Answers to Common Questions About Business Taxation in the Russian Federation
It is not unusual to have numerous questions about moving or expanding a business to Russia. Here, you will find answers to many common questions and information about how to get help with concerns that more specific to your unique business.
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What is the tax on dividend income?
Dividends received by Russian legal entities from Russian or foreign legal entities are taxed in Russia at a 13% flat rate. Tax on dividends from abroad withheld in the source country may be credited against Russian tax.
The standard 15% tax rate is applicable to dividends paid by Russian legal entities to foreign legal entities. The tax should be withheld by the Russian legal entity paying dividends. The tax may be reduced based on a relevant DTT, usually to 10% or even 5%.
What are the social contributions in Russia?
Annual salaries of all employees are taxed under the following rules (effective 2015):
- Contributions to the Social Insurance Fund: only the first RUB 670,000 is taxed (at a rate of 2.9%);
- Contributions to the Pension Fund: the first RUB 711,000 is taxed at 22%, and the excess is taxed at 10%;
- Contributions to the Medical Insurance Fund: a 5.1% rate applies to the total salary.
Remuneration of foreign nationals temporarily staying in Russia is covered by (1) pension insurance contributions at a rate of 22% within the threshold of RUB 711,000 and a 10% top-up charge on remuneration paid in excess of the threshold; and (2) social insurance contributions at a rate of 1.8% within the threshold of RUB 670,000. The only exception made is for highly qualified specialists (with a respective work permit).
What is the profits tax rate in Russia?
The maximum profits tax rate for all taxpayers in the Russian Federation is set at 20% (2% is paid to the federal budget and 18% is paid to the budgets of constituent regions). The amount payable to the budgets of constituent regions may be reduced by the regions. Russian legal entities pay tax on their worldwide income. Foreign legal entities pay tax on Russia-source income derived through a PE (at 20%) and are also subject to withholding tax (WHT) on income from Russian sources not related to a PE (at rates varying from 10% to 20%, depending on the type of income and the method used to calculate it).