8. Tax system

General

Recent developments
The most important amendments to taxation laws over the last three years include:
· Withholding 15% tax on intragroup works and services was introduced.
· Transfer pricing control was tightened, especially for cross-border transactions.
· Safe harbour loan interest ranges were adjusted.
· Special rules of taxation of remote workers were introduced.
· Significant tax benefits under corporate profits tax and insurance contributions were elaborated for accredited IT companies and developers of electronic components (provided they satisfy certain criteria).
· A progressive personal income tax scale for income received by Russian residents has been introduced.
· Unified tax account was introduced.
A number of developments over the past few years (both at the legislative level and in terms of tax authorities practice ) may be viewed as having negatively affected the tax climate for corporate taxpayers:
· Russia temporarily suspended tax treaties with “unfriendly” countries. Several treaties were terminated, while several new treaties were concluded.
· Various “black” and “white” lists of jurisdictions, which prevent or allow the application of certain benefits and strengthen control over operations involving these jurisdictions, were adjusted.
· Administrative and court tax practice has become more effective. Tax control mostly shifted to pre-emptive stage, once an audit is initiated, it will almost certainly result in accruals with little chance to successfully contest them in court.
· The tax authorities continue to conduct pricing audits primarily in relation to taxpayers engaged in foreign trade transactions.
· The tax authorities expand the practice recognising insufficiently documented and substantiated transactions as void, annulling tax benefits.
Core legal framework
Part I of the Tax Code has been in force since 1 January 1999; and Part II of the Tax Code has been in force since 1 January 2001. In this chapter, we provide an outline of the following aspects:
· Corporate taxation;
· Taxation of individuals;
· Special tax regimes;
· Tax incentives; and
· Double taxation treaties (DTTs).

