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Russia: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

An individual is considered to be a resident of Russia if he/she has resided in the country for at least 183 days in a calendar year counting the day of departure but not counting the day of arrival.

Residents are taxed on their worldwide income and married couples are taxed separately.

INCOME TAX

Resident individuals are subject to tax on their income at a flat rate of 13%. Employees’ income taxes are withheld at source by the employer who acts as tax agents. Self employed individuals are required to file annual tax returns to the Russian tax authority.

Allowances and Deductions

Numerous deductions are available for resident taxpayers. A standard deduction of RUR400 (€11) per month for each taxpayer with an annual income of less than RUR20,000 (€544) is allowed. In certain circumstances such as invalidity, membership in the armed forces (veterans) and being victims of natural disasters, an individual is entitled to deduct RUR500 (€14) or RUR3,000 (€82) per month. For each dependent, one could deduct RUR600 (€17) monthly except if the dependent’s income exceeds RUR40,000 (€1,089).

Charitable contributions are exempt up to 25% of income. Educational expenses not exceeding RUR38,000 (€1,034) are deductible per taxpayer and each of his/her children. Medical expenses are also covered up to the amount of RUR38,000 (€1,034).

Entrepreneurs and individuals working on a contractual basis may also deduct their property tax payment from their taxable income if the concerned property is actually used for carrying out their entrepreneurial activities. Taxpayers who cannot present proof of their expenses are allowed a standard professional deduction of 20% of the total income received from their entrepreneurial activities.

Capital Gains

Capital gains realized by residents for selling Russian property within three years of acquisition are taxed at a flat rate of 13%. For Russian property held for more than three years, the entire capital gain is tax-exempt. When calculating for the tax base, actual expenses incurred may be deducted such as the acquisition cost and other related expenses.

Income earned from the sale of one’s property is tax exempt if owned for at least three years. Otherwise the gain would be taxable as normal income (13%). One may choose to deduct documented expenses such as acquisitions cost and cost of improvements from the actual selling price, or deduct a maximum fixed allowance of RUR1,000,000 (€27,218) from the gross proceeds. The maximum fixed allowance for sale of securities is RUR125,000 (€3,402).

A maximum deductible amount of RUR1,000,000 (€27,218) is allowed for purchases or construction of certain real estate in Russia. This could only be availed of once in a lifetime.

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