Tax returns and compliance
Termination of residence
Economic employer approach
Types of taxable compensation
Salary earned from working abroad
Taxation of investment income and capital gains
Additional capital gains tax (CGT) issues and exceptions
General deductions from income
Tax reimbursement methods
Calculation of estimates/prepayments/withholding
Relief for foreign taxes
General tax credits
Sample 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.
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 generating income taxable in Russia on a self assessment basis and 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 activities including individual entrepreneurs, individuals who received income from which Russian income tax was not withheld and other specific categories of individuals are obligated to file a tax return. As of 1 January 2015 Russia introduced new rules which require, inter alia, Russian tax residents to report and pay tax on undistributed profits of controlled foreign corporations.
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 a tax return in time may result in penalty equal to 5 percent of outstanding tax liability per each month of delay. The total amount of late filing penalty is limited to 30 percent of the outstanding tax liability calculated on tax return but cannot be less than RUB1,000. Delay in tax payment results in interest charge equal to 1/300 of the refinancing rate of the Central Bank of Russia per each day of delay.
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 types of income (please refer to the section Tax rates for more information).
Non-resident taxpayers are subject to Russian personal income tax on their Russian source income at the general flat rate of 30 percent (exceptions are specified in the section Tax rates).
The current definition of Russian source 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.
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 some exceptions which include, inter alia:
A flat income tax rate of 30 percent (unless a lower rate is available under a DTT) applies to Russian source income with some exceptions which, inter alia, include:
For the purposes of taxation, how is an individual defined as a resident of Russia?
An individual is considered a Russian tax resident on a specific date if he/she is physically present in Russia for 183 or more days during a period of 12 consecutive months preceding the specific date (this test is used for tax withholding purposes during a calendar year). Final tax liabilities for a reporting calendar year are determined based on a tax residence status for this year. In particular, if an individual spent at least 183 calendar days in Russia in the reporting year, he/she is considered as a tax resident with regard to the entire reporting year.
In certain circumstances days out of Russia can be counted as Russian days for tax residence test if the individual leaves Russia:
For the purpose of calculation of days of presence in Russia, both days of arrival and departure are taken into account.
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 taken into account when determining the assignee’s Russian residency position for income tax purposes.
Are there any tax compliance requirements when leaving Russia?
A foreign national may be required to file a tax return if he/she terminates activities generating income taxable in Russia on a self assessment basis and leaves Russia. The personal income tax return should be submitted no later than one month prior to 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?
If during a trip the assignee works or provides services in Russia, income derived from such activities in Russia should be taxable in Russia unless a tax relief is available under a DTT.
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 provide such information to the tax authorities upon request of the latter.
Will an assignee have a filing requirement in the host country after they leave the country and repatriate?
Such requirement may arise if the assignee received income taxable in Russia on a self assessment basis (e.g., payment of trailing expenses, stock income for work in Russia, etc.) which was not reported on a Russian tax return.
Do the taxation authorities in your country adopt the economic employer approach1 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 has not adopted tax laws on economic employer approach yet. Commentaries to OECD Model Tax Convention do not have a status of law in Russia. Official clarifications of the Russian financial and tax authorities as well as court practice do use this approach.
Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
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 (e.g., resulting from the purchase of stock at a below market price and from preferential loans). 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 payment for other income. Income received in-kind is valued at fair market value.
Taxable compensation includes, but is not limited to, the following:
Are there any areas of income that are exempt from taxation in Russia? If so, please provide a general definition of these areas.
Reimbursement by an employer in Russia of employees’ business trips expenses within certain limits, provided these expenses are properly documented in accordance with Russian legislation.
Fees paid by an employer in Russia from its after-tax-profits for medical treatment of its employees, their spouses, parents, and children in licensed medical centers.
State pensions awarded in accordance with the statutory procedure established by Russian law.
Certain state benefits (such as unemployment allowance, maternity allowance within certain limits, etc.) payable in accordance with Russian law.
Compensation of injuries paid in accordance with Russian legislation.
Contributions of organizations under private medical insurance contracts in favour of individuals.
Employer contributions to properly licensed Russian non-state pension funds.
Fees paid by an organization for education of an individual (e.g., employer paid children education) in licensed educational organizations.
Are there any concessions made for expatriates in Russia?
Tax non-resident expatriates may enjoy taxation of their remuneration under a “highly qualified specialist” regime at the rate of 13 percent rather than 30 percent. This regime provides for a number of other non-tax benefits.
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.
Is salary earned from working abroad taxed in Russia? If so, how?
Salary of tax non-resident executive directors of Russian companies is subject to Russian income tax irrespective of the place of their work.
Tax residents are subject to Russian income tax on their worldwide income. A foreign tax credit may be claimed in Russia under a relevant DTT with regard to salary for work abroad.
Are investment income and capital gains taxed in Russia? If so, how?
“Capital gains” are subject to income tax. In particular, taxation of proceeds from the sale of property depends on the tax residence status of an individual in the year of sale, the type of property sold and the property ownership period prior to sale.