Corporate taxation

Corporate profits tax
Taxpayers
Taxpayers are defined as:
· Russian companies that pay tax on their worldwide income; and
· Foreign companies that conduct business in Russia through a permanent establishment and/or receive income from a Russian source.
Permanent establishments
Scope
The Tax Code defines a PE as a representative office, branch, division or any other separate fixed place of activity in Russia through which a foreign company regularly engages in certain business activities (as specified in the Tax Code).
If a foreign company does not have a permanent establishment, it is not subject to Russian profits tax. Any Russian-sourced income (interest, dividends, royalties, etc.) will subsequently be subject to withholding tax.
If a foreign company conducts any of the activities specified in the Tax Code through a dependent agent who represents the company and acts on its behalf, it may also be considered as having a permanent establishment in Russia.
Consequences
As a general rule, a foreign company has the right to allocate expenses to its Russian permanent establishment, but only direct expenses of the PE incurred in Russia. Deduction of other expenses is possible only if there is an active DTT between Russia and the respective country; and the possibility of this allocation is provided for in that DTT.
Definition of tax residency
Foreign companies may be deemed Russian tax residents if certain “key” and “auxiliary” criteria are met.
The key criteria are as follows:
· The activities of the executive body of the legal entity are regularly exercised in Russia, and more extensively than in any other country; and
· Key corporate officials of the legal entity perform their daily management activities in Russia.
Auxiliary criteria apply by default when it is impossible to recognise a foreign company as a tax resident using the key criteria above. The list of auxiliary criteria notably includes the preparation of accounting and financial statements, as well as operational personnel management and record keeping in Russia.
Tax base
The tax base is the total income received by the taxpayer minus income exempted from taxation and expenses, as defined by the Tax Code.
The types of income that are exempt from profits tax include, by way of example:
· Income in the form of property or property rights received by the Russian company from a shareholder (based in a state other than a low-tax jurisdiction included in the Russian Ministry of Finance’s blacklist), a subsidiary or an individual, if the recipient or the transferor holds 50% or more of the capital of the other party, and the property or property rights received (excluding money) are not disposed of within one year from the date of receipt;
· Income gained from revaluation of fixed assets and securities;
· Income in the form of property received as a contribution to a company’s charter capital; and
· The difference between the nominal value of shares and the value of shares gained by a shareholder as a result of an increase in share capital.
Deductibility of expenses
Expenses are generally recognised on an accrual basis. They are deductible for profits tax purposes if they are related to the taxpayer’s income and if they are economically justified and evidenced by the requisite documentation. The tax authorities are stringent in their application of these criteria.
The law specifies certain non-deductible expenses, such as:
· The cost of assets transferred free-of-charge;
· Any penalty payments made to the budget; and
· Any employee remuneration not provided for in the relevant labour regulations.
Some types of expenses are subject to limitations on tax deductibility:
· Representative expenses: up to 4% of payroll;
· Certain types of advertising expenses: up to 1% of revenues;
· Pension and life insurance for employees: 12% of payroll;
· Medical insurance for employees: 6% of payroll; and
· With respect to interest on loans and other borrowings:
If the interest rate under a controlled loan is outside the below parameters, it must meet the requirements of the transfer pricing rules. From 1 January 2024, the parameters are as follows:
— for loans in roubles, from 10% to 150% of the CBR key rate (at least 2%);
— Euro – from 1% to €STR + 7%;
— CNY – from 1% to SHIBOR + 7%;
— GBP – from 1% to SONIA + 7%;
— CHF – from 1% to SARON +5%;
— JPY – from 1% to TONAR + 5%;
— other currencies – from 1% to SOFR in USD+ 7%.
Interest is also subject to thin capitalisation rules, with the applicable debt-to-equity ratio being equal to 3:1 (12.5:1 for banks and leasing companies).
Controlled debt is calculated with reference to Russian taxpayers’ aggregate debt obligations to foreign related parties (or to Russian companies which are related parties of foreign companies).
Certain DTTs with Russia may provide for exemptions from the deductibility limitations set forth by Russian legislation for specific types of expenses under certain conditions.
Depreciation
Depreciation should be calculated separately for each depreciable asset depending on the depreciation group it is classified as. The method applied should be clearly explained in the taxpayer’s accounting policy. Once chosen, the accounting method cannot be modified more than once in five years from the beginning of the financial year (1 January to 31 December).
Two depreciation methods are available for profits tax purposes:
· The straight-line method; and
· The reducing balance method.
Depreciable property includes fixed and intangible assets with a useful life of at least one year and an initial value exceeding RUB 100,000.
The useful life of depreciable fixed assets is determined, within certain limits, based on a classification adopted by the Russian Government. For intangible assets, the useful life is the utilisation period defined by any agreement (with a default provision of ten years). The tax base for a fixed asset includes all costs incurred in order to place the asset in service for production. Accelerated depreciation is permitted in cases stipulated by the Tax Code (e.g. for leased property under financial lease).
Losses
Losses can be carried forward and offset against future taxable profits, with the exception of some specific cases, such as those arising under partnership agreements, or certain types of reorganisation in Russia.
From 2017 until 2030 inclusive, offsetting losses from previous periods is temporarily restricted in terms of the amounts of losses to be carried forward. As a result of such a restriction, the tax base may not be reduced by no more than 50% of the losses incurred in previous years.
Losses from the sale of fixed assets are recognised evenly over the remaining useful life of the assets.
If losses relate to different tax periods, they should be carried forward consistently according to the order in which they were incurred.
Tax rate
The general profits tax rate is 25%, where currently 8% of the tax is payable to the federal budget, and the remaining 17% – to the appropriate regional budget of the region where the company is incorporated.
In some cases, reduced tax rates apply. By way of example:
· A 0% profits tax rate applies to companies (domestic and foreign) transferring participatory interests or shares in companies (domestic and foreign), provided that the following conditions are met:
— the equity interest was held for at least five years;
— the Russian subsidiary’s immovable property located in Russia does not represent more than 50% of the company’s assets (subject to certain very limited exceptions); or
— the foreign subsidiary is located in a state other than a low-tax jurisdiction included in the Russian Ministry of Finance’s blacklist.
· Russian accredited IT companies (when satisfying certain criteria) are entitled to apply a 5% tax rate in 2025 – 2030.
· Russian accredited developers of electronic components, meeting additional criteria, are entitled to benefit from a substantially reduced profits tax rate of 8%.
· Similarly, organisations carrying out special types of socially useful activities such as medical and educational services may benefit from a 0% tax rate in relation to their operational profit, provided that certain requirements are met.

