When do taxes in Russia apply to worldwide income? Find out this and more with our guide to the Russian tax system, looking at income and corporate tax rates.
The Russian word for tax is налог (transliterated as nalog) and the current tax system is based on a code enacted and adopted in three stages, from 1998 to 2003. As of 2018, taxes in Russia account for around 11.5% of the country’s GDP following a series of reforms over the previous decade.
For expats, the starting point for determining your tax position depends on your residency status. As such, this status affects what elements of your income are subject to tax and how much you pay.
This guide offers an overview of the tax system in Russia, with sections including:
- The tax system in Russia
- Federal, regional and local taxes in Russia
- Taxes on goods and services in Russia
- Who pays taxes in Russia?
- The Russian tax system and foreign pensions
- Income tax rates in Russia
- Tax deductions in Russia
- How to file your income tax return in Russia
- Property and wealth taxes in Russia
- Inheritance and gift tax in Russia
- Corporate tax in Russia
- Import and export taxes in Russia
- Tax advice in Russia
- Useful resources
The tax system in Russia
In Russia, income tax is managed by the country’s tax authority (Federal Tax Service of Russia), which is governed by the Ministry of Finance.
The Russian tax year runs from 1 January to 31 December. You should submit tax returns to the Federal Tax Service using a form called Tax Declaration (Nalogovaya Declaration). Returns must be submitted before 30 April and the final date to pay your taxes in Russia is 15 July.
English information can be found on the Federal Tax Service’s website, though more information is available in Russian. Large corporations can apply electronically through special software that is not yet 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. On the other hand, an employee must notify the tax office via their employer within 10 days of starting employment.
Overall, taxpayers have benefited from streamlined procedures and more favorable tax rates in Russia, with a smaller tax burden. In particular, collection rates have doubled since 2011 thanks to better collection processes and closer tax monitoring at the highest levels, particularly for business, and it is generally thought that these will expand to cover a greater number of businesses – and eventually, consumers – over time.
Fines and penalties
For the most part, 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 that 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.
Federal, regional and local taxes in Russia
Russia’s Tax Code determines three levels of taxation: federal, regional and local. Currently, federal taxes include VAT, mineral extraction tax, individual income tax, unified social tax, corporate profits tax, excise taxes, special tax regimes, and several other taxes.
On the other hand, regional and local taxes in Russia focus on assets. Regional taxes include corporate property tax, vehicle tax, and gambling tax, while local taxes comprise land tax and individual property tax.
Taxes on goods and services (VAT) in Russia
Value-Added Tax (VAT) comprises the largest source of federal revenue for Russia. As of 2019, VAT is levied at the benchmark rate of 20% when purchasing goods and services. There is a lowered VAT in Russia on certain things such as food, shoes, some medical items and children’s clothes. This is 10%. On other necessary items, including education, medical items, public housing, and traditional financial products, zero Russian VAT is incurred.
Russian VAT also applies to imports but not typically exports.
Russian goods always include the VAT in the price.
Can you get a refund on VAT?
Foreigners must pay VAT in Russian on all purchases. This cannot be returned if living in Russia, but it is possible for visitors. To be eligible, you must hold a passport issued by a foreign country outside the Eurasian Economic Union (EEU – Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) and shop at selected retailers officially communicated by the Ministry for Trade.
The minimum purchase amount is RUB10000 per retailer per day at a differential refund rate as follows:
- Up to 18% on a wide variety of goods including fashion, technology, watches and jewelry, and;
- Up to 10% on other goods including food, medicine and books.
You’ll need to ask the store for a VAT check or refund form. A customs officer must then stamp this at the airport or port you depart through. The officer will ask to see your ticket, purchase receipts and may want to inspect the goods you’ve bought – these should ideally have their original tags or labels intact.
You can take your validated form to a VAT refund office or agency to get your money, either in cash or via a refund to your credit card. Several agencies have the authority to refund VAT taxes in Russia, including Premier Tax Free, Global Blue, National Operator Tax-Free and Hi Sky.
If you’re leaving Russia but traveling within the EEU, you won’t be able to claim a refund.
Who pays taxes in Russia?
Any foreigner who receives an income from a Russian source has to pay personal income taxes in Russia. If you live in the country for more than 183 days per year and have been granted a legal Russian residency permit, your tax liabilities are lower than those of non-residents.
Individual businesses such as freelancers, contractors and consultants pay personal income tax on their business income whether it arises from a Russian source or from overseas.
International corporate organizations have to pay tax at a flat rate of 20% on profits plus withholding tax.
When do Russian taxes apply?
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, they do not have to file a declaration and no taxes are due concerning income received outside Russia, even income received prior to obtaining non-resident status.
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;
- 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;
- Finally, individuals who have received gifts from private individuals who are not family members must declare their inheritance.
