Tax returns and complianceTax ratesResidence rulesTermination of residenceEconomic employer approachTypes of taxable compensationTax-exempt incomeExpatriate concessionsSalary earned from working abroadTaxation of investment income and capital gainsAdditional capital gains tax (CGT) issues and exceptionsGeneral deductions from incomeTax reimbursement methodsCalculation of estimates/prepayments/withholdingRelief for foreign taxesGeneral tax creditsSample tax calculation
All income tax information is summarized by KPMG Limited, the Russian member firm of KPMG International, based on the Russian Tax Code of 1998 (part 1), 2000 (part 2), and subsequent amendments.
Tax returns and compliance
When are tax returns due? That is, what is the tax return due date?
Generally, 30 April of the year following the tax year.
A foreign national may be required to file a departure tax return if he/she terminates activities leading to a filing requirement and permanently leaves Russia. A departure tax return should be filed not later than 1 month prior to the departure from Russia.
What is the tax year-end?
What are the compliance requirements for tax returns in Russia?
Individuals conducting private activity including individual entrepreneurs, individuals who received income from which income tax was not withheld and other specific categories of individuals are obligated to file a tax return. Tax returns must be filed by 30 April of the year following the tax year and the final tax payment should be made not later than 15 July of the year following the tax year.
Generally, if during a calendar year, a foreign national terminates activities generating income taxable in Russia as stipulated in the Russian Tax Code and intends to leave Russia, the individual must submit a tax return not later than one month prior to the departure from Russia. Income tax due on departure tax return should be paid within 15 days from the date the tax return is filed.
Failure to file the tax return in time may result in penalty equal to 5% of tax payable per each month of delay. The total amount of late filing penalty is limited to 30% of the tax liability payable based on tax return but cannot be less than RUB1,000. Delay in tax payment will result in interest charge equal to 1/300 of the current refinancing rate of the Central Bank of Russia per each day of delay (the interest is currently 0.027 percent per day).
Resident taxpayers are subject to Russian personal income tax on their worldwide income at the general flat rate of 13 percent on the most types of income. Different tax rates apply to specific non-employment income (please refer to the section Tax rates for more information).
Non-resident taxpayers are subject to Russian personal income tax on their Russian-sourced income at the general flat rate of 30 percent with the exceptions specified in the section Tax rates.
The current definition of Russian-sourced income includes, inter alia, remuneration for activities and services performed in Russia regardless of the location of the paying entity, remuneration of directors of Russian companies, income from property located in Russia, dividend and interest income from Russian companies, etc.
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What are the current income tax rates for residents and non-residents in Russia?
A flat income tax rate of 13 percent applies to all types of income with the following exceptions.
- 9 percent income tax rate applies to dividend income from Russian and foreign companies and some specific investment income (such as to the interest income on mortgage bonds issued before 1 January 2007).
- 35 percent income tax rate for the following types of income.
- Prizes in excess of RUB4,000 received during the reporting year from advertising competitions.
- Interest income from Rouble deposits in Russian banks received in excess of the refinancing rate of the Central Bank of Russia increased by five percent. Currently, the refinancing rate of the Central Bank of Russia is 8 percent. The current refinancing rate can be checked on the official site of the Central Bank.
- Interest income from foreign currency deposits in Russian banks received in excess of 9 percent per year.
- Deemed income from beneficial loans, i.e. savings on interest payments on interest-free or low-interest loans. A loan is considered to be beneficial if the annual interest rate is less than the specified rate (that is, for foreign currency loans – 9 percent, for Rouble loans – 2/3 of the refinancing rate). The non-taxable exceptions are as follows:
- Deemed income arising from using a credit card issued by Russian banks during interest free period established by the contract for issuing the credit card.
- Deemed income arising from mortgage loans provided by Russian banks and other Russian organizations for new construction or purchase of a house, apartment, room, or a share of it in the territory of Russia if a taxpayer is eligible for property tax deduction.
