Main taxes in Russia
Basic information on main Russian taxes
VALUE ADDED TAX (VAT)
VAT shall apply to earnings from the sale in Russia of goods, works and services, as well as to the price of the goods imported into Russia. Taxpayers are: companies, individual entrepreneurs and customs declarants.
Tax rates (depending on the type of goods, works or services): 0%, 10% and 20%.
The place of sale of goods, works or services is the key issue for taxing this sale with VAT. Generally, the place of sale is considered to be in Russia if: goods are located or shipped in Russia, works are performed in Russia or the buyer of services (customer) is located in Russia. For example, a foreign company providing services in favor of a Russian customer shall pay VAT for the cost of such services; if a foreign company is not registered with Russian tax authorities, the Russian customer may be obliged to withhold and pay VAT to the budget.
As a general rule, if necessary, conditions and documents are available (including the so called “VAT-invoices”), the buyer of goods, works or services may deduct the VAT paid by the seller of such goods, works, or services.
CORPORATE PROFIT TAX
Corporate profit tax is levied on earnings reduced by expenses. The basic rate is 20% (however, Russian legislation and international agreements on the avoidance of double taxation provide lower rates for some types of income).
Taxpayers: Russian companies; as well as foreign companies operating in Russia through a permanent establishment (the place of regular activities – usually more than 30 days) or receiving income from Russian sources (dividends, interests, royalties, rent payments, etc.).
A company registered with Russian tax authorities is obliged to calculate and pay corporate income tax by itself. For a foreign company that is not registered in Russia, the tax shall be withheld and paid by the company that is the source of the Russian income.
The expenses that reduce taxable earnings are strictly controlled by tax authorities, since the tax base and the amount of the tax due directly depend on them. Such expenses should be economically reasonable, i.e. necessary for taxpayer’s activities, and documented (with documents on purchase of goods, acts on services rendered, etc.).
PERSONAL INCOME TAX (PIT)
PIT payers are individuals who are Russian tax residents (spend in Russia at least 183 days within 12 months) receiving income from Russian or foreign sources; as well as individuals who are not Russian tax residents but receive income from Russian sources (salary for work in Russia, dividends, rent payments, pensions, etc.).
A company making payments (for example, salary) to an individual shall withhold the tax and pay it to the budget at the same time as the income is paid to an individual. Otherwise, the personal income tax shall be calculated and paid by individuals on their own.
Basic rates: 13% for residents and salaries of foreign highly qualified specialists, 30% – for non-residents.
There are also other taxes, including excises, state duties, minerals extraction tax, transport tax, property tax, land tax, obligatory insurance contributions, etc.
In addition, there are several special tax regimes whereby other tax rates or special taxes apply. For example, a simplified tax regime (tax base: income minus expenses at the rate of 15% or income at the rate of 6%; no VAT) or a tax regime for agricultural producers (tax base: income minus expenses at the rate of 6%; no VAT is possible).
Please note that Russian tax legislation is a complex set of legal acts; in addition, it is constantly being modified. The taxation procedure for every particular case should be determined with the involvement of tax advisers.