Tax system overview
Russian tax legislation consists of the Tax Code of the Russian Federation (hereinafter, the “Tax Code”) and laws adopted in accordance with it.
Taxes and levies are imposed in Russia on the Federal, regional and local levels.
Federal taxes and levies are those established by the Tax Code and by Federal Law and are paid throughout the Russian Federation.
As of the 1st of January, 2012, the following Federal taxes and levies are effective:
Regional taxes and levies are those established by the Tax Code and by tax laws of the regions of the Russian Federation and are paid 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 by the regulations of municipal authorities and are paid in the appropriate municipal Tax system overview areas. Local taxes are represented by land tax and personal property tax.
Local (or regional) legislation only have the right to introduce those types of taxes and levies stipulated by the Tax Code. When doing so, the local (regional) authorities are allowed to establish the following elements of taxation:
Tax registration requirements
There is no separate tax registration for VAT purposes – a taxpayer obtains a single tax ID number for all taxes. However, taxpayers have to obtain supplementary tax registration ID numbers (‘KPP’) with the tax authorities where their separate subdivisions are located.
A separate subdivision is a subdivision separately located from the head office (e.g. other city). A separate subdivision implies the creation of stationary working places for periods longer than one month. FLEs have to obtain tax registration with the local tax authorities within 30 calendar days from the day activities begin at that location.
BUSINESS TAXATION (MAIN TAXES)
The maximum profits tax rate is 20 percent, including 2 percent paid to the Federal budget and 18 percent to the regional budget. The regional profits tax rate can be reduced to 13.5 percent at the discretion of the regional authorities.
The methodology applied for profits tax purposes should be clearly explained in the taxpayer’s tax accounting policy. Once chosen, the tax accounting policy cannot be changed during the financial year, except in cases of changes of legislation.
Value added tax
Sale of goods, works, services (including those supplied free-of-charge or transferred for the company’s own consumption), transfer of property rights, construction conducted by and for the company and import of goods into Russia are subject to Russian VAT.
Generally, the sales of goods (works, services) are taxable at a standard VAT rate of 18 percent.
The Tax Code provides for certain types of VAT exemptions, primarily related to financial and social welfare services.
Taxpayers submit VAT returns on a quarterly basis and have the right to pay the VAT in three equal installments.
PERSONAL TAXATION (MAIN TAXES)
Personal income tax
Tax residents are subject to PIT on worldwide income, whereas nonresidents are subject to PIT only on Russian-source income.
Generally, tax residents pay PIT on the majority of income types at a 13percent flat rate.
Tax residents can benefit from claiming standard, social, property related and professional deductions.
Individuals who possess immovable property are subject to personal property tax.
Individuals possessing transport vehicles are subject to transport tax.
(Based on the report of KPMG IN RUSSIA AND THE CIS “Doing Business in Russia: Your roadmap to successful investments. 2013.”)