Income tax

Who is required to pay and how to calculate

Income tax in Russia is the main tax for individuals. The tax is levied upon both Russian and non-Russian citizens. There are five tax rates ranging from 9% to 35%. One of the five tax rates is applied depending on: (1) the tax residency status, i.e. whether the individual is a Russian tax resident or not (2) type if income, which is taxable: income from employment, income from dividends, etc.

What tax residency is

An individual is usually considered to be a tax resident if she/he lives permanently in Russia and spends not less than 183 days in Russia in the year for which the tax return is submitted. An individual is usually not considered to be a tax resident if she/he spent less than 183 days in Russia in the year for which the tax return is submitted. Tax residency status does not depend on the citizenship. Only tax residents are eligible for tax deductions associated with the income tax.

Income tax rates

There are three income tax rates for tax residents in Russia - 9%, 13%, 35%. Both income received in Russia and received abroad is subject to the income tax. The most commonly used rate is 13%. This rate, for example, is applied to income from employment or income from the sale of property (a car, for example). Tax rates are flat and do not change with the income amount.

For those who are not tax residents, there are two tax rates - 15% for dividends and 30% for all other types of income. Only income received in Russia (as opposed to income received abroad) is subject to the income tax.

What tax agent is

Often, individual’s income tax is withheld by a so-called tax agents – entities or individuals, which pay taxes on behalf of other entities or individuals. The most common example of a tax agent is an employer. For example, if you get a salary of 100 rubles, the employer is likely to withhold an income tax of 13% (13 rubles) to further pay it to the tax authorities. You receive only 87 rubles after the income tax is withheld.

Tax deductions

There are several types of tax deductions, associated with the income tax, that reduce the amount of taxes payable. Only tax residents are eligible for income tax deductions. There are five types of tax deductions in Russia - standard, social, related to property, related to securities and professional tax deductions. Standard deductions are granted under certain conditions – the tax payer’s income does not exceed certain amount, the taxpayer has children, etc. Social tax deductions are applicable if the taxpayer incurred certain expenses - paid for medical treatment or education, etc. Property deductions are applicable if the taxpayer sold some property or bought real estate. Professional deductions are applicable to certain categories of taxpayers, for example, the authors of books, artists, etc.