When do taxes in Russia apply to worldwide income? Find out about the Russian tax system, different types of taxes, and rates.
By Keith Fernandez
Maintaining our Russian site is a delicate matter during the war. We have chosen to keep its content online to help our readers, but we cannot ensure that it is accurate and up to date. Our team endeavors to strike the right balance between giving information to those who need it, and respecting the gravity of the situation.
The Russian word for tax is налог (nalog) and the current tax system is based on a code enacted and adopted in three stages, from 1998 to 2003. As of 2019, taxes in Russia account for around 10.8% of the country’s GDP following a series of reforms over the previous decade.
For expats, the starting point for determining your tax position depends on your residency status. As such, this status affects what elements of your income are subject to tax and how much you pay.
Read on for an overview of the tax system in Russia, with sections including:
In Russia, the Ministry of Finance governs the country’s tax authority (Federal Tax Service of Russia), which manages taxes.
The Russian tax year runs from 1 January to 31 December. You should submit tax returns to the Federal Tax Service using a form called Tax Declaration (Налоговая Декларация, Nalogovaya Deklaratsiya). Returns must arrive by 30 April, and the final date to pay your taxes in Russia is 15 July.
The Federal Tax Service’s website provides some information in English, though more information is available in Russian.
In 2021, Russia implemented a progressive tax with rates of 13% or 15% for those earning over 5 million rubles per year. Non-residents pay 13%, 15%, or 30%, depending on their employment status and the source of their income. It is possible that these rates will change for those who have left the country following the Russian invasion of Ukraine.
Russia’s Tax Code determines three levels of taxation: federal, regional, and local. Currently, federal taxes include VAT, mineral extraction tax, individual income tax, unified social tax, corporate profits tax, excise taxes, special tax regimes, and several other taxes.
On the other hand, regional and local taxes in Russia focus on assets. Regional taxes include corporate property tax, vehicle tax, and gambling tax, while local taxes comprise land tax and individual property tax.
Since 2019, VAT (налог на добавленную стоимость, nalog na dobavlennuyu stoimost – НДС) has been levied at the benchmark rate of 20% when purchasing goods and services. There is a lowered VAT in Russia on certain things such as food, shoes, some medical items, and children’s clothes. This is 10%. On other necessary items, including education, medical items, public housing, and traditional financial products, zero VAT applies. Russian VAT also applies to imports but not typically exports, and goods always include it in the price.
Visitors to Russia can get a refund on VAT. However, it is not possible for those living in Russia, or for citizens of the Eurasian Economic Union countries (EEU – Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia). In order to be eligible, shop at selected retailers officially communicated by the Ministry of Industry and Trade (Министерство промышленности и торговли Российской Федерации, also known as Минпромторг, Minpromtorg).
The minimum purchase amount is 10,000 р. per retailer per day at a differential refund rate as follows:
You’ll need to ask the store for a VAT check or refund form. A customs officer must then stamp this at the airport or port you depart through. The officer will ask to see your ticket, purchase receipts, and may want to inspect the goods you’ve bought. These should ideally have their original tags or labels intact.
You can take your validated form to a VAT refund office or agency to get your money. Refunds come either in cash or via a refund to your credit card. Several agencies have the authority to refund VAT taxes in Russia, including Premier Tax Free, Global Blue, National Operator Tax-Free, and Hi Sky.
If you’re leaving Russia but traveling within the EEU, you won’t be able to claim a refund.
Any foreigner who receives an income from a Russian source has to pay personal income taxes in Russia. If you live in the country for more than 183 days per year and have a Russian residency permit, your tax liabilities are lower than those of non-residents.
Individual businesses such as freelancers, contractors, and consultants pay personal income tax on their business income whether it arises from a Russian source or from overseas.
Read more about Russian corporate tax
International corporate organizations have to pay tax at a flat rate of 20% on profits plus withholding tax.
Any tax resident of the Russian Federation, even if they only receive income from outside Russia, must pay Russian tax on that income. However, if an individual is non-resident or changes their tax status to non-resident during the tax year and remains so until the end of the tax period, they do not have to file a declaration and no taxes are due concerning income received outside Russia, even income received prior to obtaining non-resident status.
Russian taxes can apply in the following situations:
Expat residents in Russia can claim a foreign tax credit against their Russian tax liabilities if they are covered by a relevant Double Taxation Treaty (DTT). Russia has signed DTTs with more than 80 countries. The credit may not exceed the amount of tax payable in Russia.
In order to claim the tax credit, individuals will need to provide supporting documentation along with the tax declaration within three years after the reporting period.
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Tax specialist in Russia
In 2018, Russia became one of over 100 countries to implement the Automatic Exchange of Information (AEOI) system, which allows the country’s government to seek information on any bank account held anywhere by any Russian citizen or any holder of a Russian residency permit. However, since February 2022, when Russia invaded Ukraine, many countries, such as the UK and Switzerland, have suspended their tax co-operation with the country.
