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Personal Income Tax in Russia

Personal Income Tax in Russia

PIT — personal income tax. It is levied on citizens' personal income in the form of money or material benefits.

In 2021, the Tax Code has five types of personal income tax rates — 9, 13, 15, 30, 35%. The PIT rate depends on the type of income and whether the payer is a tax resident or not.

Personal income tax at the rate of 13%

The rate of 13% is considered to be the main one. It applies to all income of tax residents of the Russian Federation, for which officials have not established special rates, which are mentioned in Article 224 of the Tax Code of the Russian federation.

For example, among the income taxed at the rate of 13%, there are salaries, bonuses, and dividends. Tax deductions are also applied to such income.

The income of non-residents of Russia is calculated separately for each ayment and is not reduced by deductions. The personal income tax rate is 13% in the following cases:

a person receives income working in Russia;
a person works as a highly qualified specialist;
a person is a participant in the State Program of Resettlement to the Russian Federation of compatriots living abroad, as well as close relatives of such individuals who have resettled in Russia;
foreign citizens or stateless persons who are refugees or have received temporary asylum in the territory of the Russian Federation and receive income from their work in Russia;
income of crew members that sail under the State flag of the Russian Federation.

From January 1, 2021, the President proposed to change the income tax rate from 13 to 15 percent for those earning more than 5 million rubles a year. Only the income that exceeds 5 million rubles will be taxed at the increased rate. That is, income up to this amount will be calculated at the rate of 13 percent, and over this amount — at the rate of 15 percent.

From 2022, the amount of interest on deposits that exceed the interest on one million rubles at the Bank of Russia’s key rate will be taxed at a 13% rate.

Personal income tax on income at the rate of 30%

The 30% rate is applied to income on securities issued by Russian organizations in the following cases:

income from securities is recorded in the custody account of a foreign nominee holder, a foreign authorized holder, or in the custody account of depository rograms;
the recipient of the income did not provide the tax agent with the information in accordance with the requirements of Article 214.6 of the Tax Code.

The exceptions to applying the 30% rate for income tax were fixed by the officials in paragraph Article 214.6 of the Tax Code.

Also, the personal income tax rate of 30 percent is applied to the income of non-residents. The tax is calculated for each payment separately, deductions cannot be used.

Personal income tax from income at the rate of 35%

Subject to personal income tax at the rate of 35 percent is the income of residents. This is the highest tax rate. The tax is calculated for each payment separately, deductions are not applied.

35% of the income is transferred to the budget of the Russian Federation by citizens who have received the following income:

interest on bank deposits. If the income is received in rubles or a currency less than the Central Bank of the Russian Federation’s refinancing rate, then only the difference, and not the entire amount, is taken as the tax base;
winnings and prizes. Cash prizes received by participating in lotteries and similar events are also subject to personal income tax at the maximum rate. However, only the amount of winnings over 4,000 rubles is subject to taxation;
material benefit in the form of saved interest on loans and credits;
income from the use of shareholders' funds.

In addition to the obligation to pay tax at an increased rate, holders of the income mentioned above are required to submit a declaration. All the income must be documented.

Personal income tax on income at the rate of 15%

The 15% rate is applied to the income of non-resident individuals. Moreover, payments are received in the form of dividends from Russian organizations.

The tax agent calculates, withholds, and pays personal income tax. It is impossible to reduce the base for calculating personal income tax by the amount of dividends received by the tax agent.

Non-residents do not always apply the rate from the Tax Code. Exceptions include cases stipulated by international treaties on the avoidance of double taxation. Due to the fact that international agreements have priority over Russian legislation, it is necessary to apply their rules.

Personal income tax on income at the rate of 9%

The rate is used to determine the tax on the following income of tax residents:

interest on mortgage-backed bonds issued before January 1, 2007;
income of the founders of the mortgage-backed trust management under participation certificates issued before January 1, 2007.

As we mentioned above, you can reduce the tax base and get a tax deduction in some situations.

Russian citizens are entitled to a deduction — a refund of a part of the personal income tax paid.

There are two ways to get a deduction:

The state will refund some of the taxes you paid earlier. To do this, you need to submit a declaration and documents confirming the right to deduction to the tax authority.
Refund from the employer. You need to provide a notice of deduction from the tax authority, and on this basis, the employer will stop withholding tax on the payment of wages for some time.

Only those who have an official income, from which personal income tax at the rate of 13% is paid, can receive a deduction. You also must be a resident of the Russian Federation — to live in Russia for at least 183 days in a calendar year. Non-residents cannot use the deduction.

Those who want to take advantage of the tax deduction, for example, to return 13% of the amounts for education or medical treatment, can file a return within three years from the year they paid the expenses. And the deduction for the purchase of housing can be used three years later and ten years after the purchase — there are no time limits for this deduction.

The types of deductions

For income for 2020, you can use the following types of deductions:

standard deductions. Deductions on children and those that are received by disabled people and some categories of people.
social. Deductions for education, treatment, charity, and others.
investment. Deductions by income from operations with securities and individual investment account.
property deductions. Deductions for the purchase of housing and the sale of the property.
professional deductions. Deductions for individual entrepreneurs, individuals working under civil contracts, and people engaged in private practice, such as notaries.

Property tax deductions

Property deductions can be used by a person who has made transactions with real estate.

In particular:

sold property;
bought housing: houses, apartments, rooms, etc.;
built housing, including the purchase of land for this purpose.

The complete list of transactions for which you can get a property deduction and the procedure for its provision is prescribed in Article 220 of the Tax Code of the Russian Federation.

Buying an apartment in a new building or in the secondary market, you can use the deduction for the cost of purchasing housing.

