Russia Tax Guide 2010

Transcription

1 Russia Tax Guide 2010

2 FOREWORD For any business looking to set up in a new market, one of the critical deciding factors will be the target country s tax regime. What is the corporate tax rate? What capital allowances can we benefit from? Are there double tax treaties? How will foreign source income be taxed? Foreword Since 1994, the PKF network of independent member firms, which is administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide businesses with the answers to these key tax questions. This handy reference manual provides clients and professional practitioners with comprehensive international tax and business information for over 100 countries throughout the world. As you will appreciate, the production of the WWTG is a huge team effort and I would like to thank all the member firms of the PKF network who gave up their time to contribute the vital information on their country s taxes that forms the heart of this publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF Witt Mares, and Rachel Yeo and Scott McKay, PKF Melbourne for co-ordinating and checking the entries from within their regions. This year s WWTG is the largest ever reflecting both how the PKF network is growing and the strength of the tax capability offered by member firms throughout the world. I hope that you find that the combination of reference to the WWTG plus assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business. Mark Pollock PKF Perth Chairman, International Tax Committee of the PKF network I

3 IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. Disclaimer This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. II

4 PREFACE The (WWTG) has been prepared to provide an overview of the taxation and business regulation regimes of over 100 of the world s most significant trading countries. In compiling this publication, member firms of the PKF network have sought to base their summaries on information current as of 30 September 2009, while also noting imminent changes where necessary. Preface On a country-by-country basis, each summary addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country s personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. In addition to the printed version of the WWTG, individual country taxation guides are available in PDF format which can be downloaded from the PKF website at Finally, PKF International Limited gladly welcomes any comments or thoughts readers may wish to make in order to improve this publication for their needs. Please contact Kevin F Reilly, PKF Witt Mares, Eaton Place, Suite 440, Fairfax, Virginia 22030, USA by to kreilly@pkfwittmares.com PKF INTERNATIONAL LIMITED APRIL 2010 PKF INTERNATIONAL LIMITED ALL RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION VI

5 ABOUT PKF INTERNATIONAL LIMITED PKF International Limited (PKFI) administers a network of legally independent firms. The PKF network is the 11th largest global accountancy network with over 240 legally independent member and correspondent firms which have a combined annual turnover of $1.9 billion. Located in 125 countries, the member firms of the PKF network share a commitment to providing clients with high quality, partner-led services tailored to meet each client s own specific requirements. The membership base of the PKF network has grown steadily since it was formed in Added to the sustained growth in the number of PKF member firms, this solidity has provided the foundations for the global sharing of expertise, experience and skills and the development of services that meet the evolving needs of all types of client, from the individual to the multi-national corporation. Services provided by member firms include: Assurance & Advisory Insolvency Corporate & Personal Financial Planning Taxation Corporate Finance Forensic Accounting Management Consultancy Hotel Consultancy IT Consultancy Introduction PKF member firms are organised into five geographical regions covering Africa; Latin America and the Caribbean; Asia Pacific; Europe, the Middle East & India (EMEI); and North America. Each region elects representatives to the board of PKF International Limited, which administers the network. While the member firms remain separate and independent, international tax, corporate finance, professional standards, audit, hotel consultancy and business development committees also work together to improve quality standards, develop initiatives and share knowledge across the network. Please visit for more information. VII

6 STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX/VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES B. DETERMINATION OF TAXABLE INCOME Structure CAPITAL ALLOWANCES DEPRECIATION STOCK/INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCED INCOME INCENTIVES C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROL H. PERSONAL TAX I. TREATY AND NON-TREATY WITHHOLDING TAX RATES VIII

