The Main Corporate Taxes in Russia in 2017

Corporate income tax

Generally, Russian legal entities are taxed on their worldwide profits. The tax base is calculated as all income of the company (including income received from sources outside of Russia), less the incurred deductible expenses. There is a list of expenses not recognized for tax purposes set by the Tax Code of Russia; all other expenses are recognized as deductible provided they are economically feasible, supported with relevant documentation and aimed at deriving profits.

There are some kind of expenses that are deductible for tax purpose within certain limits. For example, business trip allowances, representative expenses, advertisement expenses.

The main corporate profit tax rate in Russia is 20%.

Some types of business activity are exempted from corporate profit tax, e.g. companies -residents of special economic zones.

As well, there are some types of income with different rates of corporate profit tax. Thus,

  • for income received by foreign legal entities from Russian legal entities in the form of dividends is set as 15%.
  • Dividends received by Russian legal entities from Russian or foreign legal entities are taxable at 13% (in case if they have less than 50% of shares and they own a legal entity less than 365 days).

Income of foreign legal entities from international freight and the rental of property
involved in international shipping, and income from leasing and subleasing ships and aircrafts is taxable at 10%

Corporate income tax is payable on a year-to-date basis. Companies may choose between paying monthly on the basis of actual profits or quarterly with monthly advance payments calculated on the basis of the profits received in the previous quarter.

The deadline for annual tax return and final payment for the year is due by 28 March of the following year. The deadline for quarterly tax return and tax payment is the 28th of the month following reporting quarter.

As a rule, taxpayers pay the tax on their own account. However, in some cases (e.g. where income is paid in the form of dividends) tax is withheld at the payment source.

Where a double tax treaty exists between Russia and a foreign country, tax is paid subject to the provisions of such treaty. The list of the countries that have double taxation treaty with the Russian Federation.

Value added tax (VAT)

Sales of goods, works and services within Russia and imports of goods into Russia are subject to VAT.

  • VAT is payable at the standard rate of 18% on most goods, including imported goods and services.
  • A 10% reduced rate is applied to a limited range of basic food items, children goods, some medical products and some mass media products.
  • Export sales are subject to 0% VAT.
Amount of VAT is offset by input VAT from goods, works and services received from suppliers and VAT paid to the Custom office in case of import goods.

Some transactions and taxpayers (e.g. culture and art institutions) are VAT exempt. Transactions that are exempt include:

  • insurance and banking operations (with some exceptions);
  • leasing out premises located in the territory of Russia to foreign individuals and foreign entities accredited in Russia (on the condition of reciprocity with the respective foreign country);
  • sale of shares in the nominal (share) capital, shareholdings in unit investment funds or securities;
  • certain medical equipment/services;
  • the import of certain technological equipment, related components and spare parts as determined by the Government of the Russian Federation.

For cross-border services special rules apply which determine whether the services are provided within or outside Russia and, consequently, whether they are subject to Russian VAT.

Russian tax legislation also provides for the refund of input VAT for taxpayers that pay VAT at 0% on export sales. However, a taxpayer shall be obliged to confirm the right and provide number of documents in certain deadlines to the tax authorities.

The VAT tax return shall be submitted no later than the 25th of the month following the reporting quarter.

Payment of VAT for reporting quarter can be done by installments until the 25th of the each month of the next quarter. VAT tax return shall be provided only in electronic format. Together with calculation of VAT, taxpayer provides to the tax authorities Sales and Purchase books, which contain information about issued and received invoices for VAT purpose.

Payroll taxes

Companies pay the following taxes and contributions on employee’s remuneration:

Personal income tax (PIT)
  • Residents are taxed at the rate of 13% on their worldwide income. Statutory social, property and professional deductions may be granted.
  • Non-residents are subject to a 30% tax on their Russian source income, except dividends from Russian entities which are taxed at 15%. Russian source income includes income received for duties performed/services rendered within the Russian Federation. Standard social, property and professional tax deductions cannot be applied for foreigners.

 

Residents are defined as individuals staying within the territory of the Russian Federation for at least 183 days out of any period of 12 consecutive months.

The provisions of the respective double tax treaty signed by Russia with a number of countries may amend the taxation of individuals in Russia.

Tax is usually withheld at the source of payment.

Remunerations of foreign employees working in Russia under work permit of Highly Qualified Specialist is taxable at 13% regardless the number of days spent in Russia.

Obligatory insurance contributions

From 1 January 2017, social insurance contributions are administrated by the Tax authorities (before they were administrated by Pension Fund of Russia and Social Insurance Fund)

Total rate of insurance contributions is 30%

Insurance contributions are divided between:

  • Pension Fund of Russia (contributions on compulsory pension insurance). 22% for remunerations within limit value 876 000 Rubles and 10% for remunerations more than 876 000 Rubles.
  • Social Insurance Fund (contributions on social insurance against temporary disability and maternity) 2.9% for remunerations within limit value 755 000 Rubles and 0% for remunerations more than 755 000 Rubles.
  • Federal Obligatory Medical Insurance Fund (contributions on obligatory medical insurance) 5.1%
Insurance contributions are not payable in respect of foreign nationals whose temporary stay in Russia and work under Highly-Qualified Specialist work-permit.

The base for calculating insurance contributions is calculated separately for each employee and for 2017 limit value for obligatory pension insurance is 876 000 Rubles and for social insurance is 755 000 Ruble. Limit value is revised by Russian Government on annual basis.

More detail you may see in the table of Insurance Contributions Tariffs for 2017.

Obligatory Insurance contributions against accidents at work and occupational diseases

Are calculated and payable separately from the above insurance contributions. The rates vary from 0.2% to 8.5% of employees' remunerations. Rate depends on the employer’s business activity. The rate applicable to office personnel is typically 0.2%.

Corporate property tax

This tax is imposed on the average annual value of movable and immovable property recorded on the company’s balance as fixed assets. However, movable property acquired after 1 January 2013 is excluded from the property tax base. Exceptions are made for movable properties brought into service in the result of company re-organization and transferring from affiliated companies.

Property tax is regional tax in the Russian tax system. The tax rate is established by the regions but should not exceed 2.2%.

Transportation tax

Persons or companies in whose name vehicles are registered are liable for transport tax, which is paid annually (in some regions of Russia — quarterly). Rates depend on the capacity of the transport facilities. The law has determined specific rates; however these may be changed at the discretion of the subjects of the Russian Federation.

Unified tax for the simplified taxation system

Some companies and individuals meeting certain criteria can apply the simplified taxation system. This provides for the substitution of the corporate profit tax (except some specific kind of income, such as dividends from legal entity participation in capital, etc.), the corporate (personal) property tax and VAT (except for VAT payable when goods are imported into the customs territory of Russia and VAT of tax agent) for the single tax.

The tax is paid quarterly at the rate of 15% when the taxpayer elects to pay the tax on income less expenses (the list of expenses that can be deducted is strictly limited), or 6% when the taxpayer elects to pay the tax on income.