When do taxes in Russia apply to worldwide income? This guide explains who has to pay tax in Russia and at which rate, from personal income tax to corporate tax.
If you relocate to live, retire, or work in Russia, you will typically be liable to pay taxes in Russia on your worldwide income. Both foreign citizens working and companies engaging in business activities in Russia have to pay Russian taxes (Налог is tax in Russian).
Russian tax rates differ depending on whether you are classed as a resident or non-resident Russian taxpayer. Tax rates in Russia are higher for non-residents and tax deductions are not typically available. Residents pay around half the Russian income tax rate as non-residents, as well as eligibility to claim certain deductions.
This guide explains who has to pay taxes in Russia, the Russian tax rates for residents and non-residents, plus other liable Russian taxes on property, capital gains and goods and services (Russian VAT).
Who has to pay taxes in Russia?
Any foreigner that receives an income from a Russian source is obliged to pay personal income tax in Russia. If you live in the country for more than 183 days per year and have been granted a legal Russian residency permit, you tax liabilities are lower than non-residents.
Individual businesses such as freelancers, contractors and consultants pay personal income tax on their business income whether from a Russian source or from overseas. International corporate organizations are obliged to pay tax at a flat rate of 20% on profits plus withholding tax. Read more in our complete guide to Russian corporate and withholding tax.
Russian taxes can apply in the following situations:
- Registered individuals, such as freelancers and self-employed workers, who conduct business without forming a separate legal entity.
- Notaries and lawyers in private practices must pay Russian tax on any income received for these activities.
- Individuals who have received remuneration through civil contracts with other individuals who are not tax agents must declare that income. This includes income from contracts for rental or leasing agreements.
- Those who have sold a private property must declare that income.
- Any tax resident of the Russian Federation, even if they only receive income from outside Russia, must pay Russian tax on that income. However, if an individual is non-resident or changes their tax status to non-resident during the tax year and remains so until the end of the tax period, no declaration needs to be filed and no taxes are due concerning income received outside Russia, even income received prior to obtaining non-resident status.
- Workers who have received income without a tax agent, such as an employer withholding appropriate taxes, must declare the value of this income.
- All lottery winnings, or winnings from any other games of chance, must be declared, no matter the amount.
- Income earned from ownership of intellectual property rights must be declared.
- Individuals who have received gifts from private individuals who are not family members must declare their inheritance.
Filing US taxes from Russia
Despite the fact that every US citizen and Green Card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Russia, contact Taxes for Expats and see our guide to taxes for American expats.
Russian Tax Code
Russia’s taxation system is a complex system, regulated by the Russian Tax Code (RTC). Generally speaking, the Russian Tax Code is intended to be a national arrangement for regional, federal and local taxes, but eliminates tariffs on customs. The system uses modest regressive tax or flat rates and is highly unified for a federal state; it immensely relies on profits from natural gas and oil organizations.
Russian tax system
The Russian tax year runs from 1 January to 31 December. Tax returns should be submitted to the Federal Tax Service using a form called Tax Declaration (Nalogovaya Declaratsia). Returns must be submitted before 30 April and the final date to pay your Russian taxes is 15 July.
English information can be found on the site of Federal Tax Service of Russia, though more information on forms is available only in Russian. Large corporations can apply electronically through a special software that is not accessible for wider public use.
For a company, it is mandatory to register at the Russian tax office if it intends to do business for more than 30 days a year. An employee must notify the tax office via their employer within 10 days of being employed.
Failure to file a tax declaration can result in the following sanctions:
- If taxes are filed less than 180 days late, 5% of the tax owed is charged for each full or partial month the declaration is late. This fine may not total 30% of the total sum of taxes due, or the minimum amount set annually.
- If the declaration is more than 180 days late, 30% of the tax owed is charged, plus 10% for each full or partial month after the first 180 days.
Russian tax rates: residents and non-residents
Those who hold official residency in Russia pay 13% income tax and non-residents pay 30%. Dividend income tax rate for Russian residents is 9% and it is 15% for non-residents. Exceptions to this rule do exist; read more in our guide to Russian income tax.
If you are employed, the company you work for is responsible for registering your taxable income with the Russian tax authorities, and deducting Russian tax from your salary.
