December 20, 2024
NAVIGATING THE TAX REGIME IN RUSSIA
INTRODUCTION
Russia is a land of plethora of investment opportunities due to its vast territory and global connectivity. To make the best utilisation of these opportunities, it is important to have a holistic knowledge of the tax system in Russia. Taxation in Russia is governed by the ‘The Tax Code of the Russia Federation’. It lays down different taxes imposed at the federal, state, and local levels, all of which are necessary to comply with while running a business.
FEDERAL TAXES IN RUSSIA
The federal government levies the federal taxes which are applicable to all citizens and companies nationwide. There are a total of ten federal taxes. A few of them are:
- Value Added Tax (“VAT”): This tax is applicable on the sale of commodities, services and imported goods. The standard VAT is 20%, but essential commodities such as food, medical supplies, and children’s products enjoy a lower rate of 67%.
- Corporate Profit Tax: All companies operating in Russia are subject to 20% tax on their profits. This tax is split between the federal and regional governments.
- Personal Income Tax (“PIT”): Citizens earning less than RUB 5 million a year are subject to flat 13% income tax, while those earning more must pay 15% Non-residents are subject to 30% tax on their income originating in Russia.
- Excise Taxes: Excise taxes are applicable on a few products such as fuel, alcohol, tobacco etc. and are adjusted regularly based on the existing economic situation.
REGIONAL TAXES
Regional authorities in Russia impose three types of taxes:
- Corporate Property Tax: It is levied on the total value of the property that businesses use. It can go up to 2%.
- Transport Tax: Applies to vehicles and is determined by the type, age and power of the vehicle.
- Gaming Tax: It covers gaming and gambling activities, and is applicable only in a few regions.
LOCAL TAXES
Local taxes levied by Municipal corporations include:
- Land Tax: People and companies who own land are charged with land tax based on the location and area.
- Trade Tax: Wholesalers and retail sellers pay this tax based on the money they make from trade.
SPECIAL TAX REGIMES
Russia also has certain special tax regimes to promote small businesses and investment:
- Simplified Tax System (“STS”): Small businesses with lower income levels are given the choice of paying a 6% flat tax on revenue or 15% tax on profits.
- Unified Agricultural Tax (UAT): All Agri-based businesses pay a flat 6% tax on revenue under this scheme.
CONTRIBUTION TO SOCIAL SECURITY
The companies and workers in Russia must contribute to the social security system in addition to the direct taxes levied on them. This covers social benefits like healthcare, pensions etc.
TAX FILING AND COMPLIANCE
All companies and individuals in Russia are required to register with the tax authorities. Companies must submit their taxes regularly, and failure to do the same would lead to fines, penalties, or even shutting down of a business.
CONCLUSION
Navigating the Russian tax structure may be a difficult task due to different taxes at local, regional and federal levels. Tax payments are necessary to maintain a stabilized business environment. To maintain compliance and make the best use of the tax benefits offered by the Russian Government, it is essential to have a thorough understanding of the tax regime in Russia.
HOW WE CAN HELP?
- Our team can provide expert guidance on federal, Regional and Local tax obligations to ensure compliance with Russia’s tax regulations.
- Our team can help in making the best use of the tax exemptions offered by the Russian Government.
- Our team can keep you informed about the latest tax amendments and compliances requirements to align with the changing tax structure.
For more information or queries, please email us at
[email protected]
Key Contact
Surendra Singh Chandrawat
Managing Partner