Taxation of dividends

Dividends received by Russian companies
Any income from participation in foreign subsidiaries received by a Russian parent company, irrespective of its legal qualification and taxation in the state of the foreign subsidiary, will be treated and taxed as dividends in Russia (such as, for example, income received by a Russian shareholder upon its exit or liquidation of the foreign shareholder), save for the payment for additional shares placed among shareholders or participants.
Dividends received by a Russian company from another Russian company or from a foreign company are taxed at a flat rate of 13%.
Dividends received by a Russian company are taxed at 0% if:
· The recipient of the dividends owns at least 50% of the payer’s capital, or owns depository receipts entitling it to receive at least 50% of the amount paid in dividends; and
· The share or depository receipts have been owned for at least 365 days on the date dividends are declared.
Dividends from companies residing in low-tax jurisdictions may not be exempt from Russian corporate profits tax. These jurisdictions are identified in an official list updated by the Russian Ministry of Finance.
In addition, the following operations are exempt from taxation at the shareholder level:
· Voluntary reduction of a company’s charter capital; or
· Repayment by the company of contributions made by shareholders to the company’s assets.
Dividends paid by Russian companies
The standard 15% tax rate is applicable to dividends paid by Russian companies to foreign companies. The tax should be withheld by the Russian companies paying the dividends.
If there is an applicable DTT, then the standard tax rate may be reduced to a minimum rate of 5% under certain conditions.
Funds distributed by Russian companies to their foreign shareholders upon the company’s liquidation or a shareholder’s exit should be qualified as dividends if the amount distributed exceeds the amount previously contributed (either in the form of share capital contributions or as monetary contribution to the property).
Tax monitoring
Major corporate taxpayers can be subject to the tax monitoring system, which is a special real-time reporting by way of integration of the accounting system with the tax authority replacing “classic” audits. It allows the taxpayer to make preliminary assessment of tax risks and receive mutually binding preliminary opinions.
Transfer pricing
The Tax Code contains a specific section dedicated to transfer pricing principles, the tax supervision of transactions between related parties and advance pricing agreements.
Controlled transactions
The list of controlled transactions under the Russian transfer pricing rules includes, among other things, cross-border related-party transactions with a value exceeding RUB 120m and certain domestic transactions exceeding RUB 1bn.
The list of related parties is relatively extensive. In general, related parties are identified when “the specifics of relations between them may affect the conditions and/or results of the transactions entered into by such parties, and/or the financial results of their activities or the activities of parties that they represent”.
Methods
Russian legislation provides for the following five transfer pricing methods generally in line with the OECD Transfer Pricing Guidelines:
· Comparable uncontrolled price method (CUP), which has priority;
· Resale minus method;
· Cost plus method;
· Comparable profitability method; and
· Profit split method (treated as the “last resort” method).
The methods are applied sequentially. Each taxpayer can select the method it wishes to apply (and may even choose to use a combination of methods, or another method not expressly provided for by the Tax Code), provided it documents the reasons for this choice.
Advance pricing agreements
Major taxpayers in Russia may enter into advance pricing agreements with the Russian Federal Tax Service. This type of agreement allows minimising tax risks related to the chosen transfer pricing methodology in controlled cross-border transactions. Advance pricing agreements replace the annual obligation for taxpayers to file special transfer pricing documentation and can be concluded for a period from three to five years.
Reporting and documentation requirements
Taxpayers are subject to an overall responsibility to prepare documentation justifying the prices applied in all transactions specified as controlled. Upon request from the tax authorities (which may be submitted from 1 June of the year following the year of the controlled transaction), taxpayers must submit the requested documentation.
In addition, companies are obliged on a yearly basis no later than 20 May to notify their local tax inspectorates of all controlled transactions concluded between the same related parties during the previous calendar year. The notifications should contain general information on (i) the subject matter of the controlled transactions; (ii) the parties involved; (iii) the transfer pricing methods applied in the definition of prices; and (iv) the amount of profits received and expenses incurred as a result of these transactions.
Moreover, multinational groups of companies (“MGCs”) must prepare and provide “country reporting”. The content of the reporting is in line with the OECD principles for “three-tier documentation systems”.
Country reporting consists of the following types of reporting:
· Notification of participation in an MGC;
· Country report (which corresponds to “CbCR” under OECD principles);
· Global documentation (which corresponds to a “master file” under OECD principles);
· National documentation (which corresponds to a “local file” under OECD principles).
Certain Russian taxpayers may be wholly or partly exempt from the reporting requirements if such obligations are met by other members of the relevant MGC, or if the MGC’s revenue is lower than the established threshold.

