Personal Income Tax in Russia

Author: Dmitry Paranyushkin (on 14 Oct 2019)
If you receive payment from the sources in Russia (such as a salary, a one-off payment, or income from selling your real estate) the tax on such income needs to be paid in Russia. If you are not a tax resident in Russia and your country has a double taxation agreement with Russia, you would then deduct the tax you've paid in Russia from the tax you owe in your country of tax residency.
 
You can get paid in Russia even if you don't have a temporary residency permit (RVP) or a work visa. But in this case you cannot get a salary, only irregular payments from time to time. A type of visa that could be used for this type of sporadic jobs is a business visa, which you can get online.
 
There are also several different ways how you can optimize your taxes in Russia. There are some special conditions in the Russian tax code that allow the non-residents to reduce their personal income tax from 30% to 13%. Alternatively, if you receive income several times a year, you might want to open a limited company and register it under the simplified accounting system, which means you'd only pay 6% on your revenue (or 15% on your profits) and would not have to charge VAT (20%). Also you would only have this income taxed in your country of residence if you take out dividends from your company.
 
Below we explain how the both systems work.
 
 

Personal Income Tax in Russia: NDFL

The personal income tax (NDFL in Russian — НДФЛ — налог на доход физических лиц) is 13% for tax residents and 30% for non-residents.
 
For the purposes of the Russian tax code you are considered to be a tax resident if you spent more than 183 (consecutive or nonconsecutive) days in Russia during the last 12 months. In that case your personal income tax rate is 13%. Alternatively, if you spent less than 183 days in Russia you are a non-resident for the tax purposes (even if you have a residency permit or a Russian passport) and your personal income tax rate is 30%.
 
The tax on your income has to be usually paid by the organization that makes the payment to you. However, it is not always fully clear who has this obligation, so if you receive income in Russia you should check whether the tax has been paid on it. If not, you would have to file your own declaration in Russia and pay the personal income tax (NDFL) at the correct rate.
 
If you are selling real-estate in Russia, you would also have to pay 13% if you were a tax resident and 30% if you were a non-resident. You would normally pay that price on the whole amount, however, in some cases you may be able to present a previous contract which shows the price you bought the real-estate for and only pay the tax on the difference, if the sale price is higher than the original purchase price. Also, if you owe the real-estate for longer than 3 years you don't have to pay the personal income tax when selling it.
 
If you receive dividends from a Russian company or on the Russian shares you own, you need to pay 15% tax on these dividends if you are non-resident.
 
If you receive inheritance from Russia (money, real-estate etc) the tax rate is very low: you would pay about 0.3% on the total amount.
 
 

How to File a Personal Income Declaration in Russia

The easiest way to file your personal income declaration in Russia is electronically through the tax office's website www.nalog.ru or using their app (Android or iPhone) — Налоги ФЛ. To register you would need to first get your universal tax number (INN in Russian, ИНН — индивидуальный номер налогоплательщика), which you can also apply for online (you will need to visit the office though to get it). Once you receive your INN, you can log in your personal space online and file your taxes. This should be done not later than the 1st April of the year following the year when you received your income (so, for example, if you received any income in 2019 you have until the 1st of April 2020 to submit your tax declaration and pay the tax).
 
The best way to file the declaration is to do this online, because you can follow the instructions of the tax service and specify all the right details. However, if you don't want to deal with it, you can also ask for a consultant to help you.
 

Highly Skilled Workers in Russia pay a Reduced Income Tax

If you are a highly skilled worker, you would have a reduced income tax. Even if you are a non-resident, you'd pay 13% on your income. For the purposes of taxation the highly skilled workers are either
 
• University professors, teachers, lecturers invited by a government institution who receive a payment higher than 1 Mln R (€15000) per year (can be in several transfers or in one payment). The type of visa you have doesn't matter in this case: you could have a university visa or a business visa, or also a long-term work visa.
 
• Individuals who work at the Skolkovo innovation center (no limit on the salary). In this case you can get paid even if you don't have a work visa: you can be on a standard business visa.
 
