Taxation in Russia

1. The Russian tax system includes federal, regional and local taxes. While federal taxes are payable in all Russian regions, regional and local taxes are applicable to companies registered or doing business in the relevant region and municipality.

2. The Russian tax system has undergone significant revision since 1999 when the Tax Code Part I was enacted. This law combines provisions relating to general tax principles, rights and obligations of taxpayers and tax authorities, and tax administration. Later, since 2001, the regulations on all taxes were revised and incorporated in the Tax Code Part II.

3. Through this reform the tax administration became more transparent and predictable, and the number of taxes and the overall tax burden was reduced significantly. Among the main taxes levied in the Russian Federation are: personal income tax, corporate income tax, value-added tax, excises, taxes on property and others.

4. Personal income taxis levied individually normally at 13 percent. Employers withhold income taxes, thus the taxpayers whose only taxable income was paid by employer do not need to file a tax return – except to claim a refund for itemized deductions. The most important deductions are for home purchase (once a life), education and medical expenses. Deductions require documentation and are subject to limitations.

5. Income of Russian companies is taxed with a corporate income tax. Collections from this tax are allocated between federal and regional budgets. Russian companies complying with certain requirements may opt for special tax regimes by paying the following taxes (instead of corporate income tax, VAT, unified social tax and property tax): unified tax under a simplified taxation system – applicable to small companies held by more than 75 percent by individuals; or unified agricultural tax – applicable to agricultural producers.

6. The main indirect tax is a value-added tax or VAT. The standard VAT rate is 18 percent. A reduced rate of 10 percent applies to certain types of food-stuffs, children’s goods and medical goods. There are also cases of VAT exemptions which are established for certain types of transactions and activities. For example, income earned from rendering medical services and sale of medical goods, banking and insurance activities are exempted from value-added tax. Russia also applies excise tax on alcohol and alcoholic products, tobacco and cigarettes, cars and petrol.

7. Taxes on property include land tax, property tax and transportation tax. Owners of land are subject to a land tax assessed on the cadastre value of the land plot, at rates established by the municipal authorities. The property tax is payable for fixed assets (except for land). This tax is assessed at rates established by regional legislative bodies. The transportation tax is levied at tax rates varying depending on the type of transport.

Notes:

personal income tax – подоходный налог с физических лиц

corporate income tax – налог на доход корпорации

value-added tax (VAT) – налог на добавленную стоимость (НДС)

excise – акциз

taxes on property (= property tax)- налог на доход с недвижимого имущества

to withhold taxes – удерживать налоги

tax return – налоговая декларация

itemized deductions – детализированные вычеты

tax exemption – освобождение от налога

fixed assets – основные средства, основной капитал