certain exceptions). Income earned from labour activity by non-resident individuals with HQS status is taxed at standard rates instead of the 30% tax rate that applies to such income earned by non-residents who do not have HQS status.
Income earned by foreign employees hired under the highly qualified specialist regime is exempt from social security contributions (only accident insurance contributions are due).
Capital Tax Rate
No capital duty. A special 35% rate applies to certain income including voluntary insurance contributions, deposits on foreign currency and interest on certain bank deposits.
A real property tax is imposed annually at rates ranging from 0.1% to 2% of the cadastral value or the total inventory value, adjusted by a “deflator” coefficient.
Social security contributions are borne only by the employer. Self-employed individuals must contribute to social security.
A land tax of 0.3% applies to agricultural and residential land and 1.5% on other types of land.
Dividends are taxed at a rate of 13% for residents and 15% for non-residents.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Federal Tax Service of Russia, List of tax treaties
Withholding Taxes
Dividends: 13% (resident company)/13 or 15% (resident individual)/15% (non-resident)/5% (paid by a public international holding company to its foreign corporate shareholders)
Interest: 0% (resident company)/13 or 15% (resident individual)/20% (non-resident company)/30% (non-resident individual)
Royalties: 0% (resident company)/13 or 15% (resident individual)/20% (non-resident company)/30% (non-resident individual).
The rates may be lower as part of a double taxation treaty.

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Latest Update: June 2022