7 INTERNATIONAL TIME ZONES AT 12 NOON, GREENWICH MEAN TIME, THE STANDARD TIME ELSEWHERE IS: A Angola...1 pm Argentina...9 am Australia - Melbourne...10 pm Sydney...10 pm Adelaide pm Perth...8 pm Austria...1 pm B Bahamas...7 am Bahrain...3 pm Barbados...8 am Belgium...1 pm Belize...6 am Bermuda...8 am Bolivia...8 am Botswana...2 pm Brazil am Brunei...8 pm Bulgaria pm C Cameroon...1 pm Canada - Toronto...7 am Winnipeg...6 am Calgary...5 am Vancouver...4 am Cayman Islands am Chile...8 am China - Beijing pm Colombia...7 am Costa Rica...6 am Croatia...1 pm Cyprus...2 pm Czech Republic pm D Denmark...1 pm Dominican Republic am E Ecuador...7 am Egypt...2 pm El Salvador...6 am Estonia...2 pm F Fiji...12 midnight Finland...2 pm France pm G Gambia (The) noon Germany...1 pm Ghana noon Greece...2 pm Grenada...8 am Guatemala...6 am Guernsey noon Guyana...8 am H Hong Kong...8 pm Hungary...1 pm I India pm Indonesia pm Ireland noon Israel...2 pm Italy...1 pm J Jamaica...7 am Japan...9 pm Jersey noon Jordan...2 pm K Kazakhstan...5 pm Kenya...3 pm Korea...9 pm Kuwait...3 pm L Latvia...2 pm Lebanon...2 pm Leeward Islands (Nevis, Antigua, St Kitts)....8 am Libya...2 pm Liberia noon Lithuania...2 pm Luxembourg...1 pm M Malaysia...8 pm Malta...1 pm Mauritius...4 pm Mexico...6 am Morocco noon N Namibia pm Netherlands (The) pm Netherlands Antilles am New Zealand midnight Nigeria...1 pm Norway...1 pm O Oman...4 pm P Panama am Papua New Guinea pm Peru...7 am Philippines...8 pm Poland pm Portugal...1 pm Puerto Rico...8 am Q Qatar am Romania...2 pm Russia - Moscow/St Petersburg pm S Sierra Leone noon Singapore...7 pm Slovak Republic pm South Africa...2 pm IX Time Zones

8 Spain...1 pm Swaziland...2 pm Sweden...1 pm Switzerland...1 pm T Taiwan...8 pm Tanzania...3 pm Thailand...7 pm Trinidad and Tobago am Turkey...2 pm Turks and Caicos Islands am Time Zones U Uganda...2 pm Ukraine...2 pm United Arab Emirates pm United Kingdom (GMT) 12 noon United States of America - New York City am Washington, D.C am Chicago...6 am Houston...6 am Denver...5 am Los Angeles...4 am San Francisco am Uruguay...9 am V Vanuatu...11 pm Venezuela...8 am Vietnam Z Zambia...2 pm X

9 Russia RUSSIA Currency: Rubles Dial Code To: 7 Dial Code Out: 810 (RUR) Member Firm: City: Name: Contact Information: Kazan S Nikiforov nikiforov@acg-pkf.ru Moscow Nadejda Orlova OrlovaN@fbk.ru Zlatoust Raisa Istomina ekozlat@chel.surnet.ru A. TAXES PAYABLE FEDERAL TAXES AND LEVIES Enterprises and individuals are liable to taxes and contributions imposed by the Russian Federation and its territorial divisions (republics, regions and provinces). COMPANY TAX Russian tax law distinguishes between domestic and foreign enterprises. Domestic enterprises are those which are established under the laws of Russia and are taxed on their worldwide income. Foreign legal entities are subject to Russian profit tax on profits derived from business activities carried on through a permanent establishment in the Russian Federation. The standard rate of tax is currently 20% of which 2% is normally paid to the federal government and 18% to republican authorities. The tax rate for the share transferred to regional authorities may be as low as 13.5%. Foreign enterprises deriving income which is not connected with carrying out their business activities through a permanent establishment pay profit tax at the rate of 20% and 15% on dividends. The tax year is the calendar year. With the exception of foreign legal entities, enterprises are obliged to make monthly advance payments of their quarterly liabilities. Advance payments are due not later than the 28th day of the corresponding month. Domestic enterprises have the option to pay tax monthly based on their actual profits. Payments are due no later than the 28th day of the following month. Foreign enterprises carrying out their business activities through permanent establishments make quarterly advance payments. In general, income tax returns must be filed no later than 28 March following the tax year. Under the current tax law, there are no special benefits provided for entities such as religious associations, state and municipal museums, libraries or specialized restoration. The following allowances are deducted from the taxable base: (a) foreign financing of capital investments (b) grants for the benefit of culture, sports, recreation, scientific research and approved research foundations hold more than 50% of the share capital of the recipient. The assets should not be distributed to a third person within a year of the original transfer. R CAPITAL GAINS TAX Capital gains are treated as ordinary business income and are therefore subject to profits tax according to the general rule. BRANCH PROFITS TAX There is no special branch profits tax in Russia. SALES TAX/VALUE ADDED TAX (VAT) There is no sales tax in Russia. VAT is levied on the sale of goods and services in Russia and the import of goods into the Russian Federation. The taxable base is the sales price. 1