- Deemed income arising from loans provided by Russian banks for refinancing of the aforementioned mortgage loans.
A flat personal income tax rate of 30 percent (unless a lower rate is available under a DTT) applies to income received from sources within the Russian Federation with the following exceptions:
- 15 percent income tax rate applies to dividend income from Russian companies;
- 13 percent rate applies to remuneration received by foreign nationals employed under "highly qualified specialists" migration regime in terms of their Russian employment contracts irrespective of their tax residence status;
- 13 percent rate applies to income received by foreign nationals who are staying in Russia on a visa-free basis and engaged by individuals under a special license to work for personal, home and similar needs.
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For the purposes of taxation, how is an individual defined as a resident of Russia?
Pursuant to the Russian Tax Code, an individual is considered a Russian tax resident if he/she is physically present in Russia for 183 or more days during the 12 consecutive months period. If the individual leaves Russia for less than six months for medical treatment and/or educational purposes, such days out of Russia are also counted as Russian days. For the purpose of calculation of days of presence in Russia, both days of arrival and departure should be taken into account.
According to clarifications of the Russian Ministry of Finance, in order to determine an individual’s final residence status for the entire tax year, the 183-day check should be made in relation to the particular calendar year.
Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.
What if the assignee enters the country before their assignment begins?
If the assignee enters the country before their assignment begins, these days are also taken into account when determining the assignee’s Russian residency position for income tax purposes.
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Termination of residence
Are there any tax compliance requirements when leaving Russia?
The personal income tax return should be submitted no later than one month prior to permanent departure from Russia and personal income tax liabilities should be settled within 15 days of filing of the tax return.
What if the assignee comes back for a trip after residency has terminated?
Tax year in Russia is a calendar year. Currently there is no concept of partial year tax residence. If expatriate assignee’s assignment has been terminated in the year of tax residence, he/she has filed a departure tax return and then returned to Russia for a short business trip, this, generally, does not result in additional tax implications in Russia provided the assignee is protected by the double tax treaty. If, however, the assignee has returned to Russia on another assignment, an amended tax return should be filed with the Russian tax authorities reporting additional income as a result of the new assignment.
Do the immigration authorities in your country provide information to the local taxation authorities regarding when a person enters or leaves your country?
Generally, the immigration authorities do not provide such information to the tax office. However, the tax office can obtain it, if requested, as well as information on the visit purpose, whether work permit was issued, etc. Also, the Russian employers are obliged to notify the tax office once an expatriate individual starts working in Russia.
Will an assignee have a filing requirement in the host country after they leave the country and repatriate?
Generally no, provided an assignee has filed a Russian tax return prior to departure. Amended tax return may be required if after departure from Russia an assignee receives income which would be taxable in Russia but Russian income tax has not been withheld.
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Economic employer approach1
Do the taxation authorities in your country adopt the economic employer approach to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in your country considering the adoption of this interpretation of economic employer in the future?
Generally, Russia does not adopt the economic employer approach. Russia is not OECD member, although, most of the double tax treaties are based on OECD model and we are aware of tax authorities referring to OECD commentary when issuing clarifications.
Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
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Types of taxable compensation
What categories are subject to income tax in general situations?
In general, taxable compensation includes remuneration received in-cash, in-kind, or in the form of imputed income. Income received in foreign currency must be converted into Roubles at the rate of the Central Bank of Russia effective on the last day of each month for labor remuneration and on the date of receipt (that is the specific date of the payment) for other income. Income received in-kind is valued at fair market value.
Taxable income includes, but is not limited to, the following:
- wages, bonuses, and commissions
- allowances (such as, cost-of-living, moving, housing, education, home-visit, etc.)