Double taxation and treaties
Expats residents in Russia can claim a foreign tax credit against their Russian tax liabilities if they are covered by a relevant Double Taxation Treaty (DTT). Russia has signed DTTs with more than 80 countries. The credit may not exceed the amount of tax payable in Russia.
In order to claim the tax credit, individuals will need to provide supporting documentation along with the tax declaration within three years after the reporting period.
PWC offers a list of countries with which Russia has DTTs.
As of 2018, Russia has become one of over 100 countries to implement the Automatic Exchange of Information (AEOI) system, which allows the country’s government to seek information on any bank account held anywhere by any Russian citizen or any holder of a Russian residency permit.
The aim of the AEOI and the related Common Reporting Standard (CRS) is to find and reduce or eliminate the number of people who use secretive offshore tax avoidance schemes and who fail to declare foreign income or gains in hope that the relevant tax authorities simply will not find out. As such, bank account information is automatically shared across countries. However, this affects billions across the world and the system has been implemented unevenly across the world.
In most cases, financial institutions located in countries where the CRS and AEOI are in place must inform their account holders that they will share information with the relevant authorities (such as HMRC for UK tax residents).
To find out if the CRS applies to you, and how it affects your payment of taxes in Russia, consult a qualified tax specialist. Browse Expatica’s directory for options.
Russian tax system and foreign pensions
Russia does not provide for special exemptions for foreign pension income. Therefore, tax residents are liable to pay Russian income tax on their foreign pension, although non-residents do not do so, even if the money is remitted to Russia.
Since there are no wealth and net worth taxes in Russia, no tax applies in cases where someone inherits a foreign pension or receives it by transfer. The Russian tax resident heir, however, would be subject to tax regarding income from a foreign pension scheme and potential profits of the pension vehicle.
Russia does not provide for tax relief for residents on contributions to a foreign pension scheme.
Income tax rates in Russia
In general, tax residents pay 13% on their worldwide income as income taxes in Russia, while Russian-source income is taxed at 30% for non-residents. Self-employed persons pay 4-6% on turnover. It is not possible to file joint returns when paying taxes in Russia.
Tax rates for Russian residents
Those who hold official residency in Russia pay 13% in income tax on their salary, dividend income, rental income from property, foreign exchange gains, and gains from exercising stock options. Interest on deposits in Russian banks is tax-exempt for residents within established limits (such as up to 9% of the annual interest rate for deposits in foreign currencies) but comes in at 35% over those limits. In addition, residents must also pay 35% of any advertising prizes (over a total value of RUB4,000 per year) as taxes in Russia.
If you are employed, the company you work for is responsible for registering your taxable income with the Russian tax authorities and deducting tax from your salary.
Expats who receive some of their income in benefits pay tax based on the market value of the benefit as a rule.
Tax rates for non-residents in Russia
Basically, anyone who spends less than 182 days a year in Russia is deemed a non-resident and must pay personal income taxes at the general flat rate of 30% on income generated within the Federation. Such Russian source income includes remuneration for activities and services performed in Russia regardless of the location of the paying entity, remuneration of directors of Russian companies, interest and income from property located in Russia. Dividend income from Russian companies is taxed at 15%.
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 over-payment in the interim period is recouped.
Some foreign non-residents may pay 13% of their income as taxes in Russia. This rate applies to nationals of EEU member countries working in Russia. The 13% rate also applies to nationals of other countries who are Highly Qualified Specialists. They typically have work experience, skills, or accomplishments in a specific field and receive a monthly salary of at least RUB167,000 (with certain exceptions).
PWC offers a sample income tax calculation on its website.
Russian income tax deductions
Official residents can reduce their Russian income tax bills via deductions and allowances. These are typically not available to non-residents. Therefore, deductions only apply to earnings subject to the 13% Russian tax rate. They are not applicable to taxes you pay at any other rate. You can file declarations for tax deductions at any time throughout the year.
Some examples of when deductible expenses are available include buying property in Russia, paying tuition fees, medical treatment or making payments to charity.
The main deduction from income taxes in Russia applies to children. The exemption starts from RUB1,400 for the first two children and goes up to RUB3,000 for a third and each subsequent child. It does not matter where the children live when applying for this tax deduction. However, to qualify for a deduction of child tax, you must be earning a cumulative annual income of less than RUB350,000.
Individuals may also deduct the costs of their own education in licensed institutions (within limits) and for their children’s education (up to RUB50,000 per child).
Donations to certain non-commercial organizations (from 2012) and charities are deductible from taxable income (within the limit of 25% of all income subject to 13% tax rate).
When buying property in Russia, foreign tax residents can apply for a once-in-a-lifetime tax deduction of up to RUB2,000,000, plus the amount of interest of up to RUB3,000,000.
How to file your income tax return in Russia
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 if there are additional taxes, fees, or fines 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, and;
- Finally, all support documentation for deductions, if claimed.
