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Corporate taxation

Corporate Income Tax

Corporate Income tax is the major tax on business income (nalog na pibyl' organizacij, CIT). Dividend distributions are taxed by way of 'withholding'. Legal entities registered under Russian laws are liable to tax on their worldwide income. Foreign legal entities are subject to taxes only on income derived from business activities of a permanent establishment (branch) within Russia and on certain particular Russian-source income. All types of income are included in gross income.

Unless specifically exempted from taxation all income composed of the following is taxable:

  • profits from the sale of goods and the supply of services which is calculated as the difference between sales revenues, excluding VAT, and directly and indirectly related expenses

  • revenue in kind from the sale of goods or the supply of services; or from property rights which must be accounted for on the basis of their fair market price in conformity with transfer pricing rules as established by the Tax Code

  • profits from non-sales transactions comprise lease payments, dividends received from other companies, interest on bonds, royalties, compensation received for losses, less any non-sales expenses

From 2002 the accrual method generally applies.

All documented and economically justified expenses are deductible unless specifically disallowed for deduction by the Tax Code. Branch offices of foreign legal entities may deduct related expenses incurred by their Headquarters if allowed by the relevant international treaty on double tax avoidance (DTT).

Tax payment and reporting may either be monthly or quarterly as the taxpayer wishes.

Withholding Tax and Tax Agent Obligations

A resident company paying dividends (to any company) and interest, royalties and similar (to a foreign company without presence in Russia) is required to withhold tax at source. DTTs generally establish lower withholding tax rates.

Withholding tax is reported by the tax-withholding agents together with Corporate Income tax.