Taxation in Moscow, Russia
What are the tax rates in Moscow, Russia? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Moscow, Russia.
Personal taxation in Moscow
Effective personal income tax rate
| Annual income | $25,000 | $40,000 | $80,000 | $125,000 | $200,000 |
|---|---|---|---|---|---|
| Rate | 13% | 13% | 13% | 13% | 13% |
Teleport city rankings for personal income tax
Personal taxation puts Moscow in position 27 of all Teleport Cities.
Basis
Russian residents are taxed on their worldwide income. Nonresidents are taxed only on Russian-source income.
Residence
An individual is resident if he/she spends 183 days or more in Russia during a calendar year. Presence of 183 days or more in Russia in a calendar year is taken into account for final tax status purposes.
Filing status
Each individual must file a tax return; joint filing or assessment for spouses is not permitted.
Rates
A flat rate of 13% applies to Russian residents on most types of income, and a 30% rate applies to Russian-source income of nonresidents, unless the rate is reduced under a tax treaty.
Taxable income
Taxable income consists of any receipt (in cash or in kind) by an individual, or that is subject to an individual’s discretionary disposal, subject to certain exceptions. Profits earned from self-employment activities generally are taxed in the same way as profits derived by companies.
Capital gains
Income derived from the sale of shares in the capital of a Russian company, unlisted stock in a Russian company or listed stock in a high-technology Russian company where the shares are acquired after 1 January 2011 and held for more than five years, is exempt. Gains from the sale of other types of property, except for immovable property, by Russian residents is exempt after a three- year holding period. A five-year holding period applies to immovable property that is acquired as from 1 January 2016 (see “Deductions and allowances” below).
Other taxes on individuals
Real property tax
Tax is imposed at rates ranging from 0.1% to 2% of the cadastral value annually or the total inventory value, adjusted by a “deflator” coefficient.
Social security
Only a self-employed individual must contribute to social security since contributions are borne by the employer.
Compliance for individuals
Penalties
Penalties apply for noncompliance. No extensions are available.
Filing and payment
Tax on employment income is withheld by the employer and remitted to the tax authorities. In certain cases, individuals should report their income by filing a tax return no later than 30 April following the year of assessment, with any tax outstanding paid by 15 July.
Corporate taxation in Moscow
Teleport city rankings for corporate income tax
Corporate taxation puts Moscow in position 180 of all Teleport Cities.
Basis
Russian tax resident entities are taxed on worldwide income; foreign entities are taxed on income from commercial activities undertaken in Russia and on passive income from Russian sources.
Taxation of dividends
Dividends received by a Russian entity from Russian and foreign entities generally are subject to tax at a rate of 13% (but see under “Participation exemption,” below.)
Residence
An entity is a Russian resident if it is incorporated in Russia, if its actual place of management is in Russia or if it is deemed to be a Russian resident under a tax treaty.
Losses
Losses may be carried forward for 10 years (except for losses derived from activities subject to a 0% profits tax rate). The carryback of losses is not permitted.
Incentives
Various types of tax incentives are available in Russia. For example, a reduction in the profits tax rate (to 0%, in certain cases), along with other benefits, is available for investment projects in many regions. Certain tax preferences (e.g. a reduction of the federal profits tax rate) are granted to residents of territories of advanced social and economic growth. Companies that participate in the Skolkovo Innovation Center may benefit from a 10-year tax holiday. Technology and software companies may benefit from reduced social security rates. A 0% profits tax rate applies to certain educational and medical services. A 150% deduction for profits tax purposes is available to all companies with qualifying R&D expenditure.
Participation exemption
Dividends received from other companies will be exempt from tax if the following requirements are met: the Russian company holds at least 50% of the payer company for at least 365 days in a calendar year. Where the dividends are paid by a foreign subsidiary, it must not be a resident in a "black list" jurisdiction.
Foreign tax credit
Foreign tax paid may be credited against Russian tax on the same profits, but the credit is limited to the amount of Russian tax payable on the foreign income.
Taxable income
Profits tax is imposed on a company's profits, which consist of business/trading income, capital gains and passive income. Normal business expenses may be deducted in calculating profits, provided they are economically justified, incurred in the generation of income and substantiated by adequate documentation.
