Russian residents are liable to personal income tax (PIT) on their total worldwide income received in a calendar year. Non-residents are taxed on income received from sources in Russia. Some tax treaties provide for periods of exemption from Russian taxation on the Russian-source income of non-residents. Consequently, the details of any applicable tax treaty should always be examined before commencing work in Russia.
Income from Russian sources includes, but is not limited to, income received from property located in Russia, dividends received from Russian legal entities, and remuneration for activities performed in Russia (even if paid by a foreign legal entity from abroad).
PIT is payable in roubles at the rates applicable to certain income categories.
Earnings in any foreign currency are converted into roubles at the exchange rate of the Central Bank of the Russian Federation on each date the income is received/expenses are incurred.
Personal income tax rates
As of 1 January 2021, progressive taxation is introduced in Russia. Generally, an annual income of up to RUB 5 million will be taxed as 13%, whereas income above this limit will be taxed at 15%. However, there are several exceptions to this rule:
- Income from the sale and receipt of property other than securities as a gift and taxable insurance and pension payments is subject to a flat rate of 13%.
- The value of any awards and prizes received during contests, games, and other events conducted for the purpose of advertising goods, work, and services, in excess of set limits, is taxed at 35%.
- Loans taken with an interdependent entity (i.e. an entity in which the individual has direct or indirect control), with an employer, or representing the offset of a counterclaim from an individual to the lender, which are considered as 'beneficial loans'. Interest rates on beneficial loans are less than 9% (for non-Russian currency loan) and less than 2/3 of refinancing rate of the Central bank of Russia (for ruble denominated loans). The difference between the actual interest paid and interest recalculated at the respective rate is taxed at 35%.
Non-residents are liable to a flat PIT rate of 30% for all types of income received from Russian sources, except for the following:
- Dividends from Russian companies are taxed at 15%.
- Income of highly qualified foreign professionals (see below) is taxed at 13%/15%.
- Certain income of foreign nationals from non-visa countries (see below) is taxed at 13%/15%.
- Income of refugees for work duties is taxed as 13%/15%.
- Interest income from Russian banks up to RUB 5 million shall be taxed at 13%, whereas income above this limit will be taxed at 15%.
Tax on professional income
As of 1 January 2019, a new experimental tax regime was introduced in four regions of Russia: Moscow, Moscow region, Kaluga region, and Republic of Tatarstan. It is available to Russian citizens and citizens of countries that are a member of the Eurasian Economic Union (Belarus, Kazakhstan, Armenia, and Kyrgyzstan). Since 1 January 2020, this new regime has been spread throughout 19 more regions. From 1 July 2020, all regions of Russia can introduce this tax regime.
'Professional income' includes income from activities in which individuals do not have an employer nor employees under employment contracts (e.g. tuition fees, rental income). Income taxable under this special regime is limited to RUB 2,400,000. Extra income is taxable on a regular basis depending on status of the individual.
If services are rendered for individuals, the tax rate is 4%. If services are rendered for legal entities or individual entrepreneurs, the tax rate is 6%. Tax is payable on a monthly basis. Individuals paying tax on professional income are not required to pay PIT and/or social insurance contributions.
Individuals and individual entrepreneurs may switch to this special tax regime and communicate with the Russian tax authorities via a special app.
Highly qualified specialists (HQSs)
An HQS is a foreign national with work experience, skills, or accomplishments in a specific field who is employed in Russia at a monthly salary of at least RUB 167,000 (with certain exceptions).
Income earned from labour activity by non-resident individuals with HQS status is taxed at a rate of 13%/15% instead of the 30% tax rate that applies to such income earned by non-residents who do not have HQS status.
Foreign nationals from visa-free regime countries
Foreign nationals who have entered Russia under a visa-free regime (i.e. nationals of Commonwealth of Independent States [CIS] countries that are not members of the Eurasian Economic Union [EEU], e.g. Ukraine and Uzbekistan) and are employed by individuals under labour or civil contracts for the performance of work (provision of services) for private, domestic, and other similar needs unrelated to any business activity (e.g. as home care assistants, housemaids, gardeners), or by legal entities, individual entrepreneurs, or other types of business entities based on work patents, are eligible to apply for special tax preferences. Moreover, nationals of EEU member countries (Armenia, Belarus, Kazakhstan, and Kyrgyzstan) working in Russia can also apply for special tax preferences.
Certain income earned by the above-mentioned non-resident foreign nationals is taxed at a rate of 13%/15%, instead of 30%.
Local income taxes
There are no local taxes on personal income in Russia.