RussiaTax Obligations Detailed

In Russia, employers face various tax obligations, including income tax withholding, social security contributions, and corporate income tax.

Employer Tax Obligations in Russia for 2025

As of February 5, 2025, these are the employer tax obligations in Russia:

Income Tax

• Withholding: Employers withhold personal income tax (PIT) from employees' salaries.
• Rates: A progressive PIT rate applies:
  • 13% for annual income up to RUB 2.4 million.
  • 15% for annual income between RUB 2.4 million and RUB 5 million.
  • 18% for annual income between RUB 5 million and RUB 20 million.
  • 20% for annual income between RUB 20 million and RUB 50 million.
  • 22% for annual income exceeding RUB 50 million.
• Frequency: PIT is withheld and paid twice a month, by the 5th and 28th. December's withholding (23rd to 31st) is due by the last working day of the year.
• Non-residents are taxed 15% on dividends and 30% on other income. Highly Qualified Specialists (HQS) and foreign nationals employed by individuals are taxed at 13%.

Social Security Contributions

• Pension Fund: 22% up to RUB 1,465,000, then 10% on any excess.
• Social Insurance Fund: 2.9% up to RUB 966,000. Amounts above this threshold are not subject to contributions.
• Medical Insurance Fund: 5.1%.
• Accident Insurance: 0.2% to 8.5% (depending on the job's risk level).

Corporate Income Tax

• Standard Rate: The corporate income tax rate is 25% (increased from 20% in 2024) for most corporations.
• IT Sector Rate: For companies in the IT sector, the rate is 5%.
• Payment: Monthly advance payments are required, due by the 28th of each month. Annual filing is due by March 28th of the following year.

Other Employer Obligations

• Maintain accurate payroll records.
• Comply with all reporting requirements to the Federal Tax Service.
• Submit social security contribution reports and payments to the Social Insurance Fund.
• Maintain compliance with all Russian labor laws and regulations.
• Minimum wage in Russia is 19,242 per month.

This information is based on the available data as of February 5, 2025, and may be subject to change due to legal and regulatory updates.

In 2025, Russia implemented significant changes to its tax system, impacting both employers and employees.

Personal Income Tax

As of January 1, 2025, Russia introduced a progressive personal income tax system. This replaces the previous flat tax rate and now consists of five brackets:

• 13%: Up to RUB 2.4 million annual income (up to RUB 200,000 monthly).
• 15%: Between RUB 2.4 million and RUB 5 million annual income (between RUB 200,000 and RUB 416,700 monthly).
• 18%: Between RUB 5 million and RUB 20 million annual income (between RUB 416,700 and RUB 1.67 million monthly).
• 20%: Between RUB 20 million and RUB 50 million annual income (between RUB 1.67 million and RUB 4.17 million monthly).
• 22%: Over RUB 50 million annual income (over RUB 4.17 million monthly).

These rates apply to the portion of income within each bracket, not the entire income. For example, if an individual earns RUB 6 million annually, the first RUB 2.4 million will be taxed at 13%, the next RUB 2.6 million at 15%, and the remaining RUB 1 million at 18%.

Social Security Contributions

Employers in Russia are responsible for contributing to several social security funds on behalf of their employees:

• Pension Fund: 22% of an employee's salary up to RUB 1,465,000 annually, and 10% for any amount exceeding this threshold.
• Social Insurance Fund: 2.9% of an employee's salary up to RUB 966,000 annually.
• Medical Insurance Fund: 5.1% of the employee's salary.
• Accident Insurance: Minimum rate of 0.2%, with the exact rate varying depending on the industry and its associated risks.

Tax Deductions

Several deductions are available to reduce the taxable income of employees:

• Standard deductions related to children, with increased amounts and higher income thresholds for eligibility.
• A new deduction of RUB 18,000 for individuals who pass labor and defense readiness tests.

Simplified Taxation System (STS)

The STS has seen some adjustments. Income thresholds for eligibility have increased, along with changes to VAT obligations for businesses using this system.

Other Tax Changes

The corporate income tax rate has been raised to 25%, with some exceptions and incentives available. Changes to tax exemptions on certain financial transactions, such as the sale of shares or membership interests, have also been introduced, with exemptions no longer applying to amounts exceeding RUB 50 million.

General Information about Employee Tax and Payroll in Russia

• Employment contracts are mandatory and must be in Russian. They should clearly define the terms of employment, including salary, benefits, working hours, and termination conditions.
• The standard work week is 40 hours, with overtime limited to four hours over two consecutive days and a maximum of 120 hours annually. Overtime pay is typically 150% of the regular hourly rate for the first two hours and 200% thereafter.
• Employees are entitled to annual paid leave of at least 28 calendar days.
• Employers are responsible for calculating, withholding, and remitting employee taxes to the relevant authorities.
• Russia operates a pay-as-you-earn (PAYE) system, requiring employers to deduct income tax and social security contributions from employees' salaries each pay period.
• Payroll is typically processed twice a month.
• Employers must comply with various reporting obligations, including submitting payroll reports and tax returns to the tax authorities and social security funds.
• Non-compliance with tax and payroll regulations can lead to penalties and legal action.

