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Overview of Tax Issues for Expats in Russia

Submitted: January 2014

The Russian tax year runs from the 1 January to the 31 December.

Tax Residence

If you are working in Russia for less than 183 days you will be considered non-resident, and you will be taxable on Russian source income only. If you stay longer than 183 days you will be considered resident (spread over two years), you will be considered resident from then on. In addition, if you stay longer than 183 days in any given tax year, you will be considered resident for the whole of that tax year. As a resident you will be liable for tax on your worldwide earnings. For more details see: Taxation - Employment Taxation for Expats in Russia. Tax treaties also have a definition of residence which can override the definition above with regard to certain kinds of income. For more details see: Taxation – Tax Treaty Considerations for Expats in Russia.

Employment/Business Taxes

Income tax is deducted by your employer the same way as it is in a country with a Pay As You Earn system. Income tax is charged at a flat rate which is 13% for residents and 30% for non-residents. You will generally have to fill in a tax return after the end of the year to calculate the final amount of tax payable. If you are self-employed you will pay income tax based on the profits of your business after deduction of costs. For more details see: Taxation - Employment Taxation for Expats in Russia.

If you come to Russia to set up in business and start a company, you will be liable to coroporate income tax on the profits from your trade or business. The general rate of corporate income tax is 20%. Companies must complete a registration process, which also registers them with the tax authority. Companies must file a return and pay advance corporate taxes either monthly or quarterly, depending on their reporting period. After the end of the year a final tax return must be filed, and a final payment made, on or before 28 March of the following year. For certain small companies there is a simplified tax system. For more details see: Taxation - Business Taxation for Expats in Russia.

Other taxes

For residents in Russia, investment income in the form of interest and rental income is taxed as ordinary income. Dividend income is also taxed as ordinary income, but at a reduced rate of 9% to take in to account tax paid at the corporate level. Capital gains on real property and other assets, held for less than three years, are also taxed as personal income, gains on assets held for three years of more are exempt.

For non-residents, interest and rental income is taxed as ordinary income. Capital gains on assets (other than securities) held for less than three years are taxed at a rate of 30%, payable on the gross proceeds rather than the net gain. For securities the tax is charged after allowable expenses, which include the cost of acquisition. For more details see: Taxation - Investment Taxation for Expats in Russia.

Tax treaties

Russia has signed tax treaties with approx 90 countries worldwide. Any withholding taxes payable in Russia on dividends, interest or royalties paid to persons in other countries with tax treaties in place (or non-residents in Russia) can be significantly reduced. The treaties also mean that the amount of withholding tax charged by the originating country on money flowing into Russia is reduced. The amount that can be charged under a treaty is often reduced to between 10% and 15%, for royalties the rate is often reduced to 0%. For more details see: Taxation – Tax Treaty Considerations for Expats in Russia.

 

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