The income tax system in Russia is very simple and straightforward, as long as you are a long-term resident of Russia, and do not have self-employment income.
Income in Russia – Tax Residents
Expatriates are liable to pay Russian income tax if they either have permanent residence, a long-term status, such as a work visa, or are present in Russia for more than 183 days in a calendar year.
The flat tax rate on income is 13%. Income tax is withheld by the employer; and, if you do not have any other income, you do not have to file a tax return unless you wish to claim itemized deductions. Itemized deductions are limited to a once-per-lifetime home purchase deduction, and certain educational and medical expenses. This process is tedious, difficult, and not guaranteed to be successful, so few try it, even if they have qualified expenses.
Income in Russia – Non-Residents
Individuals who spend 183 days or less in Russia during a calendar year (regardless of visa status during those days) are liable to pay income tax on income earned from sources in Russia, at a rate of 30%. This is withheld at the source of income, and tax returns are not required.
You may be able to partially or fully avoid this tax pursuant to tax treaties between your country and Russia. To request an exemption, you must submit an official request to the tax authority, using a tax professional as an intermediary. See Tax Advisors/Accountants.
The same tax rates apply to self-employment income as to other income; however, the process of paying it is more complex because there is no employer withholding involved. Due to this level of complexity many expats chose to instruct an accountant to act on their behalf.
If you have self-employment income, you will need to submit two returns – a preliminary and a final – and of course payment. These must be submitted to your local tax office which can be found (in Russian only) on the Ministry of Taxation website: http://www.nalog.ru/
- Preliminary Return – This must be submitted to tax authorities within one month of your arrival to Russia, if you expect to be present for more than 183 days during that calendar year. It states how much income is expected (converted to rubles, if necessary).
- Making Payment – The tax authorities calculate your tax liability based on your preliminary return; and schedule payments for you to make by May 15, August 15, and November 14. Income tax must be paid in rubles.
- Final Return – The final return is due no later than April 30th of the year following the applicable tax year. If you permanently leave Russia before the end of the year, you should submit the final return one month before your departure. On the basis of the final return, the tax authorities issue a final tax assessment. If you owe more than previously assumed, payment must be made within one month. If you are due a refund, it can be either issued to you (in rubles) or used to offset future liability.
Depending on the details of your country’s tax treaty with Russia, personal income tax withheld in Russia may be offset against tax to be paid in the country of the expatriate’s permanent residence; or tax that you are liable for in your home country may be used to off-set your tax liability in Russia.