CFCs

Definition of CFCs
The CFCs are defined as foreign companies and structures that meet the following participation criterion: any foreign company or unincorporated structure (such as trusts, funds, etc.) which has a 25% participation interest owned by Russian tax residents (although the participation threshold is limited to 10% if other Russian residents also participate in the foreign company (or structure), and the total participation of all these Russian residents exceeds 50%).
At the same time, the profits of certain categories of CFCs stipulated by the Tax Code are exempt from taxation in Russia. These include, for example, non-commercial organisations, active companies, residents of the Eurasian Economic Union, companies subject to high effective tax rates.
Requirements
The law imposes two key requirements on Russian taxpayers who participate in CFCs and/or foreign companies: (i) notification requirements; and (ii) the obligation to pay taxes on the undistributed profits of the CFC.
In terms of the notification requirement, controlling Russian taxpayers must submit notifications setting out:
· The details of the CFCs they control, to be provided on an annual basis (no later than 20 March (or 30 April for individuals) of the year following the tax period in which the taxpayer accounts for the share of profit of the CFC. This accounting occurs one year after the year in which the profits were received; and
· The taxpayer’s participation interest in any foreign companies or structures other than CFCs, but only if such interest exceeds 10%. This accounting must be submitted within three months from the date on which the 10%participation threshold is exceeded.

