Accounting Outsourcing and
Tax compliance in Russia

Russia – Accounting Outsourcing and Tax Compliance

Taxation plays a huge role in the development of a nation. Russia has set out tax laws that look to raise revenue from its citizens, corporates and other business entities generating income in the country.
Global Expansion Plus provides accounting outsourcing and tax compliance in Russia. We provide services with support of our local accountants and tax specialists. We will perform bookkeeping, accounting and filling tax return on your behalf bearing all associated compliance risks.
Every state will put in place a tax system, to raise revenue. Russia is no different. Whether a resident or a non-resident, individual or corporate, there is the need to understand taxation in Ukraine. Otherwise, you are bound to get on the wrong side of the law.

Russia in facts

  • Location: Eastern Europe
  • Territory: 17,125,191 square kilometers
  • Capital: Moscow
  • Official language: Russian
  • Currency: Russian Rubles (RUB)
  • Population: 144,5 million

Corporate income tax (CIT)

Corporates, registered as legal entities have a duty to contribute to the Russian economy in the form of corporate taxes. It is normally set at 20% of the annual income. A small portion (3%) of the 20% CIT goes to the federal budget, while the rest is left to cater for the regional budget in the country. The allocation is based on the laws set and may expire in 2024, where new rates may come up.

Value-added Tax (VAT)

Value addition, among goods and services, attracts a special kind of taxation, VAT. The standard VAT rate is 20%. However, there are other products such as medicines, printed publications, foodstuffs (basic), and children’s clothing, among others, which attract a rate of 10%. Apart from the locally bought and sold goods and services, imports are also subject to this type of taxation.

When accounting for VAT in Russia, you need to consider such factors. The system applies an input-output system kind of computation. It takes on a ledger format, where VAT on purchases is the input, while sales take on the output. If the balancing figure rests on the side of the purchases, then the amount is equivalent to VAT payable, if otherwise it is VAT refundable.

There are different scenarios that can qualify for the recovery of VAT, in the case of a tax payer:
  • If tax being charged on goods or services is a result of vatable transactions
  • Where the input VAT is related to the advance payments of goods or services resulting from vatable activities.
However, the VAT refundable, by the state is an option excisable by the tax payer. They can choose to apply to get refunds or not.

Personal Income tax (PIT)

A normal rate of 13% applies. However, there are other rates depending on the residency and the source of income. For example, income by non-resident individuals, in Russia, attract a PIT of 30%. Other rates, which differ include:

  • Incomes due to dividends from Russian companies at 15%
  • Income by foreigners with high qualifications (13%)
  • Foreign nationals who earn income in Russian and are from non-visa countries (13%)
  • Income earned by refugees in the country (13%)

Withholding tax

WHT stems from a wide range of incomes in Russia. It is usually deducted from the source at a special rate depending on the nature of the income or the service provision, thereof. Some of the rates, relative to the nature of the incomes, are as follows:

  • 20% on interest and royalties;
  • 10% of the income due to shipping or freight charges;
  • 15% due to dividends from Russian companies;
  • 20% on income from the sale of property or shares non-listed for a subsidiary company in Russia;
Even with the above rates for WHT, there are those incomes which are exempt from this tax. They include:
  • Interest income due to investment in government securities;
  • Interest due to tradable bonds;
  • Interest as a result of investing in Eurobonds-related coupons;

Payroll related taxation

The nature of taxation is in the form of social contribution. The state has set out taxation rules that help categorize employees based on how much they earn and the rate at which the tax applies. The employer is the one liable to remit or deduct a proportion of the employee’s salary in the form of social contribution. The social contributions and taxation of annual salaries, rules are set out as follows:
  • The medical insurance fund – attracts a rate of 1.5% for any amount of salary incomes.
  • The pension fund – 22% tax rate applies for the first RUB 1.15 million, and 10% for anything above that. This social contribution also covers foreigners living in Russia, temporarily, where the same rates apply.
  • The social insurance fund – attracts a rate of 2.9% for the first RUB 0.865 million.
Apart from the social contribution by employees, employers also owe a duty of care to their employees. On that light, they contribute a sizeable amount in the form of insurance to cover work-related risks such as injuries and diseases. The rate for such contributions ranges from 0.2% to 8.5%, depending on the nature of the work the employee engages in.

Import/ Export related taxation

Imports and exports also contribute to the revenue in the form of taxes. They are classified as follows:

Custom duty

When it comes to imports, goods have to go through certification or verification for clearance into the country. All goods crossing the customs border will be subject to a flat rate, which is the custom duty. However, it will depend on the value of the goods on the move.

Excise taxes

It applies to the locally manufactured goods, imports and exports. However, for the exports, they are usually exempt to help encourage favorable balance of payments. Harmful products imported or locally manufactured, such as cigarettes, tobacco, and alcohol are excisable. Also, cars and oils fall in this category of products. The rates may vary depending on one factor or the other.
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