The Tax Code provides for the following special tax regimes according to which a corporate taxpayer is entitled to pay one special tax instead of a number of separate taxes:
- simplified tax system;
- tax on imputed income;
- unified agricultural tax; and
- production sharing.
Special regimes may be applicable if the necessary requirements are met, as outlined below.
Simplified tax system
Companies are eligible for the simplified tax system if they meet the following criteria:
- their annual turnover does not exceed RUB 150m (EUR 2.1m);
- the combined net book value of their fixed and intangible assets does not exceed RUB 150m (EUR 2.1m); and
- they employ fewer than 100 persons.
The Tax Code includes a list of organisations that may not use the simplified tax regime. This includes: (i) foreign companies; (ii) Russian companies with local branches and/or representative offices; (iii) companies in which more than 25% of the capital is owned by other companies; (iv) banks; (v) insurance companies; (vi) pension funds; and (vii) investment funds.
The rate for this tax regime is as follows:
- 6% – if all income (without deductions) is considered to be the tax base; or
- 15% – if income (less deductible expenses) is considered to be the tax base.
The tax rate may be reduced under the relevant regional law down to 1% or 5% respectively.
The simplified tax system is used as a single substitute for profits tax, property tax and VAT unless an exception applies (such as for property whose tax base is calculated on the basis of its cadastral value (for instance business and shopping centres, offices)). The use of this system does not exempt employers from making obligatory pension insurance contributions or from withholding income tax from their employees’ compensation.
Tax on imputed income
Regional authorities have the right to impose this tax on certain categories of taxpayers (e.g. small companies).
The tax rate is 15% on “imputed” monthly revenue and is adjusted by special coefficients which are based on the type of land used, the range of goods being produced, the level of income received each month and seasonal factors. When this tax is applied, the taxpayer becomes exempt from most, but not all, taxes and contributions (for example, obligatory pension insurance contributions remain due).
Unified agricultural tax
This tax system is aimed at reducing the obligatory tax burden on taxpayers involved in agricultural production.
Taxpayers producing, processing (including industrial processing) and selling agricultural products are entitled to use this tax system, provided that the share of income they receive from the sale of agricultural products is at least 70% of their overall sales income.
The tax rate is set by the regions of the Russian Federation in the range of 0% to 6%.
The tax is calculated as the relevant percentage of revenue less certain deductible expenses that are listed in the Tax Code and include, in particular, the following:
- expenses relating to the acquisition, construction and manufacturing of fixed assets (being allocated during the useful life term of the relevant assets);
- lease payments;
- wages costs;
- expenses connected with certain types of insurance payments (both obligatory and voluntary); and
- the cost of material.
The unified agricultural tax substitutes profits tax and property tax, and in some cases VAT (except for import VAT and VAT withheld as a tax agent, which remain due).
This simplified tax system may be used by companies (investors) entering into production sharing agreements (“PSAs”) under which they are granted an exclusive right to carry out mineral exploration and mining operations on a particular subsoil area.
PSAs provide for the sharing of profitable production between the Russian state and an investor. A part of “compensational production” is granted to the investor to compensate them for the expenses connected with the project. In general, this does not exceed 75% of the whole amount of production or 90% when the project is implemented on the Russian continental shelf.
The production sharing tax system may be used if the relevant PSA (i) is concluded as a result of an auction; and (ii) provides that, if the project’s return on investment exceeds originally agreed expectations, the Russian state’s share in the profitable production will increase.
General PSA regime
If a general PSA regime is used, the main characteristics of the production sharing tax system are as follows:
- Certain expenses incurred by the investor for the purposes of performing the PSA are subject to reimbursement by “compensational production”.
- VAT, taxes on natural resources, state duties, land tax and excise duties paid in connection with performing the PSA are subject to reimbursement by the state.
- Goods imported to and exported from Russia are exempt from the payment of customs duties.
- Property tax is not payable on fixed assets used solely for performing the PSA.
- Transport tax is not payable on vehicles used solely for performing the PSA.
- The relevant local or regional authority may exempt the investor from paying any regional or local taxes.
Special PSA regime
Additional tax privileges may apply if (i) the PSA is concluded under a procedure which differs from the general procedure described above; and (ii) the share in the production taken by the Russian state is at least 32%.
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