VAT

Taxpayers
VAT applies in particular to companies, including those importing goods into Russia.
If the taxpayer’s aggregated income for three consecutive months, excluding VAT, is below RUB 2m, the taxpayer may be exempt if it applies for the exemption.
Tax base
The following operations are subject to VAT (even if they are supplied free of charge):
· Sale of goods, works and services within Russia;
· Aircraft services rendered at Russian airports and airspace;
· Sale of e-services in Russia if provided by foreign companies with no presence in Russia (the so-called “Google tax”);
· Transfer of goods, works and services within Russia for the taxpayer’s own purposes, if the relevant expenses are not deducted for the purpose of corporate profits tax;
· Construction and building projects for the taxpayer’s own use; and
· Imports into Russia.
The taxable base is generally defined as the market value of the goods, works and services supplied, inclusive of excise duties but exclusive of VAT.
If the goods, works and services are supplied free of charge, an imputed price (set at the market value for identical goods, works or services, exclusive of VAT) is used.
Exempt supplies
Certain activities, including the following, are exempt from VAT:
· The assignment of loan agreements;
· Operations with securities and derivative financial instruments;
· Certain banking transactions;
· The issuance of guarantees by non-banking entities;
· Transactions with certain medical equipment and medical services;
· Certain research and development services;
· The transfer of a range of other rights under licence agreements, including exclusive and non-exclusive rights to inventions, know-how, and software and databases which are listed in national registries (unless software is used for advertising on the internet and/or gaining access to such information, posting offers for purchase/sale of goods, works or services, or searching for information about potential buyers/sellers and/or concluding transactions));
· Imports of technological equipment that does not have a Russian equivalent (as per a list approved by the Russian Government).
Tax rates
The standard VAT rate is 22%. A reduced rate of 10% applies to books, periodicals, medical goods, certain foods and children’s clothes. A 0% rate is applicable to the following operations:
· Export of goods from Russia (subject to document confirmation);
· International transportation;
· Works and services related to the transportation of goods in transit; etc.
Input VAT
The VAT payable to the tax authorities is the difference between the VAT accountable for transactions subject to VAT (“output VAT”) and the VAT incurred on purchases subject to VAT (“input VAT”).
Input VAT is only recoverable in certain cases. Recovery no longer depends on whether it has been paid to the supplier. VAT on imports can be recovered only after payment is made to the customs authorities.
Any VAT incurred on purchases and expenses which relate to activities, both subject to and not subject to VAT, must be apportioned. Only the part which is deemed to relate to activities subject to VAT may be offset as input VAT.
Any excess of input VAT over output VAT has to be refunded to the taxpayer. As a general rule, such a refund can only be made after the tax authorities have undertaken an audit. However, an accelerated VAT recovery procedure is also possible. Under this procedure, a taxpayer may recover VAT before the tax authorities complete the tax audit and have made a definitive decision on VAT recovery. According to these rules, companies which have existed for at least three years and paid taxes exceeding RUB 2bn over the last three years are eligible for the accelerated procedure, without having to provide a bank guarantee. All taxpayers not under reorganisation, liquidation or bankruptcy may apply a simplified procedure in 2022 – 2026 tax years within the amount of taxes paid during the previous calendar year.
VAT invoices serve as the basis for the offset of input VAT. They have to be issued in Russian and must contain the information specified in the Tax Code.
Reverse charge
If a foreign company which does not have a Russian tax registration supplies goods, works or services in Russia, VAT is collected through a withholding mechanism. The tax-registered buyer is required to withhold VAT from the amount payable to the foreign seller and to remit it to the Russian authorities. The tax-registered buyer may then offset the VAT which has been withheld and paid, as input VAT.
Agents or commission agents with a Russian tax registration are considered to be tax agents in relation to goods supplied on behalf of non-registered foreign companies.
Withholding mechanisms are not available for the supply of electronic services to Russian clients in respect of B2C operations. Foreign providers of such services need to register with the Russian tax authorities, file VAT reports and pay VAT to the Russian budget.
Filing and payment
VAT is calculated on the earlier of the following two dates:
· The date of shipment or transfer of goods, works or services; or
· The date of payment (in full or in part) for a future shipment or transfer of goods, works or services.
Advance payments are included in the VAT base at the time payment is received.
Taxpayers must file their VAT declarations on a quarterly basis. VAT returns must be filed within 25 days after the end of the tax period (quarter).
Taxpayers pay VAT in three instalments, in the three months following the relevant quarter, except for specific cases, such as payment of VAT by a tax agent. All VAT taxpayers, irrespective of the number of staff, must file VAT tax returns electronically. This obligation also applies to branches and representative offices of foreign legal entities registered in Russia.

Excise duties

Excise duties must be paid¹ by producers and/or importers of excisable products. Excisable products include, for example, oil products, alcohol, tobacco and cars.
Excise duties are generally levied on the value of the product.

¹ Please see the Customs section.

Corporate property tax

Property tax is payable in accordance with regional regulations and the Tax Code.
Taxpayers
Generally, Russian and foreign companies (with or without PE) owning immovable assets (excluding land and other natural objects) in Russia are recognised as taxpayers.
Tax base
The tax base for most assets is the average annual residual value of taxable property for financial reporting purposes. The cadastral value is used to calculate the corporate property tax base for the following types of property:
· Business centres, shopping centres and premises in these buildings;
· Non-residential premises used as offices, shops or to provide catering services or services to consumers, or intended for such use;
· Any property owned by a foreign company operating without a permanent establishment in Russia or with a permanent establishment in Russia, provided that the property is not allocated to that permanent establishment; and
· Residential buildings and premises and some non-residential premises (such as garages, parking slots, construction in progress).
Regional laws establish the features of property tax calculation based on the cadastral value.
The Russian tax legislation does not currently provide unified criteria to classify property for tax purposes. This may give rise to disputes with the tax authorities, as confirmed by the existing court practice.
Tax rate
Depending on the type of asset and the region the rates vary. The maximum rate for different types of assets ranges from 0.3% to 2.5%. The applicable rate is set at regional level.