Non-residents will be taxed in Russia at a rate of 30% for the first 183 days, even if you are on a 12-month contract. If you receive official residency or stay longer than 183 days, your Russian tax liability can be reduced to 13% and any overpayment in the interim period is recouped.
In some cases non-residents may be exempt from the Russian tax rate of 30% if granted migration status as a highly qualified specialist. In such circumstances earnings are taxed in Russia at the typical rate of 13%.
If you wish to file for deductions, they only apply to earnings subject to the 13% Russian tax rate. They are not applicable to taxes paid at any other rate. Declarations for tax deductions can be filed at anytime throughout the year.
Paying Russian taxes
There are several ways to file a tax return in Russia. The easiest method is online, although there are also options to pay personally at the Russian tax office or through a Russian bank account. You can also use an authorized company and pay an administration fee.
You should keep copies of the payment documents and any other tax related documents for up to four years. Also, after submitting a tax declaration, the taxpayer can contact the Russian tax authority to check there are is additional tax, fee or fine owed.
You may be required to attach the following documents to your Russian tax declaration:
- copy of your passport;
- employer certificate for employee income received outside the RF, which must indicate the specific date of each payment;
- a notarized power of attorney if an individual is submitting the declaration through a legally authorized representative;
- all support documentation for deductions, if claimed.
Russian VAT (Value Added Tax) is paid when purchasing services or goods at a benchmark rate of 20%. There is a lowered VAT in Russia on certain things such as food, shoes, some medical items and children’s clothes, set a 10%, while certain necessity items incur zero Russian VAT.
Russian VAT is also charged on imports but not typically exports.
It should be noted that the price you see on goods always has a Russian VAT included. Foreigners have to pay VAT in Russian on all procurements and cannot be returned if living in Russia, but it is possible for visitors.
Russian capital gains tax
Capital profits for non-residents in Russia are taxed at a flat rate of 20%. Taxable profits are the gross income or selling price without prior subtractions for purchase costs or other expenses.
Taxes in Russia on rental income
Rental income gained by residents is taxed at 13%, while non-residents are subject to a tax rate of 30%, which is typically withdrawn at the source. If it is received by an international legal entity which does not have a permanent organization in Russia, you are also subject to holding income tax on gross rentals at 30%.
Russian property tax
Russian property tax is paid by the owners at a maximum rate of 2% of the value of the property, depending on the value of the property as determined in 1 January:
- Lower then 300,000 p.: 0.1%
- 300,000–500,000 p.: 0.1 to 0.3%
- 500,000+ p.: 0.3% to 2%
Property tax in Russia is paid annually as part of your tax return application. More information on Russian property tax is explained by the Russian tax authority.
There is a slight difference when it comes to land tax in Russia. Any owner of land and a property located on it pays the Russian tax rate set by local authorities, although the rate is generally determined at 0.3% of the land value regardless of whether the land is used for housing or agricultural purposes. For land uses other than agricultural, residential or utilities infrastructure, a tax rate of 1.5% can apply. The payment process is similar to the property tax.
Corporate tax in Russia
The standard rate of Russia corporate tax is currently 20%, from which 18% goes to the regional authorities and 2% to the federal government. In exceptional circumstances, regional authorities, might reduce the rate of tax to 13.5% at their discretion. As for dividend profits, Russian companies pay 9% tax rate; if the dividend profit comes from international companies it is taxed at 15%.
In addition, international companies active in Russia and have no tax treaty agreement are taxed at 20% on royalties and interests. While organizations with an income of around 567,000 p. are taxed at 30% on social contributions, and if the profit is more an additional 10% is payable.
Individual entrepreneurs do not pay profit tax and are subject to personal income tax on their business profit.
Working as a sole trader in Russia is somewhat complex. Although you are classified as a legal entity and therefore responsible for business debts and possessions, tax liabilities can be waived. Sole traders have little contact with tax authorities.
What is important when registering a business as a sole trader, is that you obtain the appropriate Sole Proprietor License. In order to obtain such a license you must submit a notarized translation of your passport together with a temporary or permanent residency visa and pay the token state duty of 800 rubles. Read more in our guide to Russian corporate taxes.