10 Russia The standard rate of VAT is 18%. Some supplies of basic foodstuffs and children s clothing and footwear are taxed at a reduced rate of 10%. Some imported medicines, medical equipment and scientific research are exempt from VAT. Other exemptions include cultural and educational services, as well as services rendered by lawyers. The tax period for VAT is per quarter. A foreign legal entity carrying out its business activity through several branches located within the territory of the Russian Federation can independently choose one branch through which VAT on the sales and services of all branches should be paid. OTHER FEDERAL TAXES A tax on transactions in securities applies to the nominal sum of the securities issued by a joint-stock company, except for the initial issue. The tax is paid by the issuer at a rate of 0.2% on the nominal sum of the issued securities (maximum RUR 100,000). Excise Duties are levied on some goods such as alcohol, beer, cigarettes, cars and petrol. A mineral resources recovery tax applies to the cost of minerals extracted by a taxpayer company. Companies and individuals exercising water consumption for special purposes are subject to water tax. The tax rate is fixed and depends on the water body used. SPECIAL SYSTEM OF TAXATION Local authorities may determine an alternative income tax for certain small business activities such as personal services and retail sales. The tax is paid instead of profit tax, VAT (except on the import of the goods into the Russian Federation) and property tax. In this case, taxpayers calculate common tax at the rate of 15% based on standard income and determined by the local legislative body. In some cases, a simplified system of taxation may be applied as an alternative to common tax. Taxpayers whose income does not exceed RUR 15m after the end of the ninth month of the tax year (excluding VAT) have a right to use this system of taxation during the following year (except for banks, enterprises with affiliated branches etc.). These enterprises do not pay profit tax, VAT (except on the importation of the goods to the Russian Federation) and property tax. Only one tax is levied, as with common tax. The tax payer can choose the taxable base for this tax - either gross income for the 6% rate or income minus expenses for the 15% tax rate. LOCAL TAXES Local authorities can define certain tax rules but cannot impose taxes not stipulated by the federal tax law. Land tax is payable at a rate of 0.3% on agricultural and residential land and 1.5% on other types of land. The taxable base is the value of land as stated in the state land register as at 1 January of the relevant tax year. R OTHER TAXES Resident enterprises and foreign companies that own property within the territory of the Russian Federation are liable to property tax. The rate is set by the regional authorities but cannot exceed 2.2%. The taxable base is the average aggregate annual depreciated value of fixed assets on the balance sheet of the resident company or permanent establishment concerned. Foreign companies which do not have a permanent establishment in Russia and which own only movable property are not subject to Russian Property Tax. The owners of transport facilities (cars, motorcycles, buses etc) pay transport tax. This tax is imposed by territorial divisions of the Russian Federation (republics, regions and provinces). The tax rate depends on the technical specification of the vehicles owned. Taxpayers must pay the tax according to a contributory scheme determined by legislative bodies of regions of the Russian Federation. Companies operating gambling establishments are subject to a tax on the gambling industry. The tax rates are fixed and are not related to profit. B. DETERMINATION OF TAXABLE INCOME Taxable profits are calculated by ascertaining assessable income and then deducting all allowable expenses. In general, companies may deduct all necessary expenses paid or accrued during the year in the course of a business. DEPRECIATION Only the straight-line method may be used to calculate depreciation of certain groups of fixed assets such as buildings, construction and transfer mechanisms. Depreciation 2

11 Russia of other fixed assets should be calculated by a taxpayer using either the straightline method or the accelerated method, depending on which method they prefer. Depreciation is calculated on a monthly basis and must be taken whether or not the company makes profits in the period. STOCK/INVENTORY Under accounting law, stock is valued at its purchase cost. The profits tax law contains no provision concerning valuation of stock. The cost of materials transferred to production may be determined by the following valuation methods: average cost, cost of item, FIFO or LIFO. CAPITAL GAINS AND LOSSES As discussed above, capital gains and losses are subject to profit tax at regular corporate rates. DIVIDENDS Dividends paid by Russian companies are subject to a final withholding tax whether they are paid to resident or non-resident recipients. Dividends received by resident companies are subject to a 0% withholding tax rate if: This tax rate is 15% if paid to a non-resident company or individual and 9% if paid to a resident company or individual. INTEREST DEDUCTIONS Thin capitalisation rules apply where interest is paid to a foreign enterprise that holds more than 20% of the share capital of a Russian entity. If the debt exceeds equity by more than 3:1 (for bank companies more than 12.5:1), the amount of interest deductible by the Russian entity is restricted. The difference between the real amount of interest and that calculated under Russian Tax legislation is treated as a dividend paid out by the Russian entity to its foreign shareholder and is subject to 15% withholding tax base. LOSSES Current trading losses may be used to offset profits for the same tax year. Losses may be carried forward for ten years. With effect from 1 January 2007, losses may be carried to the following tax period without any restrictions relating to the tax. FOREIGN SOURCED INCOME Foreign sourced income and gains are subject to profit tax at the regular rate. C. FOREIGN TAX RELIEF The Russian tax law provides a tax credit for foreign taxes paid on foreign sourced profits or revenues subject to a limit which is equal to the maximum amount of Russian tax due on the same profits or revenues. Any excess foreign tax credits may not be transferred to future or previous periods. No credit is granted for underlying corporate income tax on dividends. D. CORPORATE GROUPS The concept of fiscal unity does not exist in Russian law and there is no provision for combining the profits or losses of one enterprise with those of another in the same group. R E. RELATED PARTY TRANSACTIONS The Tax Code of the Russian Federation regards related parties as those where: the other person Tax authorities may control prices on transactions: market value of more than 20%. 3