Payroll-related levies

Taxpayers
Several kinds of payroll-related taxes must be paid by employers. This applies to Russian employers as well as to foreign companies.
Insurance contributions
Insurance contributions are paid partly to the unified tax account and partly to the Social Fund.
Administration and monitoring of social contributions for mandatory pension insurance, mandatory social insurance with regard to temporary disability and maternity, and mandatory medical insurance is handled by the tax authorities. Main unified social insurance contributions are applicable as follows: 30% is payable on the part of an employee’s annual gross remuneration below the limit set annually (RUB 2,979,000 for 2026) for contributions to the Social Fund and 15.1% is payable on the part of any remuneration in excess of this amount. Some categories of taxpayers, such as SMEs, accredited IT companies that meet additional criteria may apply reduced rates.
Also, payments and other compensation made to highly qualified foreign specialists² and some other foreigners are partly exempt from social contributions.
Personal injury contributions vary between 0.2 and 8.5% depending on the risk category of the employer and are payable to the Social Fund.

² Please see the Employment and migration section.

Taxes on natural resources

Taxpayers who use land, either on the basis of ownership rights or rights of permanent use, have to pay land tax to the local budget. The tax base used for calculation is the relevant land’s cadastral value (which, in practice, can differ from its market value). The tax rate is set at a local level and may not exceed 1.5% of the cadastral value (0.3% in respect of certain types of land).
Water tax is imposed on taxpayers who use water for various purposes, including the production of hydroelectricity. The tax rates vary depending on the specific water object.
Mineral resources extraction tax is imposed on subsoil users. It applies to various types of minerals, including oil and gas. It is based on the value (or quantity) of the extracted resources, and the rate varies according to the type of mineral.
Excess-profits tax on hydrocarbon production was introduced for oil and gas producers on 1 January 2019. This tax is aimed at shifting the tax burden to a later period in a field’s life cycle. It should be paid in conjunction with the mineral resources extraction tax (under a substantially reduced rate) and is applicable not to the volume of the oil and gas extracted but to the income imputed from its sale reduced by the costs related to hydrocarbon production.

Transport tax

This is a tax payable on registered transportation vehicles by the registered owners of these vehicles.
The transport tax basic rates are fixed at federal level, but the regional authorities are entitled to increase/decrease these rates by a maximum of ten times. In addition, the regions have a right to set different transport tax rates depending on the categories of vehicles, their age and/or emission class.

Sales duty

The provisions on sales duty apply in the territory of Moscow.
The taxpayers of sales duty are companies and individual entrepreneurs carrying out trade activities.
The sales duty base is defined as the value of movable or immovable property used for trade purposes. The amount of the sales duty paid is generally treated as a deductible for corporate profits tax purposes (regional part).
The sales duty rates are set by the regional authorities depending on the areas used for trade purposes.

State duties

According to the Tax Code, a state duty is a fee charged on companies and individuals for certain services supplied by state bodies, including state registration, consideration of cases, etc.

