Mazars in Russia

Corporate and other taxes

Russian legislation on taxes and levies consists of the Tax Code of the Russian Federation (hereinafter, the Tax Code) and laws adopted in accordance with it. Taxes and levies in Russia could be categorized as federal, regional and local. Federal taxes and levies are those established by the Tax Code, they are payable throughout the Russian Federation. Federal taxes include :

  • Federal taxes and levies: value-added tax (VAT), excise tax, personal income tax, profit tax, water tax, levies for natural and biological resources consumption, stamp duty, tax on additional income from extraction, mineral extraction tax. There are special tax regimes in Russia which are intended for smaller businesses and special categories of the taxpayers, e.g. simplified tax system, unified agricultural tax etc.
  • Regional taxes: corporate property tax, transport tax, gambling tax.
  • Municipal taxes: land tax, individual property tax.

Profits tax

The tax rate is flat and generally 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 rules that have been significantly amended starting 2017 inter alia by extending definition of the controlled debt. 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.

Transfer pricing in Greece
Arm's length principle since 1999
Documentation liability since 2012
APA with Russian Tax authorities since 2012
BAPA and MAPA in respect of a cross-border transaction * since 2018
Transfer pricing documentation Can be requested by the tax authorities not earlier than 1 June of the next calendar year. The taxpayers are obliged to submit it within working 30 days from the date of the tax authorities’ request.
- Penalty - 40% on tax underpayment starting 2017
- Tax shortage + late payment interest
Notification on Controlled transactions Must be filed not later than May 20 of each calendar year
- Penalty   - RUB 5000 (~EUR68) fine for non-filing of TP Notification
Country-by-Country liability since 2017
- Language   - If the ultimate parent company is a Russian tax resident, should be filed in Russian
Penalty   RUB 100,000 (~EUR 1340) starting from 2020
Master file and Local file since 2017
Language   - Russian
Penalty   - RUB 100,000 (~EUR 1351) starting from 2020
Local file since 2018
Language   Russian
Penalty   - RUB 100,000 (~EUR 1351) starting from 2018
CbCR Notification since 2017
Language   Russian
Penalty   RUB 50,000 (~EUR 676) starting from 2020
Related parties (25%) > direct or indirect control plus other criteria
Safe harbors Interest

Level of attention paid by Tax Authority:

5/10

*Bilateral and multilateral APAs

Russia has concluded double tax treaties (DTTs) with more than 80 countries. Withholding income tax rates are as follows:

Type of income General rate Minimal tax rates under DTT*
Dividends 15% 5%
Interest 20% 0%
Royalty 20% 0%
Income from international freight, including lease of property used in international transportation and lease of sea craft and aircraft 10% 0%
Other income 20% 0%

*These reduced withholding tax rates will be applied if the company receiving abovementioned income is beneficial owner of such income and provide Russian company with confirmation (documents) of the actual right of income. This company should provide the Russian company paying income the certificate of its tax residence.

Starting from 2020, it supposed that the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) will limit tax benefits granted by most treaties to which Russia is a party. Russia has chosen PPT and S-LOB (simplified LOB) rules, which will be applied if the Russian company paid out passive income.

There are many profits tax incentives in Russia in regard of some companies’ activities: federal and reginal tax incentives as well as incentives related to the defined industries (for example, medical or educational activity).

VAT

Generally VAT applies to goods (property rights) sold, work performed and services rendered, if supplied on the Russian territory. Examples of other taxable events are (i) the importation of goods into the territory of the Russian Federation; (ii) the transfer of goods (performance of work, rendering of services) in the territory of the Russian Federation for own requirements, expenses for which are not deductible (whether through amortization deductions or otherwise) in calculating tax on the profit of organizations; (iii) the transfer of ownership in goods or of the results of work performed and the rendering of services transfer free of charge. Tax base is calculated based on sales prices applied by the taxpayer or imputed market price (in case of free-of-charge transfers).

VAT payable to (receivable from) the budget is calculated as the difference between VAT accrued on taxable revenue and VAT claimed for offset with regard to VATable purchases.

Payments in favour of foreign suppliers that are not registered in Russia as taxpayers are subject to reverse charge VAT, where the Russian customer should withhold and pay VAT to the tax authorities.

The standard VAT rate is 20%. However, sale of certain food products, goods for children, medical and pharmaceutical products is taxable at a 10% rate. 0% VAT rate applies to export sales and cross-border services (e.g. international transportation and freight).

There are non-taxable (tax-exempt) operations in Russia, closed list of which is defined in RF Tax Code.

Foreign companies, providing electronic services (via Internet) to Russian individuals and legal entities as well as foreign companies’- foreign intermediaries (agents) taking part in settlements are obliged to register with the Russian tax authorities and Independently calculate and pay VAT on the value of services rendered.

Registration is mandatory even if the services provided are exempt from Russian VAT.

VAT options in Russia  
Distance selling EUR 35,000/year
Call-off stock No
VAT group registration No
Cash accounting Optional for small companies up to 2m turnover
Import VAT deferment
Local reverse charge sale of waste,B2B sales for laptops- tablets- cell phones under conditions
Option for taxation
letting of real estate optional on business rents
supply of used real estate No
VAT registration threshold EUR 10,000/year

Personal income tax and social security contributions

Russian tax residents are individuals who spent 183 days on more in the Russian territory for the subsequent 12 months and are taxable on their worldwide income at the flat rate of 13% on most types of income. Individuals that do not meet the above physical stay criteria are non-residents. Non-residents are only taxable on their Russian source income. Salary paid for the performance of a labor function in Russia is deemed a Russian source income. Non-residents are subject to personal income tax a 30% 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.

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:

Social Fund Russian citizen (foreigner with residency permit) Foreigner temporary staying in the RF
    HQS non-HQS
Pension Fund 22% on gross annual remuneration not exceeding 1 150 KRUR (~15.54 KEUR), above - 10% exempt 22% on gross annual remuneration not exceeding 1 150 KRUR (~15.54 KEUR), above - 10%
Social Security Fund 2.9% on gross annual remuneration not exceeding 865 KRUR (~11.69 KEUR), above - 0% exempt 1.8% on gross annual remuneration not exceeding 865 KRUR (~11.69 KEUR), above - 0%
Medical Fund 5.1% on gross annual remuneration exempt exempt

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 that could vary from 0,2% to 8,5% of the gross annual remuneration payable to employees.

Wage-related taxes in Russia Minimum wage Average wage in private sector
Exchange rate RUB/ EUR 74 in EUR in RUB in EUR in RUB
  254 18 781 587 43 445
Total wage cost* 330 130% 763 130%
Employer's contributions 76 30% 176 30%
Gross salary 254 100% 587 100%
Personal income tax (for tax resident) 33 13% 76 13%
NET SALARY 221 87% 511 87%
RUSSIA
Nizhniy-Susalniy pereulok, 5, bld.19 Moscow, 105064 Russian Federation
ALEXEY SHVYNDENKOV
Head of Tax and Legal Department