Russia’s tax system has undergone significant reforms in recent years, affecting how foreign businesses operate. Understanding key taxes—such as VAT, corporate profit tax, and compliance rules—is essential to avoiding penalties and optimizing financial efficiency.
This guide breaks down the Russian tax system for foreign-owned companies, including rates, filing requirements, and strategic considerations.
1. Overview of Russia’s Tax System
Russia operates a territorial tax system, meaning companies pay taxes on income earned within the country. Key taxes for foreign businesses include:
- Corporate Profit Tax (20%)
- Value-Added Tax (VAT) (20%, with some exemptions)
- Withholding Tax (15% on dividends, interest, royalties)
- Personal Income Tax (PIT) (13-30% for employees)
- Social Insurance Contributions (~30% of payroll)
Note: Russia has Double Taxation Treaties (DTTs) with over 80 countries, which may reduce tax liabilities.
2. Corporate Profit Tax (Налог на прибыль)
Standard Rate:
- 20% (17% federal + 3% regional, though regions may lower their portion to 12.5% for investment incentives).
Taxable Income Calculation:
- Revenue – Allowable Deductions (salaries, rent, depreciation, etc.) = Taxable Profit
- Losses can be carried forward for up to 10 years (but not back).
Special Cases:
- Small businesses (revenue < ₽60M/year) may qualify for simplified taxation (6% on revenue or 15% on profit).
- Oil & gas companies face higher taxes (e.g., Mineral Extraction Tax, MET).
Compliance Requirement:
- Quarterly advance payments + annual tax return (due March 28).
3. Value-Added Tax (VAT / НДС)
Standard Rate: 20% (applies to most goods/services).
Reduced Rate: 10% (for food, medicine, children’s products, books).
0% VAT for:
- Exports
- International transportation
- Certain high-tech services
VAT Registration:
- Mandatory if annual revenue exceeds ₽2 million (or voluntarily).
- Foreign e-commerce firms must register if selling digital services to Russian customers.
VAT Refunds:
- Possible for exporters but requires thorough documentation.
4. Withholding Tax (WHT)
Applies to payments to foreign entities:
| Payment Type | Standard Rate | DTT Rate (if applicable) |
|---|---|---|
| Dividends | 15% | Often 5-10% |
| Interest | 20% | 0-15% |
| Royalties | 20% | 0-15% |
Key Point: Check Russia’s DTT with your home country to reduce WHT.
5. Personal Income Tax (PIT / НДФЛ)
- 13% for tax residents (spending 183+ days/year in Russia).
- 15-30% for non-residents (e.g., short-term expats).
Employer Responsibilities:
- Withhold PIT from salaries.
- File monthly reports (6-NDFL) and annual declarations.
6. Social Insurance Contributions
- Paid by employers (not employees):
- Pension Fund (22%)
- Social Insurance (2.9%)
- Medical Insurance (5.1%)
- Total: ~30% of gross salary (capped at ₽2.1M/year for pensions).
Note: Self-employed individuals pay fixed contributions.
7. Compliance & Reporting Deadlines
| Tax Type | Filing Deadline | Payment Deadline |
|---|---|---|
| Corporate Profit Tax | March 28 (annual) | Quarterly advances |
| VAT | 25th of next month (quarterly) | Same as filing |
| 6-NDFL (PIT) | Last day of next month (monthly) | Same as filing |
| Financial Statements | March 31 (annual) | – |
Penalties for Late Filing:
- 5-30% of unpaid tax + daily fines (₽1,000+ per delay).
8. Tax Incentives & Special Economic Zones (SEZs)
Russia offers incentives to attract foreign investment:
- SEZs (e.g., Skolkovo, Vladivostok Free Port) – 0-10% profit tax, VAT exemptions.
- IT Companies – 3% profit tax (instead of 20%).
- R&D Tax Breaks – Up to 150% deduction on research expenses.
9. Key Challenges for Foreign Businesses
1. Complex VAT Refunds
- Exporters must provide detailed customs documentation.
- Solution: Work with a local tax advisor.
2. Currency Controls
- Large foreign transactions (>$1M) require Central Bank reporting.
- Solution: Use Russian banks for local operations.
3. Sanctions & Banking Restrictions
- Some foreign banks avoid Russian transactions.
- Solution: Partner with non-sanctioned banks (e.g., in China, UAE).
4. Transfer Pricing Risks
- Transactions with foreign affiliates must follow arm’s length rules.
- Solution: Prepare transfer pricing documentation.
10. Conclusion & Recommendations
To minimize tax risks and maximize efficiency in Russia:
✅ Register for VAT if revenue exceeds ₽2M/year.
✅ Use Double Taxation Treaties to reduce withholding taxes.
✅ Explore tax incentives (SEZs, IT benefits).
✅ Hire a local accountant to handle compliance.
Next Steps:
- Consult a Russian tax advisor for tailored planning.
- Review applicable DTTs to optimize cross-border taxes.