Different Types of Taxes In Russia

Russia experienced various upheavals in the process of establishing a stable taxation system in the country. Taxation in Russia underwent a reform in 2001. Tax reform in Russia was undertaken in order to incorporate a system of taxation, which was taxpayer friendly. The main objective however was to establish a transparent evaluation method of taxation in the country.

Taxation in Russia- at a glance:

In Russia, income tax is payable at the rate of 13 percent, which is a flat tax rate. This rate is applicable for residents of Russia. However, a non resident Russian is required to pay 30 percent as personal income tax. Income on dividend attracts 9 percent. This was the scenario in the year 2006. Corporate tax in Russia was 24 percent in the year 2006.

There are different types of taxes in Russia. These are imposed on Russians by the government. There are different criteria for the payment of taxes.

Different types of taxes in Russia:

A) Personal income tax:

Depending on the salary of an individual, amount of personal income tax is determined in Russia. An individual who has his own business firm is also required to pay tax on the profit earned by him. An individual who is not a Russian but is residing in the country for the purpose of employment is liable to pay tax only for the taxable income. A tax payer who is self employed is also required to make payments to the government in advance. Since, the payment is made in advance, if the taxpayer is entitled for a refund, this is done at the time of filing tax returns.

B) Corporate tax:

There are two tax rates pertaining to corporate tax in Russia. Federal tax rate is 6.5 percent and regional tax rate is 17.5 percent in the country. Profit tax can be imposed by the maximum rate of 24 percent in Russia. Alternatively, one can also opt for the “simplified tax systemâ€. Under this system, the individual tax, value added tax, profit tax and the property tax are replaced. The tax rate applicable for this alternative system of taxation is 6 percent on profit and 15 percent on “profit less listed expensesâ€.

C) Capital gains tax

(i) In case of an individual:

In case of a citizen, the capital gains tax rate is 13 percent and in case of a foreign national, the tax rate is 30 percent.

(ii) In case of a corporation:

Capital gains are not inflation adjusted. Depending on the profit earned, the corporations are liable to pay the tax.

D) Withholding tax:

With regard to royalties, tax rate payable is 20 percent. The same applies for interest. In case of dividends, 9 percent is the tax rate for Russians and for foreigners, the tax rate has been fixed at 15 percent.

E) Value Added Tax or VAT:

In majority of the cases, the value added tax is 18 percent. Value added tax applicable for food products and other products used by children is 10 percent.

Cases of VAT Exemption

Import of medicines and other medical items are exempted from VAT. Income earned from rendering medical services and sale of medical goods also enjoys VAT Exemption. Export activities are not taxed with VAT. Profits earned from banking services as well as income earned from insurance are exempted from value added tax.

Mode of payment of value added tax or VAT:

If the amount to be payed as value added tax is above R2 million, then the tax is paid by the 20th of every month. If the amount of the tax is below R2 million, then the tax is paid after every three months or quarterly.

F) Property tax in Russia:

Depending on the depreciation, property tax is levied on movable assets as well as immovable assets. Maximum rate of property tax imposed in Russia is 2.2 percent.

Given above are the different types of taxes in Russia. History of Russian taxation reveals that prior to tax reform in Russia, confusion about taxation ruled supreme in the country. It was Mikhail Motorin, who took up the strain to pave way for an established taxation system in the country. His efforts were maintained by Minister Boris Yeltsin and is now being upheld by Vladimir Putin.