- reimbursement of personal expenses
- school fees paid by employer
- employer paid rest and recreation costs
- gifts from organizations (and in some cases – from individuals)
- proceeds from the sale of assets
- gains resulted from purchase and sale of securities (special rules apply to reporting of gains/losses resulting from such transactions)
- gross rental income, interest, and dividend income
- imputed income arising as a result of the purchase of goods (such as company’s stock), works, and services from related parties on preferential terms
- deemed income on beneficial loans (loans borrowed at the annual interest rate less than the specified rate: for foreign currency loans – 9 percent annually, for Rouble loans – two-third of the refinancing rate).
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Are there any areas of income that are exempt from taxation in Russia? If so, please provide a general definition of these areas.
Reimbursement of employees’ business trips expenses within specified limits, provided these expenses are properly documented in accordance with Russian legislation.
Medical treatment paid by Russian employer for its employees, their spouses, parents, and children in licensed medical centers, provided the payments are made from after-tax-profits.
State pensions awarded in accordance with the statutory procedure.
State benefits (such as unemployment, maternity allowances within certain limits, etc.) except for temporary disability allowance.
Injury or professional illness allowances paid in accordance with legislation.
Employer contributions to private medical insurance.
Employer contributions to properly licensed Russian non-state pension funds.
Sale of personal property by Russian tax residents owned for more than 3 years (except for sale of securities and sale of property used by individual entrepreneurs in their entrepreneurial activity).
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Are there any concessions made for expatriates in Russia?
Income of diplomats, consuls, administrative and support staff, as well as their family members who do not hold a permanent residency permit and members of international organizations are exempt from taxation in Russia, unless the income relates to an activity other than their duties within these organizations.
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Salary earned from working abroad
Is salary earned from working abroad taxed in Russia? If so, how?
Non-residents, other than directors or members of a supervisory/managing board or board of directors of Russian companies, are not subject to Russian income tax on compensation attributable to services performed outside Russia.
Residents are subject to Russian income tax on their worldwide income. At the same time residents may claim a foreign tax credit in Russia for taxes paid in a foreign country for work in it as provided by the relevant double tax treaty.
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Taxation of investment income and capital gains
Are investment income and capital gains taxed in Russia? If so, how?
Capital gains are subject to income tax. The amount of taxable income realized from the sale of property depends on the tax residence status of an individual, the type of property sold and the property ownership period prior to sale.
On the disposal of real property held for less than three years the capital gain is calculated as the difference between the sale proceeds received by a resident individual in the reporting year and the documented acquisition cost (or RUB1 million if documents are not available). On the disposal of other assets held for less than three years (except securities), the capital gain is calculated as the difference between the sale proceeds received by a resident individual in the reporting year and the documented acquisition cost (or RUB250,000 in total irrespective of number of assets sold if documents substantiating the acquisition are not available). The gain is taxable at 13 percent. On the disposal by Russian tax residents of real property and other assets held for three years or more, the total amount of sale proceeds received are exempt from taxation.
On the disposal of securities, the capital gain is calculated as the difference between the sale proceeds received in the reporting year and the total of acquisition cost, expenses incurred during the holding period and sale, the amount of deemed income subjected to taxation at acquisition of securities and amount of income tax paid at acquisition. Losses incurred from sale of listed securities can be carry forward to the future period over 10 years following the tax period in which losses were incurred.
Non-residents are subject to taxation on the total amount of gross proceeds from the disposal of assets (except for securities) within Russia, no deduction of acquisition cost is available. On the disposal of securities within Russia, a non-resident may reduce proceeds by the documented acquisition cost, expenses incurred during the holding period and sale, the amount of deemed income subject to taxation at acquisition and amount of income tax paid at acquisition of securities. The applicable tax rate is 30 percent.
All dividends received by residents are subject to personal income tax at the rate of 9 percent. Dividends received by non-residents from Russian legal entities are taxed at the rate of 15 percent.
