All income received in the course of a calendar year from employment is subject to PIT. This includes all earnings, bonuses, and other forms of payment or remuneration in cash or in kind.
For expatriates, taxable income includes allowances paid to employees living in Russia and compensation for food and travel by employees and their families on holiday, and other non-business purposes. Benefits in kind are taxed at their monetary equivalent (market price).
Employer’s contributions to Russian-licensed non-state pension funds and under pension insurance agreements (with a licensed insurance company) are not taxable for the employees, whereas the respective pension and insurance payments are taxable.
Stock options are a quickly developing area for both multinational and Russian companies doing business in Russia. However, there are currently no special rules for the taxation of stock option plans, and their tax treatment is based on the general provisions of the law, which may be subject to various interpretations. Generally, an individual is taxed at grant, based on modified Black-Scholes formula, and on exercising the option, on the difference between the fair market value of the shares at exercise and the exercise price.
Individuals receiving income from entrepreneurial or similar activities are supposed to be properly registered. Taxation of individual entrepreneurs depends on the applicable taxation system.
There is no separate capital gains tax in Russia. Instead, gains from the disposal of property and assets are subject to income tax at the normal rate. The taxable amount is calculated as the difference between (i) sale proceeds and (ii) historical cost or application of a statutory exemption.
A statutory exemption is available for tax residents only. It is provided for all property sold during a calendar year and is limited to RUB 1 million in the case of real estate and RUB 250,000 for other property. The statutory exemption does not apply to gains on assets disposed of in the course of entrepreneurial activities. Additionally, the legislation sets special rules for transactions with securities and derivatives.
Another capital gains provision is available only for Russian tax residents. Under this provision, proceeds received from the sale of real estate are excluded from taxation if the property is owned for three years or more. For property obtained from 2016, the term of possession for exemption was generally increased for five years.
Dividends received by residents from both Russian and non-Russian sources are taxed at 13%.
Dividends received by non-residents from Russian companies are taxed at 15%.
Interest income from deposits outside Russia is included in taxable income. Interest and gains from deposits in banks and other credit institutions in Russia (above set limits) are also included in taxable income.
A tax rate of 35% is applied to interest income in excess of (i) the amount calculated based on the Central Bank’s current interest (key) rate increased by five points for deposits made in roubles or (ii) 9% annual interest for foreign currency deposits.
The positive difference between a notional interest amount calculated with reference to a benchmark rate set by the Russian legislation and actual interest paid on all loans is taxable under certain circumstances at 35%.
Rental income from leasing property, both in Russia and abroad, is included in taxable income.
Royalties from the creation, publication, performance, and use of works of literature, art, and science, as well as from inventions, discoveries, and industrial prototypes are included in taxable income (subject to deductions).
In addition to the exemptions mentioned above, the following income is not taxable to an individual:
- Reimbursement by an employer for expenses arising from a work-related change of domicile (in limited circumstances).
- Payments by an employer in compensation for injury or damage to health incurred in the performance of employment duties.
- Severance gratuities payable upon dismissal (within established limits).
- Reimbursements by an employer for business travel expenses (within established limits) if certain documentary requirements are met.
- Income from Russian state pensions (currently, the statutory pension age is 60 years for men and 55 years for women, but many groups of employees have a right for early retirement, which is usually five or ten years earlier than the standard retirement age).