Russia does not provide for special exemptions for foreign pension income. Therefore, tax residents are liable to pay Russian income tax on their foreign pension, although non-residents do not do so, even if the money is remitted to Russia.
Since there are no wealth and net worth taxes in Russia, no tax applies in cases where someone inherits a foreign pension or receives it by transfer. The Russian tax resident heir, however, would be subject to tax regarding income from a foreign pension scheme and potential profits of the pension vehicle.
Russia does not provide tax relief for residents on contributions to a foreign pension scheme.
As of January 2021, tax residents pay a 13% tax rate on an annual income of up to 5 million p. Income above this limit is subject to 15% taxes. Meanwhile, Russian-sourced income is taxed at 30% for non-residents. Self-employed persons pay 4-6% on turnover. It is not possible to file joint returns when paying taxes in Russia.
Those who hold official residency in Russia pay 13% or 15% in income tax on their salary, dividend income, rental income from property, foreign exchange gains, and gains from exercising stock options. From January 2021, both residents and non-residents pay 13% income tax on interest accrued on deposits exceeding 1 million p., multiplied by the Bank of Russia key rate.
Learn more about the average salaries in Russia
If you are employed, the company you work for is responsible for registering your taxable income with the Russian tax authorities and deducting tax from your salary. Expats who receive some of their income in benefits pay tax based on the market value of the benefit as a rule.
Basically, anyone who spends less than 182 days a year in Russia is a non-resident and must pay personal income taxes at the general flat rate of 30% on income generated within the Federation. Such Russian source income includes remuneration for activities and services performed in Russia regardless of the location of the paying entity, remuneration of directors of Russian companies, interest, and income from property located in Russia. Dividend income from Russian companies is taxed at 15%.
Non-residents will be taxed in Russia at a rate of 30% for the first 183 days, even if you are on a 12-month contract. If you receive official residency or stay longer than 183 days, you can reduce your tax liability to the progressive Russian tax rate and recoup any over-payment in the interim period.
Some foreign non-residents may be eligible for the Russian progressive tax rate. This applies to nationals of EEU member countries working in Russia. The 13% or 15% rate also applies to nationals of other countries who are Highly Qualified Specialists. They typically have work experience, skills, or accomplishments in a specific field and receive a monthly salary of at least 167,000 p. (with certain exceptions).
There are several ways to file a tax return in Russia. The easiest method is online, although there are also options to pay personally at the Russian tax office or through a Russian bank account. You can also use an authorized company and pay an administration fee.
You should keep copies of the payment documents and any other tax-related documents for up to four years. Also, after submitting a tax declaration, the taxpayer can contact the Russian tax authority to check if there are additional taxes, fees, or fines owed.
How to file your income taxes in Russia
You may be required to attach the following documents to your Russian tax declaration:
You can file accounting documentation and tax returns online, at a tax office or via authorized operators. Only high-earning taxpayers are able to electronically file tax returns directly to the tax authority via special software. This is not available for use by the general public or small to medium-sized businesses.
According to Russian tax laws, relevant documents for the calculation and payment of taxes should be kept for at least four years.
About 3.55 million people in Russia were self-employed in 2021. If this applies to you, you will still need to pay the progressive income tax rate at 13% or 15%. Foreigners with a temporary or a permanent residence permit are eligible to register as an individual entrepreneur (индивидуальный предприниматель, individualny predprinimatel) or IP (ИП), in which case different tax rates apply.
In 2022, Russia introduced a new experimental tax regime in Moscow, Kaluga Oblast, and the Republic of Tatarstan. Corporate and entrepreneurial taxpayers will be able to either be taxed at 8% on their income or 20% on their income minus expenses. The regime is expected to be trialled until 2027, and any business with less than 60 million p. taxable income and fewer than five employees may apply.
Official residents can reduce their Russian income tax bills via deductions and allowances. These are typically not available to non-residents. Therefore, deductions only apply to earnings subject to the progressive Russian tax rate. They are not applicable to taxes you pay at any other rate. You can file declarations for tax deductions at any time throughout the year.
Some examples of when deductible expenses are available include buying property in Russia, paying tuition fees, medical treatment, or making payments to charity.
The main deduction from income taxes in Russia applies to children. The exemption starts from 1,400 p. for the first two children and goes up to 3,000 p. for a third and each subsequent child. It does not matter where the children live when applying for this tax deduction. However, to qualify for a deduction of child tax, you must be earning a cumulative annual income of less than 350,000 p.
Individuals may also deduct the costs of their own education in licensed institutions (within limits) and for their children’s education (up to 50,000 p. per child).
Donations to certain non-commercial organizations (from 2012) and charities are deductible from taxable income (within the limit of 25% of all income subject to 13/15% tax rate).
When buying property in Russia, foreign tax residents can apply for a once-in-a-lifetime tax deduction of up to 2,000,000 p. plus the amount of interest of up to 3,000,000 p.