Taxation of individuals

Income tax
Taxpayers
Taxpayers are subject to Russian income tax as either tax residents or non-residents.
Tax residents are taxed on their worldwide income. An individual is considered to be a tax resident if they are physically present in Russia for at least 183 calendar days during a 12-month rolling period. According to clarifications from the Russian Ministry of Finance, however, the tax residence status of an individual should be defined by counting the days spent in Russia within the relevant calendar year.
Non-residents are taxed on their Russian-sourced income, irrespective of the nature of that income.
Individuals are responsible for tracking their tax residency and gathering supporting documents.
An automatic system is for tracking tax residency is being developed.
Taxable income
Taxable income is gross income less deductions and exemptions.
Gross income is defined as any economic gain, in cash or in kind, received by a taxpayer and over which they have discretionary control.
Deductions and non-taxable income
A Russian tax resident can benefit from five kinds of deductions:
· Standard deductions are available in fixed amounts for certain categories of taxpayers (disabled persons, veterans, parents and guardians of children, etc.).
· Social deductions are comprised of:
o Charitable donations (up to 25 % of income);
o Educational expenditures, medical expenditures, personal insurance and private pension contributions, fitness services (up to a combined annual maximum of RUB 150,000 0);
o Certain types of costly treatments (without limit).
· Investment deductions relate to certain types of investment income of taxpayers, such as long-term investments in pension and insurance funds and certain types of securities.
· Property deductions relate to the purchase and sale of property (mainly residential real estate).
· Professional deductions are generally permitted for individual entrepreneurs and certain occupations and include, for example, expenditure for the creation of intellectual property rights.
Certain statutory allowances, state pensions (and certain other pensions) and revalued shares issued as a result of statutory revaluation, merger or reorganisation are exempt from taxation.
Tax rates
Residents
A standard progressive rate of 13-15-18-20-22% applies to most types of income. The applicable rate depends on the portion of income exceeding respective statutory thresholds).
Certain types of investment income are subject to a progressive tax rate of 13% on income of RUB 2.4m and 15% on income exceeding this threshold.
A rate of 35% applies to certain prizes.
Non-residents
A general rate of 30% applies to all types of Russian-sourced income except dividends (to which the rate of 15% applies). It may be possible to apply the relevant provisions of a DTT in order to exempt certain types of income from non-resident taxation.
In addition, a 13-15-18-20-22% personal income tax rate applies to certain types of remuneration, including:
· Remuneration received from professional activities of non-residents with a highly qualified specialist status under Russian migration law;
· Remuneration received by non-residents working remotely for Russian based companies.
Tax payments
Withholding of tax
Russian companies, individual entrepreneurs and permanent establishments of foreign companies are considered to be tax agents. They must calculate, withhold and pay income tax on the payments they make to individuals.
As a result, employees are not required to file tax returns for their salary, unless they claim certain deductions or have other income that must be declared.
An individual entrepreneur remains personally responsible for fulfilling their income tax obligations.
Tax return
Individuals must generally file returns and pay the appropriate income tax if:
· Income was received from outside Russia (in the case of a Russian tax resident);
· Tax was not properly withheld; or
· Income was received from the sale of property, etc.
The tax return must be filed by 30 April in the year following the tax period.
The amount of tax due must be paid by 15 July in the year following the relevant tax period.
Individual property tax
Taxpayers
The owners of houses, flats, rooms, cottages, garages, other buildings or constructions are liable to pay individual property tax.
Tax rates
The cadastral value of the property is used as a taxable base to calculate individual property tax. The applicable tax rate depends on the type of taxable property concerned.
As individual property tax is a local tax, the local authorities are entitled to set the tax rate within prescribed statutory limits.

