The basis of the tax system in the Russian Federation is primarily enshrined in the Tax code of the Russian Federation (1. part of from 31.07.1998 and 2. part of 05.08.2000) (hereinafter “tax code”). The tax code contains provisions relating to the General system of taxation, the rights and obligations of taxpayers and tax authorities, tax control, tax offences and liability. 2. part of the tax code contains special provisions relating to certain types of taxes. The Russian tax system is quite complex, and consists not only of the tax code, but also of laws and other regulatory documents. However, the process of simplifying the tax system and reducing the tax burden (tax reform) is under way. Since 2000, chapters 2 have been adopted. parts of the tax code that relate to the following taxes:
Chapter 21. Value added tax
Chapter 22. Excises
Chapter 23. The tax to incomes of physical persons
Chapter 25. Corporate income tax
Chapter 25.1. Fees for use of objects of fauna and for use
objects of aquatic biological resources
Chapter 25.2. Water tax
Chapter 25.3. State duty
Chapter 26. Tax on extraction of mineral resources
Chapter 26.1. Taxation system for agricultural
producers (single agricultural tax)
Chapter 26.2. Simplified tax system
Chapter 26.3. The system of taxation in the form of a single imputed tax
income for separate kinds of activity
Chapter 26.4. The system of taxation in the implementation of agreements
about product section
Regional taxes and fees:
Chapter 28. Transport tax
Chapter 29. Gambling tax
Chapter 30. Corporate property tax
* Chapter 31. Land tax
In five years, the total amount of taxes in Russia decreased from 44 taxes to 15: 10 Federal taxes, 3 regional and 2 local taxes.
The most important Federal taxes are the following:
* corporate income tax;
* value added tax;
· excise tax;
* personal income tax;
· tax on extraction of mineral resources;
* state fee;
* inheritance and gift tax.
These taxes are mainly paid to the Federal budget, and some of them (for example, corporate income tax) are also paid to the budgets of the constituent entities of the Russian Federation (regional budget) and the local budget. Regional legislative bodies have the right to reduce tax rates, in part coming to their budget, depending on the specific activities of the taxpayer.
The most important regional taxes include the following:
* corporate property tax;
* transport tax.
These taxes are paid to the budgets of the Russian Federation.
The most important local taxes include:
* tax on property of individuals;
* land tax.
These taxes are paid to the local budget.
Obligation to pay taxes by foreign organizations and citizens
Foreign organizations and individuals are taxpayers on an equal basis with Russian organizations and individuals. The procedure for payment, as well as the exemption of foreign organizations and individuals from taxes in Russia is determined in the tax code, in the laws of the Russian Federation, as well as in international treaties of the Russian Federation. Thus, between Russia and Germany on 29.05.1996, an agreement on avoidance of double taxation in respect of taxes on income and property was concluded (hereinafter: “DBA”). DBA applies to the following Russian taxes:
– corporate income tax;
– the tax to incomes of physical persons;
– tax on property of enterprises and individuals.
The DBA also deals with dividend profits, interest, royalties, royalties and property disposal.
Foreign firms, organizations and physical persons carrying out their activity through permanent representative office (branch, representation, Department, Bureau, Agency, factory, etc.) are required to register at the location of the permanent mission within 30 days after the beginning of activity in Russia. Tax accounting and control is carried out by the district tax inspection at the location of the permanent establishment. The main tax authorities of the tax code are the Federal tax service of Russia and its divisions in the Russian Federation (tax authorities). In addition, the control functions have the right to perform customs authorities and state extra-budgetary funds (pension Fund, health and social insurance Fund). Taxpayers are obliged to keep their own records of taxes and report to the tax authorities in a timely manner. For non-compliance with the order of tax reporting, there are monetary penalties, the perpetrators are also criminally responsible.
Main Federal taxes:
Corporate income tax:
01.01.2002 entered into force on Chapter 25 of the tax code about the profit tax of the organisations. In addition to Russian organizations, the income tax obligation also applies to foreign organizations operating in the Russian Federation through permanent missions and (or) receiving income from sources in the Russian Federation.
For tax purposes, this Chapter defines a permanent establishment of a foreign organization as a branch, representative office, branch, Bureau, office, Agency, any other separate unit or other place of activity of this organization through which the organization regularly carries out business activities in the Russian Federation.
The profit is:
– for foreign organizations operating in the Russian Federation through permanent establishments-income received through these permanent establishments, reduced by the amount of expenses incurred by these permanent establishments;
– for other foreign organizations-income received from sources in the Russian Federation.
In the event of a loss, the taxpayer is entitled to carry forward the loss within ten years following the tax period in which the loss was incurred.
The tax rate for all organizations is 20 %. At the same time, 2% of this rate is credited to the Federal budget, 18% is credited to the budgets of the subjects of the Russian Federation. Legislative bodies of constituent entities of the Russian Federation has the right to decrease, for certain categories of taxpayers the tax rate (e.g., provide investment incentives) in the amount of tax payable to the budgets of constituent entities of the Russian Federation. At the same time, the specified rate cannot be lower than 13.5 %. Tax rates on income of foreign organizations not related to activities in the Russian Federation through a permanent establishment are set in the following amounts:
– 20 % – from any income other than those listed below;
– 10 % of the use, maintenance or rental of vehicles or containers in international transport.
– 15 % – on income received in the form of dividends from Russian organizations by foreign organizations, as well as on income received in the form of dividends by Russian organizations from foreign organizations.
Taxpayers are required to pay tax on a monthly basis during the reporting period (quarter). Tax returns must be submitted every quarter and at the end of the year.
The list of income of foreign organizations that do not have permanent representative offices in Russia, the tax from which is subject to payment to the budget at the source of payment. Such income includes, in particular, dividends, income from the distribution of profits from property in the liquidation of organizations, from the use of intellectual property rights, the sale of shares and real estate, from the lease of property, as well as from international transportation. The source of payment shall not be charged with tax on the above income if the income is not taxed in the Russian Federation in accordance with the international agreement. (As mentioned above, there is such an agreement between Germany and Russia (DBA)). For this purpose, the foreign organization is obliged to provide the source organization of payment with confirmation that the foreign organization has a permanent location in the state with which the Russian Federation has such an international Treaty. This document must be certified by the competent authority of the relevant foreign state.
Income received by a foreign organization from the sale of goods, works and services in the territory of the Russian Federation, which does not lead to the formation of a permanent representative office in the Russian Federation, is not subject to tax at the source of payment.
Value added tax:
Chapter 21 “value added Tax” of the tax code entered into force on January 1, 2001
Organizations and individual entrepreneurs are recognized as VAT taxpayers. The sale of goods, works and services on the territory of the Russian Federation, in particular, is subject to taxation.
VAT is 20%, and for certain categories of goods (food and goods for children) – 10%. VAT is also charged when importing goods to the territory of the Russian Federation. Goods are not subject to VAT when exported from the territory of the Russian Federation. Taxpayers are required to pay tax and file a tax return on a monthly basis.
This Chapter of the tax code contains transactions and goods that are exempt from VAT. For example, the lease of office and (or) residential premises to foreign citizens or organizations accredited in the Russian Federation is not subject to taxation.
from Andrey Nikishenko, 2019