Russians and foreign nationals alike do not need to pay taxes when buying real estate or other assets. A foreign national can buy an apartment, a country house, a garage, and even land (for private housing or private subsidiary farming) except in border areas, regions with special regimes, forests, nature reserves, and closed administrative areas.
Learn more about applying for a mortgage in Russia
Net wealth and net worth taxes are not levied in Russia.
Russian property tax is paid by the owners at a maximum rate of 2% of the value of the property, depending on the value of the property as determined on 1 January:
In general, you pay Russian property tax annually as part of your tax return application. You can find more information on Russian property tax at the Russian tax authority.
However, there is a slight difference when it comes to land tax rates in Russia. Any owner of land and the property located on it pays the Russian tax rate set by local authorities. This rate is generally 0.3% of the land value regardless of whether the land is for housing or agricultural purposes. For land uses other than agricultural, residential, or utilities infrastructure, a tax rate of 1.5% can apply. The payment process is similar to that for property tax.
Rental income gained by residents is taxed at the progressive rate, while non-residents are subject to a tax rate of 30%, which is typically withheld at the source. If such rental income is received by an international legal entity that does not have a permanent organization in Russia, such an entity is also subject to holding income tax on gross rentals at 30%.
There is no separate capital gains tax in Russia. Instead, gains from the disposal of property and assets are subject to income tax at the progressive rate.
Tax residents are eligible for a statutory exemption on all property sold during a calendar year. The exemption is limited to 1 million p. in the case of real estate and 250,000 p. for other property. Proceeds from the sale of real estate are excluded from taxation for both residents and non-residents if the property is owned for more than five years (with certain exceptions). From 2021, income from the sale of shares in Russian and foreign companies after five years of continuous ownership is exempt from tax.
Capital profits for non-residents in Russia are taxed at a flat rate of 20%. Taxable profits are the gross income or selling price without prior subtractions for purchase costs or other expenses.
As of January 2006, there is no inheritance or gift tax in Russia. In case of death, heirs do not have to pay personal income tax for the deceased. Salaries owing to resident employees must be transferred to their heirs without taxes being withheld.
Read about inheritance law and taxes in Russia
However, gifts of real estate, shares, and vehicles by non-family members are subject to personal income taxes in Russia of 13% or 15%, payable by the recipient. Gifts from immediate family – spouses, parents, grandparents, children, grandchildren, siblings, and half-siblings – are exempt.
Gifts to non-residents are taxed at 30%.
The benchmark rate of Russian corporate tax on profits is 20%. Companies are also taxed 13% on dividend profits. However, corporate taxes in Russia and allowable expenses vary depending on the company structure.
In the case of self-employed persons, note that individual entrepreneurs do not pay profit tax and are subject to personal income tax on their business profit.
Read more in our guide to Russian corporate tax.
Import taxes in Russia apply to the majority of goods exceeding 5,000 p. in value. Since its official entry to the WTO in 2012, Russia has committed to implementing all the provisions of the WTO, including an average tariff of 6.1% for goods. Imported goods that carry a higher customs tariff include finished products (15%), foodstuffs (20%), and agricultural products.
For countries that have a special most favored nation (MFN) status, only base rates apply. Special exemptions also apply to some Commonwealth of Independent States countries. In addition to customs duties, import excise taxes ranging from 20% to 570% may apply for limited categories of products (e.g., luxury goods, alcohol and tobacco products, cars, diesel and motor oil, and other petroleum products).
More than 154 product lines attract export taxes in Russia, with rates that may reach 50%. They mainly concern energy products, ferrous and non-ferrous mineral ores, skins, and wood. There are no import and export taxes in Russia on specific merchandise such as transit goods, cultural valuables, and humanitarian aids.
All goods passing through Russian customs attract processing charges at a flat rate depending on value and quantity.
As an oil producer, Russia has some of the lowest-priced fuel in the world. Taxes on petrol and diesel, however, are levied at between 55–65%, although this can vary.
There are no departure taxes in Russia. However, the flight fee includes several other taxes and surcharges. The total amount varies depending on fluctuating oil prices and government policy. For an indication of what you can expect to pay, check out each airline’s website, as in the case of Aeroflot.
If your contract ends or you leave in the middle of the Russian tax year, you can file for a departure tax return at least one month before you leave the country permanently. Your should pay your personal Russian income tax during the 15 days after filing the tax return form.
Although taxes in Russia appear straightforward, there are a number of exceptions and deductions available to resident and non-resident taxpayers alike. The tax system is fluid, and many legal requirements may not be applicable in practice thanks to additional exceptions.
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There is also wide scope for interpretation. As such, it is advisable for expatriates to seek expert advice before determining the likely tax consequences and finalizing their returns.
Originally from Vancouver, Adam has lived in Belgium and Hong Kong and is currently residing in the Netherlands.
His interests range a wide spectrum of topics, from digital nomads and modern conflict to sports and local craft beer.