You can file accounting documentation and tax returns online, at a tax office or via authorized operators. Only high-earning taxpayers are able to electronically file tax returns directly to the tax authority via special software. This is not available for use by the general public or small to medium-sized businesses.
According to Russian tax laws, relevant documents for the calculation and payment of taxes should be kept for at least four years.
Self-employed income tax rates in Russia
One in five people in Russia is self-employed, and many of these do not register as entrepreneurs. As long as you are paying personal income taxes at 13%, the authorities are unlikely to bother you. Foreigners with a temporary or a permanent residence permit are eligible to register as an individual entrepreneur (индивидуальный предприниматель) or IP (ИП), in which case different tax rates apply.
As of 2019, a new experimental tax regime applies to the four regions of Moscow, Kaluga region, and the Republic of Tatarstan. Subject to certain conditions, individuals and individual entrepreneurs may switch to this special tax regime and pay tax on professional income from some independent services at rate of 4% or 6% irrespective of their tax residence status in Russia. Since January 2020, this new regime is now operational in a further 19 Russian regions.
Such IPs pay between 4-6% on their turnover as income taxes in Russia. The former rate applies when providing services to private individuals, while the higher rate is for companies. These rates only apply to entrepreneurs who earn less than RUB 2.4 million per year, above which the 13% rate comes into force.
Property and wealth taxes in Russia
Russians and foreign nationals alike do not need to pay taxes when buying real estate or other assets. A foreign national can buy an apartment, a country house, a garage, and even land (for private housing or private subsidiary farming) except in border areas, regions with special regimes, forests, nature reserves, and closed administrative areas.
Net wealth and net worth taxes are not levied in Russia.
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 than RUB300,000: 0.1%
- 300,000–500,000: 0.1 to 0.3%
- 500,000+: 0.3% to 2%
In general, you pay Russian property tax annually as part of your tax return application. You can find more information on Russian property tax at the Russian tax authority.
However, there is a slight difference when it comes to land tax rates in Russia. Any owner of land and a property located on it pays the Russian tax rate set by local authorities. This 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 that for property tax.
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 withheld at the source. If such rental income is received by an international legal entity that does not have a permanent organization in Russia, such an entity is also subject to holding income tax on gross rentals at 30%.
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.
Inheritance and gift tax rates in Russia
As of January 2006, there is no inheritance or gift tax in Russia. In case of death, heirs do not have to pay personal income tax for the deceased. Salaries owing to resident employees must be transferred to their heirs without taxes being withheld.
However, gifts of real estate, shares, and vehicles by non-family members are subject to personal income taxes in Russia of 13%, payable by the recipient. Gifts from immediate family – spouses, parents, grandparents, children, grandchildren, siblings and half-siblings – are exempt.
Gifts to non-residents are taxed at 30%.
Corporate tax rates in Russia
The benchmark rate of Russian corporate tax on profits is 20%. Companies are also taxed 9% on dividend profits. However, corporate taxes in Russia and allowable expenses vary depending on the company structure.
In the case of self-employed persons, note that individual entrepreneurs do not pay profit tax and are subject to personal income tax on their business profit.
Read more in our guide to Russian corporate tax.
Import and export tax rates in Russia
Import taxes in Russia apply to the majority of goods. The rate varies as an average between 5–20% of the customs value of goods but might even reach 45% in extreme cases. For countries that have a special “most favored nation” status, only base rates apply. Special exemptions also apply to some Commonwealth of Independent States countries.
Over 154 product lines attract export taxes in Russia, with rates that may reach 50%. They mainly concern energy products, ferrous and non-ferrous mineral ores, skins and wood.
There are no import and export taxes in Russia on specific merchandise such as transit goods, cultural valuables, humanitarian aids or personal use goods (up to 35kg and €1,500).
All goods passing through Russian customs attract processing charges at a flat rate depending on value and quantity.
As an oil producer, Russia has some of the lowest-priced fuel in the world. Taxes on petrol and diesel, however, are levied at between 55-65%, although this can vary.
There are no departure taxes in Russia. However, several other taxes and surcharges are included in the flight fee. The total amount varies depending on fluctuating oil prices and government policy. For an indication of what you can expect to pay, check out each airline’s website, as in the case of Aeroflot.
If your contract is terminated or you leave in the middle of the Russian tax year, you can file for a departure tax return at least one month before you leave the country permanently. Your personal Russian income tax should be paid during the 15 days after filing the tax return form.
Advice on tax rates in Russia
Although taxes in Russia appear straightforward, there are a number of exceptions and deductions available to resident and non-resident taxpayers alike. The tax system is fluid, and many legal requirements may not be applicable in practice thanks to additional exceptions.
There is also wide scope for interpretation. As such, it is advisable for expatriates to seek expert advice before determining the likely tax consequences and finalizing their returns.
American expats living in Russia can get help meeting their US tax obligations through Taxes For Expats.