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Overview of the Russian Taxation

Russian Tax System Overview
Tax Code

In general, taxes levied at all levels are regulated by the Tax Code, which sets out the structure of each tax (e.g. taxpayer, tax base, maximum tax rates, tax exemptions, administrative matters). The Russian regions are authorized to set their own rates within the framework provided by the Tax Code. The introduction of the Tax Code resulted in the systematization of the tax legislation inherited from the Soviet era and the simultaneous abolition of a number of turnover taxes and ineffective duties. Moreover, it centralized fiscal function within the tax authorities. The Tax Code was introduced in 2001 with General and VAT chapters and was then unified with chapters on other taxes in 2002, 2003 and 2004. Therefore, it is continuously being correlated, with resulting corrections and still contains a lot of loopholes and ambiguities, requiring further clarifications to be made by the fiscal governmental authorities (the Ministry of Finance) or by the courts.

Laws

The Tax Code often refers to other legislation composed of other Codes and hundreds of subordinate laws and regulations.

Tax Law Interpretations

Interpretations of the law by the Ministry of Finance and the Federal Tax Service or the tax authorities are not binding on the taxpayer or on the courts, although the tax authorities must follow such interpretations. Generally, court decisions on tax cases, including the decisions of the Supreme Arbitration Court, do not establish a binding precedent. However, the information letters on recent judicial practice issued by the Supreme Arbitration Court and the Supreme Court are binding on lower courts. The Constitutional Court's decisions on the constitutionality of particular legislation establish a binding precedent.

 

Taxes

Russian taxes on usual corporations may be grouped as follows:

1. Income taxes Corporate Income tax - 20%
 

Withholding Corporate Income tax on Russian source passive income of foreign legal entities
(interest, dividend, rent, royalty and similar) - from 9% to 20%

Withholding tax on dividends paid to Russian legal entities - 9%

Please refer to Corporate Income Tax and Withholding Tax and Tax Agent Obligations for more details.

2. Indirect taxes
 

Value-Added Tax (VAT) -10% on the value of socially important goods and 18% on the value
of most goods and services.

Please refer to VAT for more details.

3. Payroll taxes

Payroll taxes are paid by employers only and comprised of contributions from cumulated gross annual income of Russian and foreign nationals citizens( except for foreign nationals working in Russia for less than 6 months or keeping Highly Qualified Specialist work permit):

:

  1. Pension Fund of the Russian Federation – 22% on gross anual cumulative incomes up to 876 000 rubles a year and 10% on gross income in excess of 876 000 rubles
     
  2. Medical Fund of the Russian Federation – 5.1%
     
  3. Social Insurance Fund – 2.9% on gross annual cumulative incomes up to 755 000 and zero on exceeding income.
     
  4. and Insurance against industrial accidents and deaths in the workplace / industrial fatalities - from

0.2% to 8.5% (depending on industry)
 

Total amount of contributions payable by agricultural and small business engaged in production and socially important areas of business varies from 14% to 26%. 


4. Property Taxes

All property taxes are regional and the rates are established by regional authorities but cannot exceed the following limits established by the Tax Code:

Property tax on fixed assets - 2.2%
 
Transport tax on owned vehicles, vessels and aircraft - tax amount depends on engine capacity
and is calculated on horse-power or by a similar yardstick
 
Land tax on owned land plots - rate varies from 0.3% to 1.5% of the land book value and
depends on type of plots

Individuals are liable for:

Individual Income tax: 13% for tax residents and 30% for non-residents, 35% on interest and
similar income, 13% to 15% on dividend income
 
Property tax on immovable property  - 0.1%-0.3%
 
Land tax - similar to corporations
 
Transport tax - similar to corporations

Please refer to  for more details.

5. Other taxes and duties are applied on specific products, activities and certain procedures carried out by notaries and governmental authorities:
 

Excises
 
Tax on Mineral Resources Extraction
 
Customs Duties
 
Water Tax
 
Duty on the use of Flora and Fauna
 
Stamp Duties

There are also special tax regimes for small, agricultural businesses and agreements on product sharing used for the extraction of mineral resources.

Under small and agricultural regimes a unified tax, generally from 6% to 15% (or a fixed contribution) is paid. But certain conditions have to be satisfied in applying such regimes.