Doing Business in Russia

Personal taxation Personal Income Tax Personal Income Tax (PIT) in Russia generally depends on the taxpayer's tax residency status. An individual is considered a Russian tax resident if he/ she is physically present in Russia for a period of 183 days or more during 12 consecutive months. Short-term travel (less than 6 months) outside Russia's borders for medical treatment or educational activities does not qualify as an interruption to the individual's presence in Russia. The day of arrival and day of departure should be included as days in Russia when calculating the number of days a person has been present in Russia when determining an individual's tax residency status. If a company makes a salary payment locally in Russia, the company should determine the individual's tax residency status on each date of payment in order to apply the appropriate withholding tax rate. Residency is determined on the basis of a 183-day period within the 12-month period immediately preceding the date the income was paid. Consequently, the tax withheld may not be the amount of tax ultimately due. Final tax liabilities are determined based on the individual's tax residency status for the reporting calendar year. This status is determined based on the '183-day presence test' in the reporting calendar year. Tax residents are subject to PIT on all their income, irrespective of the country in which it arises, whereas non- residents are subject to PIT only on income sourced in Russia. Tax base Taxable income includes income received in cash, in kind, and in the form of deemed income. Income in kind is assessed based on the market price of the goods received or services provided. Deemed income generally results when: Interest payments are made on loans from organisations and sole proprietors when the payments are benchmarked at a rate of 2/3rds of the refinancing rate of the Central Bank of Russia on loans in Russian roubles, or the interest is up to 9% per annum on loans in other currencies. The use of credit cards issued by non-Russian banks is also likely to trigger deemed taxable income for the cardholder. Favourable prices (non-market rates) are paid by an individual on goods or services purchased from related parties. Securities and financial instruments are acquired at a price below the market level. Some exceptions from the above rule apply. Tax rates A 13% PIT rate applies generally to all types of income received by a tax resident except for certain types of non-employment income (e.g. deemed income resulting from the interest derived from the use of loans is taxable at the rate of 35%); A 30% PIT rate applies generally to all types of income received by a tax non- Perm Doing Business in Russia 41 ©2016 KPMG. All rights reserved.

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