It is crucial for employers to stay up-to-date with the latest tax legislation and regulations in Russia to ensure compliance and avoid potential penalties. Information provided is valid as of today, February 5, 2025, and may be subject to change. Consulting with a qualified tax advisor is recommended.

In Russia, Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates

• Standard Rate: 20% applies to most goods and services.
• Reduced Rate: 10% applies to specific goods like food, children's clothing, books, medical equipment, and certain services.
• Special Rate: 16.67% applies to electronic services provided by foreign suppliers.
• Simplified System of Taxation (SST) Rates (from 2025):
  • 5% if annual income is between RUB 60 million and RUB 250 million.
  • 7% if annual income exceeds RUB 250 million. These rates apply for at least 12 consecutive quarters.
• Zero Rate (0%): Applies to exports, international freight forwarding, certain transportation services, and specific supplies like raw hydrocarbons. (Note: As of today, February 5, 2025, a 0% VAT rate for hotels is in effect and is proposed to be extended until the end of 2030, pending legal amendments by April 1, 2025).

VAT Registration

• Threshold: No threshold exists; registration is generally required for any taxable activity, even a single sale.
• Exemption: Businesses with a turnover below RUB 2 million for the preceding three years can request an exemption.
• Timeframe: While the official registration period is five days, it often takes longer in practice.
• 30-Day Rule: No VAT registration is required if business activities in Russia do not exceed 30 days.

VAT Filing and Payment

• Frequency: Quarterly
• Deadline: The 20th of the month following the reporting quarter. (Note: The deadline for Q1 2025 declarations is April 25, 2025, with a new declaration form introduced).
• Method: Online filing is often mandatory but paper filing is also available in some cases.
• Input VAT Deduction: Claims can be made within three years, provided the supply is registered in tax accounting and supported by a VAT invoice.

VAT Exemptions

Exemptions apply to various goods and services, including but not limited to:

• Certain financial and insurance services
• Public transport
• Medical services
• Veterinary services (new exemption)
• Digital currency mining and sales (new exemption from 2025)
• Services related to digital currency transactions by authorized organizations within a specific legal framework.

Invoicing Requirements

Invoices must be in Russian and contain specific details:

• Sequential number and date
• Seller and purchaser names and addresses
• Taxpayer Identification Numbers (TIN) and Codes of the Reason for Registration (CRR) of both parties
• Description of goods/services
• Unit of measurement (if applicable)

This information is current as of today, February 5, 2025, and might change in the future. Consulting a tax advisor is recommended for specific situations.

Russia offers a range of tax incentives at both federal and regional levels, designed to attract investment and stimulate economic growth. As of 2025, significant changes to the tax code have been implemented, affecting both personal and corporate taxes.

Personal Income Tax

A progressive income tax scale has replaced the previous flat rate system.

• Up to RUB 2.4 million: 13%
• RUB 2.4 million - RUB 5 million: 15%
• RUB 5 million - RUB 20 million: 18%
• RUB 20 million - RUB 50 million: 20%
• Over RUB 50 million: 22%

Passive income (dividends, interest, etc.) is taxed at 13% up to RUB 2.4 million and 15% above that threshold. Tax deductions are available for expenses such as medical treatment, education, and charitable contributions.

Corporate Taxes

The standard corporate profit tax rate is now 25%, up from 20%. This consists of an 8% federal portion and a 17% regional portion.

• Investment Tax Deduction: Companies can deduct up to 50% of qualifying capital expenditures from their federal profit tax liability.

Special Economic Zones (SEZs)

SEZs offer various tax benefits to resident companies, including:

• Profit Tax: Potentially reduced to 0%, depending on the specific SEZ and region.
• Property Tax: Exemptions are often available.
• Social Security Contributions: Reduced rates may apply.
• Customs Duties: Benefits such as free customs zone treatment can be offered.

Other Incentives

• Research and Development (R&D): A super deduction of 150% of R&D expenses can be applied to reduce profit tax. Accelerated depreciation is available for fixed assets used in R&D.
• Specific Industries: Certain sectors, like IT and agriculture, might qualify for reduced social security contribution rates or other targeted benefits.
• Regional Incentives: Many regions offer their own tax incentives, such as reduced profit tax rates or property tax exemptions, to attract investment. These incentives often depend on factors like the industry, investment amount, and job creation potential.

It's crucial to consult with tax professionals for the most up-to-date and specific information relevant to individual circumstances. Tax laws and regulations in Russia can be complex and are subject to change. This information is current as of February 5, 2025, and should not be considered financial or legal advice.