For example, disposal by a tax resident individual of property (except for securities and derivatives) held for three years (five years in certain cases) or more does not create any taxable income for the individual (i.e., the total amount of sale proceeds is exempt from tax).
Proceeds from the sale of property (except for securities and derivatives) located in Russia by a Russian tax non-resident are taxable in full (no deductions are available) at a rate of 30 percent.
Proceeds from the sale of securities and derivatives may be reduced for tax purposes by acquisition expenses, expenses incurred during the holding period and sale. All expenses must be supported by confirmation documents. Other deductions may also be available. Special rules are established for loss carry forward (available only with regard to securities and derivatives tradable at stock exchanges and specific Russian securities).
For proceeds and expenses received/incurred in foreign currency an equivalent in Russian roubles must be calculated for tax purposes based on the official exchange rate of the Central Bank of Russia effective on the day when expense was incurred and income was received. As a result, in such cases taxpayers bear currency risk (e.g., due to exchange rate fluctuation a loss from transaction in original foreign currency may result in taxable income in rouble equivalent).
All dividends received by residents are subject to personal income tax at the rate of 13 percent. Dividends received by non-residents from Russian legal entities are taxed at the rate of 15 percent.
Special rules apply to taxation of dividends paid by Russian organizations to foreign nominal shareholders. If the ultimate shareholder is not disclosed, the tax should be withheld at a rate of 30 percent.
Rental income received by tax residents is subject to personal income tax at the rate of 13 percent. Rental income derived by tax non-residents from property located in Russia is taxable at the rate of 30 percent. Rental expenses (e.g., mortgage interest, maintenance and utilities costs) 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 the gain is considered as Russian source income).
Special rules apply for determination of stock fair market value.
Generally, if currency exchange transactions are made with an aim of deriving profits, each exchange operation is considered as sale of property. A loss from one exchange transaction cannot be credited against a gain from another transaction. Such gains are taxable at the rate of 13% for tax residents. Non-residents are taxable at the rate of 30% if the gain is considered Russian source income.
General rules on taxation of proceeds from the sale of property apply.
Losses and gains from sales of listed securities within one calendar year can be netted subject to certain limits. Losses from sales of listed securities can be carried forward to next years (up to 10 years).
General rules on taxation of proceeds from the sale of property apply.
Gifts received from legal entities and individual entrepreneurs for a total value of less than RUB4,000 per year are tax-exempt. The value of such gifts exceeding the threshold 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 of immovable property, vehicles, securities and shares between individuals who are not family members or close relatives are taxable at the rate of 13 percent for tax resident recipients and at the rate of 30 percent for tax non-residents.
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?
What are the general deductions from income allowed in Russia?
Tax resident individuals may be entitled to the following main tax deductions from their income taxable at the rate of 13 percent.
The deductions apply to the parent’s cumulative annual income not exceeding RUB280,000.
These deductions are granted in a double amount if the other parent waives their right to claim the deduction or if the parent is single.
This type of tax deductions relate to expenses incurred by a taxpayer.
This deduction is available once in a life time.
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.
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.
Tax agents which pay income (exceptions apply to some types of income) to individuals are required to withhold income tax and remit it to the Russian finance authorities. Tax agents include 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 generally on a monthly basis.
Individuals who receive remuneration from outside Russia are personally responsible for income tax compliance and pay tax from such income on a self assessment basis. Tax prepayments during a year are not required in such cases.
When are estimates/prepayments/withholding of tax due in Russia? For example: monthly, annually, both, and so on.
Tax agents are generally required to withhold income tax every time when income is paid to an individual or to third parties on behalf of the individual.
Tax payable based on the individual tax return is generally due by 15 July of the year following the reporting year.
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 may be available in Russia only if it is provided by the effective double tax treaty.
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 a lower tax rate under the treaty, the individual should submit a 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 authorities, authenticated (e.g., by means of an Apostile) and translated into Russian with the translation being certified by a notary public.
What are the general tax credits that may be claimed in Russia? Please list below.
This calculation3 assumes a married taxpayer resident in Russia with two children whose three-year assignment begins 1 January 2013 and ends 31 December 2015. The taxpayer’s base salary is USD100,000 and the calculation covers three years.
|Moving expense reimbursement||20,000||0||20,000|
|Interest income from non-local sources||6,000||6,000||6,000|
Exchange rate used for calculation: USD1 = RUB50.
Calculation of taxable income
|Days in Russia during year||365||365||365|
|Earned income subject to income tax|
|Net housing allowance||600,000||600,000||600,000|
|Moving expense reimbursement||1,000,000||0||100,000|
|Total earned income||8,700,000||7,950,000||8,700,000|
|Total taxable income||8,700,000
Calculation of tax liability
|Taxable income as above||8,700,000
|Russian tax thereon||1,131,000||1,033,500||1,131,000|
|Domestic tax rebates (dependent spouse rebate)||0||0||0|
|Foreign tax credits||0||0||0|
|Total Russian tax||1,131,000||1,033,500||1,131,000|
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 1998 (part 1), 2000 (part 2), and subsequent amendments.
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