12 Russia F. WITHHOLDING TAXES Foreign legal entities obtaining profits in connection with activities within Russia may be subject to withholding taxes on dividends, interest and royalties. Domestic and treaty rates are set out in Section I below. G. EXCHANGE CONTROL Generally, hard currency transactions between Russian residents and non-residents are executed without any limitation. However, certain transactions are subject to state regulations and restrictions. Hard currency transactions between residents are forbidden with certain exceptions. Hard currency transactions between non-residents may be carried out without limitations. H. PERSONAL TAX Personal income tax is levied on resident and non-resident individuals, whether or not they are citizens of the Russian Federation. Individuals are considered to be resident if they spend more than 183 days in Russia in a calendar year. Residents are subject to income tax on their worldwide income and non-residents on their Russian-sourced income only. The personal income tax rate for residents is 13%. A special 35% rate is applied to some kinds of income, e.g. the cost of any prizes and wins, voluntary insurance proceeds, interest on certain bank deposits and deposits on foreign currency. A 9% rate is applied to income in the form of dividends received from share holdings. All personal income of non-residents, including dividends, is taxed at the rate of 30%. The following types of income are exempt from tax: in compliance with legislation currently in force discharging of labour duties international and foreign organisations In determining the taxable base, individuals are entitled to the following statutory deductions: R According to the tax legislation: that are exempt from income tax. Gifts of immovable property, vehicles and shares are taxable unless these items are received from close relatives to RUR 4,000 in a calendar year. The excess is taxable at a rate of 13% for residents and 30% for non-residents INSURANCE CONTRIBUTIONS From 2010, employers pay separate insurance contributions on the payroll cost of employing Russian employees. For 2010 the aggregate amount of contributions is 26%. For 2011 the aggregate amount of contributions will be 34%. Special rates are established for certain groups of employers and professions. I. TREATY AND NON-TREATY WITHHOLDING TAX RATES The table below shows the withholding tax rates on dividends, interest and royalties under tax treaties concluded by the USSR and the Russian Federation. The Russian Federation has announced that it will honour the international 4

13 Russia agreements existing between the USSR and other countries. The table is for general guidance only. The relevant treaty should be consulted to confirm the rates applicable in each case. Dividends (%) Interest (%) Royalties (%) Non-treaty countries: Treaty countries: Albania Algeria 5/ Armenia 5/ Australia 5/ Austria 5/ Azerbaijan Belarus Belgium Brazil 10/ Bulgaria Canada 10/15 0/10 0/10 China Croatia 5/ Cyprus 5/ Czech Republic Denmark Egypt Finland 5/ France 5/10/ Germany 5/ Greece 5/ Hungary India Indonesia Iran 5/10 7,5 5 Ireland Iceland 5/ Israel Italy 5/ Japan /10 Kazakhstan Korea, Democratic Republic of, Korea, Republic of 5/ Kuwait Kyrgyzstan Lebanon Lithuania 5/ /10 Luxembourg 10/ Macedonia Malaysia (1) /15 (2) 0/15 10/15 Mali 10/ Mexico R 5

14 Russia R Dividends (%) Interest (%) Royalties (%) Morocco 5/ Moldova Mongolia (1) Montenegro 15/ Namibia 5/ Netherlands 5/ New Zealand Norway Philippines Poland Portugal 10/ Qatar Romania Serbia 15/ Singapore 5/ Slovak Republic Slovenia South Africa 10/ Spain 5/10/ Sri Lanka 10/ Sweden 5/ Switzerland 5/15 0/5/10 0 Syria /18 Tajikistan 5/ Thailand Turkey Turkmenistan Ukraine 5/ United Kingdom United States 5/ Uzbekistan Venezuela 10/15 5/10 10/15 Vietnam 10/ There is no reduction under the treaty the domestic rate applies. 2 The 15% rate applies to Joint Ventures. The domestic rate applies in other cases. 6

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