• All other workers who have a yearly salary of more than 2 Mln rubles (€30000). If you fit into this category you need a work visa for your application to be valid.
 
 

Optimizing Your Tax Liabilities in Russia

If you are working in Russia as a freelancer, a contractor or on the permanent basis you might want to consider registering a Limited company in Russia (OOO — society with a limited liability — общество с ограниченной ответственностью in Russian) or as an "individual entrepreneur" (индивидуальный предприниматель - ИП or IP in Russian). Don't write it off as a crazy idea: the internet and the banking infrastructure is very well developed in Russia. You can be very flexible in terms of controlling your accounts, submitting your tax reports, and doing accounting online. Plus, the tax system is very attractive if you are earning less than €2 Mln a year.
 
As you register the company or the entrepreneur status you could apply for the simplified tax system (упрощенная система налогообложения - УСН or USN in Russian) and then you can choose to pay 6% on your revenue or 15% on your profits, which makes it a very attractive form of running a business even if you are based abroad.
 
To set up a company you would have to pay about €100 for a Limited liability one and less than €20 for the entrepreneur status. The problem with entrepreneur status (IP) is that you need a temporary residence permit (RVP) in Russia to open it, so if you don't want to bother getting it opening a limited liability company is a better option. Moe Delo offers Russian company registration packages for €100 (basic) and for €150 (extended) — with a consultation on the best company form to choose. We recommend the latter, because as an English-speaking customer you might benefit from that extra level of customer support.
 
 

How to Submit Your Personal or Company Accounts in Russia

You would be able to submit your accounts online (after you get a digital signature) and the Russian banking system is pretty well developed, so once you set everything in order you would be able to work on your accounts remotely. Once you have the simplified tax system status, you'd need to send your reports every 3 months. There are a few different kinds, but there are many companies that offer digital accounting services for about €20 a month. One that we can recommend is Elba Contur or Moe Delo — both will submit your accounts online and remind you when they are due. You would only need to visit their office once to set up the digital signature.

Obviously, because your costs would be about $240 a year plus your minimum tax per annum on the simplified tax system is about $300, it makes sense to open a company in Russia only if you plan to earn more than $1800 in that year from the sources in Russia. Of course, it becomes much more attractive if you also want to move your other business to your Russian company in which case you will probably save on taxes as the 6% revenue tax rate is much lower than what you get in other countries around the world.

 

Consult a Russian Lawyer on the Tax Matters

You can get a consultation with a Russian tax lawyer recommended by Way to Russia over the phone, Skype, Zoom, WhatsApp or in a personal meeting. He will be able to provide you the detailed information with all the references to the Russian law based on your particular case. He has been working in this field since 2008 and has an extensive knowledge of the Russian tax code and the related law practice. So whether you're interested in your personal tax matters or want to find out specific information about your company's tax liabilities in Russia, he will be able to help you.
 
If you are interested, please, fill out the form below and describe your case. Your request will be sent the lawyer directly who will contact you to confirm whether or not he can help you with your case and you will also be able to arrange the time and date for your consultation. The price of the consultation is 2000 Rubles (€28) per every 15 minutes and you will only be charged for the number of minutes you spend discussing your case. A short question will usually need about 15 minutes while a longer case may take up to an hour.
 
 
 
 
 
 



 

Comments, Questions, Feedback?

If you have a question, please, post it in Way to Russia forum or tweet @waytorussia.

For comments and feedback about this article, use the form below.

 

 

 


Most Recent Articles:

Russian Tax Legislation

If you are working or running a company in Russia you are subject to several different taxes, which you should be aware of in order to make sure you don't break the law.

The Legal Status of Foreigners in Russia: Residency Permits and Long-Term Work Visas

When you travel to Russia on a tourist or a business visa you can stay in Russia not longer than 90 days in every 180-day period (they don't have to be consecutive but may also be), so if you need to settle in Russia for longer, you will need a different type of visa.

How to Marry in Russia

Marrying in Russia is not an easy task, but it's feasible and this complete step-by-step guide is based on our own experience of the process.