- Interest received by residents is subject to personal income tax at the rate of 13 percent. Interest received by non-residents from Russian legal entity, Russian individual entrepreneurs, or foreign legal entities in connection with the activities of their permanent establishment in Russia are taxed at 30 percent. Interest received on Rouble and foreign currency deposits held at banks located in Russia is tax-exempt within specified limits. Income is tax exempt if the annual interest rate does not exceed the following threshold:
- 9 percent for foreign currency deposits
- the refinancing rate of the Central Bank of Russia increased by 5 percentage points for deposits in Roubles.
This exemption is provided to all taxpayers irrespective of their residency status.
Interest income received in excess of the above thresholds is taxable at 35 percent tax rate.
Rental income is subject to personal income tax at the rate of 13 percent for tax residents and 30 percent for tax non-residents (if rental income is considered as Russian-sourced income). Rental expenses are generally not deductible for tax purposes.
Generally, the difference between the fair market value of the stock and the exercise price is considered as taxable income and is taxed at the rate of 13 percent for tax residents and 30 percent for tax non-residents (if considered as Russian-source income).
There are no special rules for taxation of foreign exchange rate gains and losses, general rules of personal income taxation should apply.
There are no special rules for taxation of principal residence gains and losses. Gross proceeds from the sale of principal residence in Russia in the year of tax non-residence in Russia are subject to tax at 30 percent. Gain from the sale of principal residence in the year of tax residence is i) subject to tax at the rate of 13 percent, if the seller owned the property for less than three years before the sale or ii) exempt from tax, if the seller owned the property for three years or more prior to the sale.
Generally, not applicable in accordance with Russian personal income tax legislation. Losses from sale of listed securities can be credited against gain received from sale of listed securities within the next 10 years.
Not applicable in accordance with Russian personal income tax legislation.
Gifts received from legal entities and individual entrepreneurs, who have a cumulative value of less than RUB4,000 per year, are tax-exempt. If the cumulative value of gifts received during the year exceeds the above amount, the difference is subject to personal income tax at the rate of 13 percent for tax residents and 30 percent for tax non-residents.
Any gifts between family members and close relatives are tax-exempt. Gifts between other individuals are tax-exempt, except for gifts of immovable property, vehicles, securities, and shares.
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Additional capital gains tax (CGT) issues and exceptions
Are there additional capital gains tax (CGT) issues in Russia? If so, please discuss?
There is no additional CGT in Russia.
Are there capital gains tax exceptions in Russia? If so, please discuss?
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General deductions from income
What are the general deductions from income allowed in Russia?
The following may be deducted from taxable income:
- RUB1,400 per month for first and second child and RUB3,000 per month for third and each next child or disabled child from income of a parent of children up to the age 18 or a parent of children - daytime students between the ages of 18 and 24, until the parent’s cumulative annual income exceeds RUB280,000. This tax deduction may be granted in the double amount to one of the parents at their choice if one of the parents signs a refusal to receive the tax deduction or to a single parent.
- Donations to Russian charitable organizations, socially oriented non-commercial organizations, non-commercial organizations operating in the sectors of science, culture, sports (except for professional sports), education, medicare, protection of citizens' rights and freedoms, social and legal support of citizens, environmental and animal protection, religious organizations as well as to non-commercial organizations to form and enlarge charter capital. Qualified donations may be deducted in the amount not exceeding 25 percent of the individual’s income taxable at the rate of 13 percent received in the reporting period. In case donated funds are returned to a taxpayer, taxable base in the year of refund should be increased for the amount of social tax deduction that was granted to a taxpayer in relation to these funds.
- Tuition fees paid by a taxpayer to certified educational organizations for his/her children’ full-time education up to RUB50,000 per child per year.
- The total amount of social deductions listed below should not exceed RUB120,000 per year. In case the taxpayer incurs medical, educational and pension fund expenses during the year, he/she on his/her own chooses which type of expenses and which amounts would be deducted up to a maximum of RUB120,000 per year.
- Medical expenses paid by the taxpayer for his/her medical treatment as well as medical treatment of his/her parents, spouse and children to certified Russian medical centers.
