Taxpayers are subject to Russian income tax as either tax residents or non-residents.
Tax residents are taxed on their worldwide income. An individual is considered to be a tax resident if he/she is physically present in Russia for at least 183 calendar days during a 12-month rolling period. According to clarifications from the Russian Ministry of Finance, however, the tax residence status of an individual should be defined by counting the days spent in Russia within the relevant calendar year.
Non-residents have tax imposed on their Russian-sourced income, irrespective of the nature of that income.
Taxable income is gross income less deductions and exemptions.
Gross income is defined as any economic gain, in cash or in kind, received by a taxpayer and subject to his/her discretionary disposal.
Deductions and non-taxable income
A Russian tax resident can benefit from five kinds of deductions:
- Standard deductions are available for certain categories of taxpayers (disabled persons, war veterans, etc.);
- Social deductions comprise of educational expenditures (per taxpayer and each of his/her children) and medical expenditures (per family), up to a combined annual maximum of RUB 120,000 (EUR 1,600);
- Investment deductions relate to certain types of investment income of taxpayers, such as long-term investments in pension and insurance funds;
- Property deductions relate to the purchase and sale of property (mainly residential real estate);
- Professional deductions are generally permitted for individual entrepreneurs and include, for example, expenditure for the creation of intellectual property rights.
Certain statutory allowances, bank interest (within limits), state pensions (and certain other pensions) and revalued shares (issued as a result of statutory revaluation, merger or reorganisation) are exempt from taxation.
A standard flat rate of 13% applies to most types of income.
A rate of 35% applies to certain prizes, insurance receipts and interests from bank deposits in excess of specific limits.
A general rate of 30% applies to all types of Russian-sourced income except dividends (to which the rate of 15% applies). It may be possible to apply the relevant provisions of a DTT in order to exempt certain types of income from non-resident taxation.
In addition, a 13% personal income tax rate applies to remuneration received from professional activities of non-residents with a highly qualified specialist status under Russian immigration law.
On 1 January 2019, a tax exemption applicable to Russian tax residents who sell residential property after a certain period of ownership (the length of the period depends on the ground on which the seller had initially gained ownership of the property) was extended to non-residents. Initially, such an exemption was applicable only to the income from the sale of immovable property acquired by such non-residents after 1 January 2016. Now it applies irrespective of the date of acquisition of the property.
Withholding of tax
Russian companies, individual entrepreneurs and permanent establishments of foreign companies are considered to be tax agents. They must calculate, withhold and pay income tax on the payments they make to individuals.
As a result, employees are not required to file tax returns for their salary, unless they claim property deductions or have other income which is subject to the obligation to file a tax declaration.
An individual entrepreneur remains personally responsible for meeting his/her income tax obligations.
Individuals must file returns and pay the appropriate income tax if:
- income was received from outside Russia (in the case of a Russian tax resident);
- tax was not properly withheld; or
- income was received from the sale of property, etc.
The tax return must be filed by 30 April in the year following the tax period.
The amount of tax due must be paid by 15 July in the year following the relevant tax period. However, if the taxpayer leaves Russia, he/she must file a tax return at least one month before his/her departure and pay the amount of tax due within 15 days after the filing date.
Individual property tax
The owners of houses, flats, rooms, cottages, garages, other buildings or constructions are liable to pay individual property tax.
The cadastral value of the property is used as a taxable base to calculate individual property tax. The applicable tax rate depends on the type of taxable property concerned.
As individual property tax is a local tax, the local government authorities are entitled to set the tax rate within prescribed statutory limits.
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