Russian Federation

Corporate - Income determination

The accounting period in Russia is the calendar year. Different periods are not permitted. The taxable base is calculated on an accrual basis (only small-scale taxpayers are allowed to use a cash basis).

Taxable income is to be calculated following the rules and principles established in the RTC. Taxpayers must maintain tax accounting registers. Statutory accounts may be used for computing tax items for which accounting methods are the same. In practice, most taxpayers use statutory accounts as a basis and apply adjustments so as to arrive at their taxable income.

Inventory valuation

Inventory can be valued using one of the following methods: first in first out (FIFO), average cost, and individual unit cost.

Capital gains

Capital gains are subject to the same 20% CIT rate and are added to ordinary income in order to arrive at the taxable income.

There are two tax baskets for taxpayers performing operations with securities and derivatives: (i) general and (ii) results from operations with non-listed securities and non-listed derivatives. A loss on the second basket cannot be offset with profits on the first basket (however, the opposite offset is possible). It is worth noting that prices charged in transactions with securities and derivatives should be compared with the market price only if a transaction is controlled under transfer pricing rules.

Gains from the sale of fixed assets and other property are equal to the difference between the sale price and their net book value for tax purposes. Losses resulting from the sale of fixed assets should be deducted in equal monthly instalments during the period, defined as the difference between their normative useful life and the actual time of use.

A 0% tax rate is available for capital gains from the sale or other disposal (including redemption) of shares in Russian and (or) foreign entities (interests in Russian and (or) foreign entities’ charter capital) held before the sale for more than 5 years. One of the following conditions must be met in order to apply a 0% tax rate:

  1. Less than 50% of the entity’s total assets are represented by Russian immovable property at the end of the month preceding the sale;
  2. Shares sold are shares of listed Russian technology companies.

Also, the exemption does not apply to the shares of the the companies located in black listed jurisdictions.

Dividend income

Dividends earned by Russian legal entities from Russian legal entities or FLEs are taxed in Russia at a 13% flat rate.

Participation exemption rules (0% rate on dividends) are applicable to the following situation:

  • the owner (recipient of dividends) owns at least 50% of the capital of the payer of dividends or owns depository receipts entitling it to receive at least 50% of the total amount of dividends paid out, and
  • the shares or depository receipts have been owned for at least 365 calendar days at the date when the dividends are declared.

Dividends from companies domiciled in low tax offshore zones are not eligible for this tax exemption. The Ministry of Finance maintains a list of offshore zones.

Effective from 2021, a 0% tax rate may not be applied to dividends distributed between Russian corporate tax residents when using the look-through approach. It sets a transition period of 1 January 2021 through 31 December 2023 during which a 0% rate may be still applied, provided certain conditions are met.  

Foreign companies being Russian tax residents may apply a 0% tax rate on dividends through 31 December 2023.

Tax on dividends from abroad withheld in the source country may be credited against Russian tax.

The standard 15% tax rate is applicable to dividends paid by Russian legal entities to FLEs. The tax should be withheld by the Russian legal entity paying dividends. The tax may be reduced based on a relevant DTT, usually to 10% or 5% (see the Withholding taxes section for more details).

Interest income

Interest income is taxed on an accrual basis. A standard tax rate of 20% is applied to interest income, except for interest on government and municipal securities, which are taxed at 0%, 9%, or 15%, depending on the type of security.

The WHT rate on interest income paid abroad equals 20% and may be reduced (typically to zero) under relevant DTT.

The level of interest income recognised for tax purposes may be subject to control (see Interest expense in the Deductions section for more details).

Royalty income

There is no separate tax on royalty income. A standard CIT rate of 20% applies.

Exchange gains and losses

Foreign exchange gains and losses are recognised for tax purposes on an accrual basis only.

Foreign income

Russian legal entities pay tax on their worldwide income. Credit relief is available for foreign taxes paid up to the amount of the Russian tax liability that would have been due on the same amount under Russian rules.

Current tax legislation does not contain provisions that allow tax deferral with respect to foreign income.