Capital gains
Capital gains are taxed as ordinary income at the normal corporate rate (but see under “Participation exemption,” below.)
Other taxes on corporations
Real property tax
See under “Other,” below.
Social security
The employer is required to make pay-related contributions to pension, social and medical insurance funds. The rates of the social security contributions for 2016 are as follows: for pension contributions, the rate is 22% of an employee’s remuneration up to RUB 796,000, plus 10% of any excess over this cap; for social insurance contributions, the rate is 2.9% of an employee’s remuneration up to RUB 718,000 (the rate is 1.8% of an employee’s remuneration in the case of foreign nationals staying temporarily in Russia); and for medical insurance, the rate is 5.1% of the full amount of remuneration.
Other
Property tax is a regional tax imposed under local legislation. The maximum rate is up to 2.2% where the tax base is calculated as the depreciated book value, and up to 1.5% where the tax base is calculated as the cadastral value. The tax base includes immovable fixed assets and certain movable fixed assets owned by the taxpayer, excluding land (which is subject to land tax) and movable property booked as fixed assets from 2013. The tax base generally is calculated based on the depreciated book value of the assets as of the balance sheet date. For certain types of administrative, business and trading premises (e.g. real estate owned by foreign companies and not allocated to a permanent establishment in Russia and dwelling houses and premises that are not booked as fixed assets for accounting purposes), the tax base is estimated as the cadastral value of the real estate.
Stamp duty
Stamp duty may be levied on certain transactions and documents, but it usually is nominal.
Compliance for corporations
Consolidated returns
Russian companies forming a group with 90% (or more) direct or indirect ownership may file a consolidated tax return for the preceding calendar year if tax payments totalled exceeded RUB 10 billion and revenue and assets exceeded RUB 100 billion and RUB 300 billion, respectively, calculated according to Russian accounting standards.
Penalties
Penalties generally are 20% of the relevant tax (or 40% if the default is intentional), plus late payment interest and fixed penalties. Criminal sanctions also may apply.
Rulings
Rulings generally are not granted, but an advance pricing agreement may be obtained under the transfer pricing rules.
Filing requirements
The annual profits tax return must be filed by 28 March following the close of the previous tax year.
Other taxation in Moscow
Value added tax
Filing and payment
The general VAT return is filed on a quarterly basis. Payments are made in three equal monthly installments and
Rates
The standard VAT rate is 18%; reduced rates of 10% and 0% may apply in certain circumstances.
Taxable transactions
VAT is levied on the sale of goods, the provision of services deemed to be supplied in the Russian territory, the transfer of property rights and the import of goods.
Registration
A foreign entity cannot register for VAT purposes only; the general tax registration is applicable for all taxes.
Anti-avoidance rules
Controlled foreign companies
A Russian (corporation or individual) is taxed on the undistributed profits of a controlled foreign corporation (CFC) at a rate of 20% for corporations or 13% for individuals. The CFC provisions are applicable where an entity or an individual that is considered a Russian tax resident has an interest of more than 25% (10%, if more than 50% is owned, directly or indirectly, by Russian tax residents) in a nonresident entity.
Disclosure requirements
Certain information must be disclosed to the tax agent on persons exercising rights to certain securities issued by Russian entities and accounted for in the depositary account of a foreign nominee holder (including certain types of shares and bonds), foreign authorized holder or depositary program. This information may be made available to the tax authorities in some cases. Where the information is not disclosed, a 30% withholding tax may be applied to the income derived from such securities (except dividends).
Transfer pricing
Comprehensive transfer pricing provisions, which are substantially in line with OECD principles, apply. The rules include detailed documentation requirements and allow for the possibility of obtaining an advance pricing agreement.
Withholding tax
Dividends
Dividends paid to a foreign entity or to a nonresident individual are subject to a 15% withholding tax, unless the rate is reduced under a tax treaty.
Other
Other Russia-source payments made to a foreign company may be subject to withholding tax at various rates.
Interest
Interest paid to a nonresident is subject to a 20% withholding tax, unless the rate is reduced under a tax treaty. In
Royalties
Royalties paid to a nonresident are subject to a 20% withholding tax, unless the rate is reduced under a tax treaty.
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