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Russia: Domestic Taxation

Tax Rates

The rate of corporate profits tax in Russia is currently 20% (reduced from 24% in 2008). Of this amount, 2% is payable to the central government, and the remainder is payable to the regional government. Regional governments have the power to reduce the regional element by up to 4%.

Capital gains are usually taxed at the corporate profits tax rate of 20%.

There is no branch remittance tax, but there are withholding taxes as follows:

  • Dividends 9% (15% if either the payor or recipient of the dividends is a foreign legal entity);
  • Interest: 0% on domestic payments; and 20% on payments to non-treaty countries.
  • Freight expenses 10%, but only if the payor does not have a Permanent Establishment in Russia;
  • Royalties from patents, know-how, etc. 20% (for payments to non-treaty countires; exempt for domestic payments);
  • Payments of other Russian source income to foreign companies 20% (ditto)

From 1st January 2007 there is unlimited carry-forward of prior-year losses from the previous 10 years, and a FIFO basis is applied; there is no carry-back. Until 2006, only 30% of current year profits could be sheltered with prior year losses.

There is no tax credit with the domestic 9% dividend tax, but if a Russian legal entity pays the dividend onwards to its own investors, this is untaxed. Thus an RLE deducts dividends received from dividends paid out before calculating tax payable on the balance.

 

 

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