MAZARS IN RUSSIA
Nizhniy-Susalniy pereulok, 5, bld.19
Moscow, 105064 Russian Federation
(+7) 495 792 52 45
(+7) 495 792 52 47
Head of Tax and Legal Department
+7 916 403 16 73
Federal taxes and levies are those established by the Tax Code, they are payable throughout the Russian Federation. Federal taxes include value-added tax (VAT), excise tax, personal income tax, profits tax, mineral extraction tax, water tax, levies for natural and biological resources consumption, stamp duty.
Regional taxes and levies are those established by the Tax Code and tax laws of the regions of the Russian Federation, being payable in the appropriate regions. Regional taxes include property tax, gambling tax and transport tax. Local taxes and levies are those introduced by the Tax Code and regulations of the municipal authorities, these taxes are payable in the appropriate municipal areas. Local taxes are represented by land tax, personal property tax and trade levy.
Profits tax rate is flat and equals to 20%.
The tax base is calculated as income less expenses, which should be economically justified and duly documented. Certain expenses could be deducted for tax purposes within specific limits (e.g., interest, advertising expenses, representation expenses, etc.).
Starting 01 January 2017 tax losses could be carried forward without timing limitations. However, for the tax periods from 01 January 2017 to 31 December 2020 it is not allowed to carry forward tax losses exceeding 50% of the taxable profit for the respective tax period.
Russia applies thin capitalization (3:1) rules. Starting 01 January 2017, the thin capitalization rules have been significantly amended. In particular, the affiliation criteria has been reviewed in line with the Russian TP rules, the definition of the controlled debt has been extended and will also include the debt payable to foreign “sister” companies.
Starting from 2015, several new anti-tax avoidance concepts were introduced in the Russian tax legislation such as: (1) the concept of beneficial owner of income for application of DTT benefits; (2) CFC rules; (3) the concept of tax residency for companies.
Russia has concluded double tax treaties (DTTs) with more than 80 countries. Withholding income tax rates are as follows:
Income from international freight, including lease of property used in international transportation and lease of sea craft and aircraft vehicles is subject to a 10% withholding income tax rate.
|Transfer pricing in Russia|
|Arm’s length principle||since 1999|
|Documentation liability||since 2012|
|lack of documentation||~EUR 80 for non-filing of TP Notification|
|tax shortage||for 2016 - 20% (from 2017 40%) on tax underpayment + late payment interest|
|direct or indirect control plus other criteria|
|Safe harbours||Market range of interest on loans|
Level of attention paid by Tax Authority:
|Type of income||General rate||Tax rates under DTT|
The standard VAT rate is 18%. However, sale of certain food products, goods for children, medical and pharmaceutical products is taxable at a 10% rate. A 0% VAT rate applies to export sales and cross-border services (e.g. international transportation and freight).
According to the Russian tax legislation, Russian VAT is applicable to the provision of services deemed to be supplied in the territory of Russia.
Electronically supplied services (“ESS”) are deemed to be supplied in Russia for VAT purposes if the customer (legal entity, private entrepreneurs or individual) is considered to be located in Russia. In case the ESS are rendered to business customers, legal entities and private entrepreneurs registered with the Russian tax authorities, accounting of VAT and payment of VAT is done by those legal entities and private entrepreneurs acting as tax agents.
Private individuals do not act as VAT agents with regard to the ESS. Therefore, if a foreign legal entity is rendering B2C ESS in Russia, it should register for VAT purposes and pay Russian VAT with regard to revenues gained from Russian individuals.
Excise tax applies to companies dealing with excisable goods (ethanol, alcohol beverages, tobacco products, cars, petrol, diesel, nature gas, etc.)
Russian tax residents are taxable on their worldwide income at the flat rate of 13% on most types of income. Only Russian tax residents may benefit from tax deductions (including notional deduction available when selling movable property and tax exemption of real estate disposal income available starting 01 January 2016).
Non-residents are only taxable on their Russian source income at a 30% PIT rate, unless otherwise provided in the Tax Code. However, individuals holding a work permit of highly qualified specialist (HQS) are subject to a 13% tax with regard to employment income received from the Russian company for which they obtained this migration status. To qualify for HQS status the foreigner should earn monthly gross income under the Russian employment agreement of at least 167 KRUB, i.e. approximately EUR 2,700.
Dividends payable to an individual being non-resident are subject to personal income tax at a 15% rate, unless the lower tax rate applies under the applicable DTT.
Rates for the calculation of social contributions vary depending on the type of social fund and the status of an employee as presented in the table below:
Accident insurance contributions are payable to Social Security Fund in addition to social contributions (including foreign employees both holding the HQS work permit and employed without such permit) at the rate depending on class of professional risk that could vary from 0,2% to 8,5% of the gross annual remuneration payable to employees.
|Social Fund||Russian citizen (foreigner with residency permit)||Foreigner temporary staying in the RF|
|Pension Fund||22% on gross annual remuneration not exceeding 876 KRUR (~14.1 KEUR), above - 10%||exempt||22% on gross annual remuneration not exceeding 876 KRUR (~14.1 KEUR), above - 10%|
|Social Security Fund||2.9% (1,8% for foreigners) on gross annual remuneration not exceeding 755 KRUR (~12.2 KEUR), above - 0%||exempt||1.8% on gross annual remuneration not exceeding 755 KRUR (~12.2 KEUR), above - 0%|
|Medical Fund||5.1% on gross annual remuneration||exempt||exempt|
|Wage-related taxes in Russia||Minimum wage||Average wage in private sector|
|Exchange rate RUB/ EUR 85||In EUR||In RUB||In EUR||In RUB|
|278||17 219||578||35 843|
|TOTAL WAGE COST||361||130%||752||130%|
|Personal income tax (for tax resident)||36||13%||75||13%|
*the rate depends on the amount of gross salary