If you buy an apartment with a mortgage, the state returns even more: in addition to the deduction for housing, you can also use the deduction for interest.

You can get a deduction for the amount of expenses for the apartment, but not more than 2 000 000 rubles.

You can return from the budget 13% from 2 000 000 rubles. That is 26 000 rubles.

If you took a mortgage loan from a bank to buy an apartment, you can also get a deduction for the interest paid to the bank. The maximum amount of interest deduction is 3 000 000 rubles. You can return from the budget 13% from 3 000 000 rubles. That is 390 000 rubles.

Tax deduction for the sale of an apartment

If you owned the apartment for five years, and in certain cases — for three years, when selling it, you do not need to pay tax and submit a declaration.

If you sell the apartment before this period expires, you will have to report to the tax authority.
As for the tax, a deduction in the amount of income received from the apartment’s sale, but not more than 1 000 000 rubles, can be used. The deduction can be applied if there are no documents about the expenses.

If a person sells several apartments during the year, the total amount of the deduction is 1 000 000 rubles, but not 1 000 000 rubles for each apartment.

The deduction for the sale of the estate can be applied an unlimited number of times. But not more often than once a year.

Standard tax deductions

There are two categories of standard tax deductions: personal deductions and deductions on children.

Personal deductions

The deduction is granted to certain categories of individuals. For example, disabled people from childhood, disabled people of the first and second groups, Chernobyl disaster victims, parents and spouses of military personnel who died being on military duties, etc.

Deduction for children

hese deductions are provided to both parents. Adoptive parents and guardians can also claim the deduction.
The deduction is granted from the month in which the child was born until the end of the year in which the child reached the age of 18 or 24 if he continues to study full-time.

The amount is 500 rubles or 3 000 rubles for each month of the year. The amount of the deduction depends on the category of the taxpayer. For example, for people who received a disability in the Chernobyl disaster, every month’s deduction is 3 000 Rubles. Disabled people from childhood can claim a deduction of 500 rubles per month.

If a person has the right to take advantage of several personal deductions, he can use only one of them.

Deductions for children are provided as long as the parent’s income from the beginning of the year does not exceed 350 000 Rubles. From the month of excess, deductions for children will not be applied. But in the next calendar year, the deduction can be received again.

Social tax deductions

There are seven social tax deductions in total. They can be used by those who have had the following types of expenses:

For charity;For education;
For treatment and medicines;
For non-state pension provision, voluntary pension insurance, and voluntary life insurance;
For the funded part of the pension;
For an independent assessment of the qualification;
For fitness (from 2022).

The maximum amount of the social tax deduction is 120 000 rubles. This amount does not include expenses for charity, children’s education, and expensive medical treatment.

These cases are subject to their own rules:

For charity expenses, the annual income can be reduced by no more than 25%.
For the education of children, you can get a deduction of 50 000 rubles per child.
The cost of expensive treatment can be deducted without restrictions.
If the expenses exceed 120 000 rubles, the taxpayer must choose which expenses he will claim for deduction.

Tax deduction for medical treatment

A social deduction for treatment can be received by a person who had medical expenses for himself, his spouse, parents, or children under 18 years of age, including adopted children. Medical expenses can be as follows:

the cost of medicines prescribed by the doctor;
medical services: doctors' appointments, examinations, tests, procedures;
expensive treatment;
contributions under the voluntary health insurance agreement.

It is important that the clinic that provided medical services, as well as the insurance company with which the voluntary health insurance contract is concluded, have licenses.

The amount of the deduction depends on the type of treatment. For expensive treatment, expenses are deducted without restrictions. For other types of treatments, the deduction amount is up to 120,000 rubles. This amount includes expenses not only for medical treatment but also for other social deductions, except for charity expenses, children’s education, and expensive treatment.

The deduction for education can be received by the person who paid for:

Personal education in any form: full-time, evening, part-time, etc.;
Education of your child under the age of 24 who is studying full-time;
Education of a supervised child under the age of 18 who is studying full-time;
Education of a brother or sister under the age of 24 who studies full-time.

The amount of the deduction of 50 000 rubles is the maximum deduction for children’s education costs. This amount is provided for each child in the family, but it can only be applied by one of the parents or guardians.
The education deduction is granted only for the year in which the costs were paid. You can’t use it next year.

Investment tax deductions

Residents can get the investment deduction on:

Tax deduction on income from securities transactions

The deduction is provided for the sale of securities that are traded in an organized market. The securities must be purchased on the brokerage account after 01.01.2014. This deduction does not apply to the individual investment account.

To use the deduction, the securities must have been owned for more than three years.

Professional tax deductions

The right to use a professional deduction has:

A deduction of 20%

If the individual entrepreneurs can not confirm the expenses with documents, they can reduce the income by 20%.

It is useful to apply such a deduction not only when there are problems with confirming expenses with documents but also when the expenses are less than 20%.

This type of deduction is available only to individual entrepreneurs. Individuals who do not have the status of individual entrepreneurs cannot use the 20% professional deduction.

Deductions from 20 to 40%

Authors who receive income from their works and cannot confirm their expenses with documents have the opportunity to take advantage of a deduction from 20 to 40%. The percentage depends on the type of income. For example, authors of literary works can reduce their income by 20% and sculptors — by 40%.

income received from transactions with securities traded on the organized securities market;
deposited money on the individual investment account;
received income from operations recorded on the individual investment account.
individual entrepreneurs on the general system of taxation that is, those who pay personal income tax at the rate of 13%;
notaries;
lawyers;
people who are engaged in private practice (security guards, detectives, and others);
individuals who are not registered as individual entrepreneurs who work under civil contracts;
authors who receive remuneration.

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