- Contributions for voluntary medical insurance paid by taxpayers including contributions in favor of a spouse, parents and/or children under 18 years old.
- Contributions to a Russian non-state pension fund or insurer including contributions in favor of a spouse and parents.
- Tuition fees paid by a taxpayer to certified educational organizations for his/her own education.
- Additional pension contributions to state pension fund paid by a taxpayer.
Amounts spent for the construction or purchase of a house (with or without land plot), apartment, land plots for residential construction or a part of it in Russia, are eligible to a deduction up to RUB2 million plus mortgage interest.
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Tax reimbursement methods
What are the tax reimbursement methods generally used by employers in Russia?
Current year gross up and roll-over methods are used for personal income tax reimbursements.
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Calculation of estimates/prepayments/withholding
How are estimates/prepayments/withholding of tax handled in Russia? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
Income tax should be withheld from income paid to individuals and remitted to the finance authorities by tax agents including individual entrepreneurs, Russian legal entities, and Representative offices/Branches of foreign legal entities registered in Russia.
Income tax from salary is withheld and remitted to the finance authorities on a monthly basis.
Individuals who receive remuneration from outside Russia are personally responsible for income tax compliance. Generally, no tax prepayments are required from such individuals.
When are estimates/prepayments/withholding of tax due in Russia? For example: monthly, annually, both, and so on.
Generally, income tax should be withheld by tax agent every time when income is paid and the tax agent is responsible for remitting tax withheld to the tax office. Tax payable based on the individual tax return is generally due on 15 July of the year following the reporting year.
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Relief for foreign taxes
Is there any Relief for Foreign Taxes in Russia? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
Relief for foreign taxes is available in Russia only if it is provided by the relevant double tax treaty. According to the double tax treaty the individual can be exempt from taxation in Russia or entitled to tax credit. To support a credit for foreign taxes, an individual should submit to the Russian tax authorities a statement of income received and income taxes paid in the foreign country. To support an exemption or application of a lower rate based on the treaty, the individual should submit confirmation of tax residence in the foreign country and confirmation of income received and income taxes paid in the foreign country, if applicable. In both cases, documents must be endorsed or issued by the relevant foreign tax authority, apostil led or legalized and properly translated into Russian.
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General tax credits
What are the general tax credits that may be claimed in Russia? Please list below.
Few tax deductions may be available for Russian tax residents: standard, social, and property-related deductions. Please refer to the paragraph General Deductions from Income for more detailed information.
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Sample tax calculation3
This calculation assumes a married taxpayer resident in Russia with two children whose three-year assignment begins 1 January 2012 and ends 31 December 2014. The taxpayer’s base salary is USD100,000 and the calculation covers three years.
|Moving expense reimbursement
|Interest income from non-local sources
Exchange rate used for calculation: USD1 = RUB30.
- All earned income is attributable to local sources.
- Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
- The company car is used for business and private purposes (50/50).
- The employee is deemed resident throughout the assignment.
- Tax treaties and totalization agreements are ignored for the purpose of this calculation.
Calculation of taxable income
|Days in Russia during year
|Earned income subject to income tax
|Net housing allowance
|Moving expense reimbursement4
|Total earned income
|Total taxable income
Calculation of tax liability
|Taxable income as above
|Russian tax thereon
|Domestic tax rebates (dependent spouse rebate)
|Foreign tax credits
|Total Russian tax
1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.
2For example, an employee can be physically present in the country for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.
3Sample calculation generated by KPMG Limited, the Russian member firm of KPMG International, based on the Russian Tax Code of 2000 and subsequent amendments.
4Reimbursement of moving expenses may be exempt from taxation subject to the fulfillment of certain criteria (e.g. provision in the employment contract, reimbursement by employer, availability of documents confirming expenses incurred by the individual, etc.). Due to certain ambiguity in the legislation with regard to whether this exemption can be applicable to foreign national employees employed by foreign employers and seconded to work to Russia, this exemption has been ignored for the purposes of this calculation.