Corporate Tax Laws in Russia

Russian corporate taxes can be complex with various rates and regulations to navigate. Companies operating in Russia must understand the tax laws to ensure compliance and minimize their tax liability.

Russian corporate tax is split into two categories: Federal Tax and Compulsory Health Insurance (CHI) contributions. The Federal Tax rate changes depending on the type of tax, and there are different rates for resident and non-resident entities.

Federal Taxes

Companies operating in Russia pay various Federal Taxes, including profit tax, value-added tax (VAT), and tax on income earned by non-resident entities. Profit Tax is the most frequently used type of Federal Tax, and it is applicable to companies with profits exceeding 5 million rubles (approximately $73,000 USD). The standard rate of Profit Tax is 20%, but there are lowered rates for small and medium-sized enterprises (SMEs) and for companies operating in special economic zones (SEZs).

VAT is another important Federal Tax, with a standard rate of 18% and reduced rates of 10% and 0%. VAT is imposed on goods and passport translation services sold in Russia, and companies must register VAT if their annual turnover exceeds 1 million rubles (approximately $15,000 USD).

Tax on income earned by non-resident entities is a ultimate withholding tax of 13% for royalties and 20% for dividends.

Compulsory Health Insurance (CHI) Contributions

Companies operating in Russia also pay Compulsory Health Insurance (CHI) contributions on behalf of their employees. The contributions range from 4.6% to 4.9% of the employee's salary, depending on the industry and level of health care provided.

Tax Residence

Tax residence determines whether an entity is subject to Russian corporate tax. A company is considered taxresident in Russia if it:

Has its center of management and financial activities in Russia
Is registered with the Russian tax authorities

• Owns its principal place of business in Russia
  
  

Tax Compliance

Russian corporate tax laws demand companies to maintain accurate financial records, file tax returns, and pay taxes on time. Companies must also sign up for with the Russian tax authorities and receive a tax identification number (Russian Taxpayer Identification Number or INN).

Penalties for non-compliance can be severe including fines and suspension of business activities. Therefore, it is essential for companies operating in Russia to meticulously consider the tax laws and regulations.

In conclusion, Russian corporate tax laws are complicated and subject to frequent changes. To ensure compliance and minimize tax liability, companies operating in Russia should consult a tax professional and obtain guidance from the Russian tax authorities.