Special tax regimes

The Tax Code provides for the following special tax regimes which allow a corporate taxpayer to pay one special tax instead of a number of separate taxes, including:
· Simplified tax system;
· Professional income tax;
· Unified agricultural tax.
Special regimes may be applicable if the necessary requirements are met, as outlined below.
Simplified tax system
Taxpayers
Companies are eligible for the simplified tax system if they meet the following criteria:
· Their annual turnover does not exceed RUB 490.5m in 2026;
· The combined net book value of their fixed and intangible assets does not exceed RUB 218m; and
· They employ fewer than 130 persons.
The Tax Code includes a list of organisations that may not use the simplified tax regime. This includes: (i) foreign companies; (ii) Russian companies with local branches and/or representative offices; (iii) companies in which more than 25% of the capital is owned by other companies; (iv) banks; (v) insurance companies; (vi) pension funds; and (vii) investment funds.
Tax rates
The rate for this tax regime for companies meeting the general rule thresholds is as follows:
· 6% – if all income (without deductions) is considered to be the tax base; or
· 15% – if income (minus deductible expenses) is considered to be the tax base.
The tax rate may be reduced under the relevant regional law down to 1% to 5% (or 5% to 14%) respectively.
The simplified tax system is used as a single substitute for profits tax, property tax unless an exception applies (such as for property with tax base calculated on the basis of its cadastral value, for instance business and shopping centres, offices). The use of this system does not exempt employers from making obligatory insurance contributions or from withholding income tax from their employees’ compensation.
Simplified tax system provides for special VAT rules. Taxpayers with the annual turnover not exceeding RUB 20m are not subject to VAT. Otherwise, taxpayers may choose to apply the standard tax rate or special tax rates of 5/7% with input VAT.
Unified agricultural tax
This tax system is aimed at reducing the tax burden on taxpayers involved in agricultural production.
Taxpayers
Taxpayers producing, processing (including industrial processing) and selling agricultural products of their own production are entitled to use this tax system, provided that the share of income they receive from such activities is at least 70% of their overall income.
Tax rate
The tax rate is set by the regions of the Russian Federation in the range of 0% to 6%.
The tax base consists of all revenue diminished by certain deductible expenses that are listed in the Tax Code and include, in particular, the following:
· Expenses relating to the acquisition, construction and manufacturing of fixed assets (being allocated during the useful life term of the relevant assets);
· Lease payments;
· Wages costs;
· Expenses connected with certain types of insurance payments (both obligatory and voluntary); and
· The cost of material.
The unified agricultural tax substitutes profits tax and property tax. The taxpayers can benefit from certain special VAT rules.

Preferential regimes

Taxpayers implementing major investment projects may, in many cases, benefit from tax and economic incentives fixed at federal and regional levels.
To receive beneficial status, the relevant project must meet specific criteria, for example making substantial investments, creating jobs and new production facilities, etc.
These incentives may include:
· Reduced total corporate profits tax rate;
· Reduced insurance contributions;
· Exemptions from property, land and transport taxes;
· Exemption from customs duties and import VAT; and
· Subsidies compensating interest paid to Russian banks on loans, еtc.
Popular preferential regimes include:
· Special economic zones;
· IT and Skolkovo incentives;
· Territories of advanced development;
· Free port of Vladivostok;
· Special investment contracts;
· Agreements for protection and promotion of investments.

DTTs

General remarks
DTTs exist between many countries on a bilateral basis in order to prevent double taxation, i.e. taxation which is levied twice on the same income, profit, capital gain, inheritance or other item. The treaties generally guarantee non-discriminatory tax treatment and provide for cooperation between the tax authorities of the respective signatory countries.
Tax treaties signed by Russia are usually based on the OECD Model Treaty and the United Nations Model Convention. The provisions of these treaties override Russian domestic law.
Foreign companies wishing to obtain benefits under DTTs must provide Russian tax agents with a statement on beneficial ownership and a tax residency certificate. The look-through approach can be applicable to the payment of passive income in any forms (dividends, royalties or interest).
Recent developments
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “MLI”)
The MLI is an OECD convention that updates DTTs to counteract tax avoidance and attempts by taxpayers to receive unjustified tax benefits.
Russia completed all necessary formalities for MLI implementation to applicable DTTs.
Suspension and termination of certain treaties
In 2023, Russia suspended most provisions of DTTs with “unfriendly” countries. Some general provisions, such as the provision for elimination of double taxation, remain in force, however, reduced rates and other incentives cannot be applied starting 8 August 2023. Several treaties were terminated (e.g. Denmark and the Netherlands).
Treaty revisions and new treaties
Russia continues to work on active and new DTTs. In the recent years it has adopted higher basic rates negotiated during revisions of active treaties and conclusion of new ones: 15% on dividends and 10% on interest and royalties.
Also, recently Russia concluded and revised DTTs with several countries, including Malaysia, Oman, and the UAE.