Doing Business in Russia

42 Doing Business in Russia resident, except for the following rates which specifically apply to particular types of income: 15% applies to dividend income from Russian companies received by a tax non-resident; 13% applies to the Russian employment income of tax non- residents who are foreign employees with the status of HQS, and to certain other specific categories of taxpayers. Social deductions are also available on: Expenses incurred by the taxpayer on the education of him/herself and each of his/her children; - - - Generally, tax residents pay PIT on the majority of income types at a flat rate of 13%. - Tax deductions Standard tax deductions Standard monthly tax deductions of RUB3,000 and RUB500 can be granted to certain categories of individual taxpayers (such as disabled war veterans, handicapped persons, etc). If a taxpayer is eligible for multiple tax deductions, the higher deduction applies. In addition, a standard tax deduction of RUB1,400 per child, per month can be granted to a parent of up to two children, and RUB3,000 for each additional child (the deduction is RUB12,000 per child for those who are disabled) up to the age of 18, or for a child who is a full-time undergraduate student up to the age of 24. The tax deduction is doubled for one parent if the other parent agrees to refuse the deduction or if the parent is divorced. These tax deductions are available only if cumulative annual income does not exceed RUB350,000. Social tax deductions Social tax deductions are available on donations given to specific charities which qualify against government criteria, though only on up to 25% of the income received in the tax period. Expenses for medical treatment and medicines for the taxpayer and his/ her spouse, parents, children; Contributions to voluntary medical insurance for the taxpayer and his/her spouse, parents and children; Contributions to a private pension fund for the benefit of the taxpayer, his/her spouse, parents and any disabled children; Additional insurance contributions to the cumulative part of state pensions. The above deductions cannot exceed RUB120,000 in one calendar year per taxpayer (except expenses for certain expensive medical treatments on a specific list approved by the Russian Government, deductible by the actual expense amounts; and except for expenses for the education of the taxpayer's children, deductible within a limit of RUB50,000 per child). Property-related tax deductions Property related tax deductions are available on expenses related to the purchase of (construction of) dwellings and on land plots for the construction of a dwelling (or along with a dwelling place) in Russia (up to RUB2,000,000). Interest on the loans used to pay for the above mentioned purchases/ constructions may also be claimed as a deduction (up to RUB3 million). On the sale of residential property and land plots that have been owned for less than three or five years (depending on the property acquisition details), a deduction up to RUB1,000,000 or by the amount of documented actual expenses for the acquisition can be claimed. On the sale of other property owned for less than 3 or 5 years (depending on the property acquisition details), a deduction of up to RUB250,000, or by the amount of the actual documented expenses for the acquisition, may be claimed. Income from the sale of property that has been owned by the seller for three or five years (depending on the property acquisition details) or more is tax-exempt, provided that the seller is Russian tax resident in the year of sale. Professional tax deductions Professional tax deductions can be granted to individuals conducting registered entrepreneurial activity. These deductions apply to documented, business-related expenses. If business related expenses are undocumented, a sole proprietor can apply professional tax deductions of up to 20% of the income derived from business activities. Professional deductions can also be granted to individuals who receive income under a civil-law service or work agreement. The deductions are based on documented expenditures related to the performance of services under these agreements. Individuals who receive author's fees or fees for the creation, execution or other use of specific intellectual property can apply for professional tax deductions that amount to their documented expenses or for a fixed amount if the documents supporting the expenses are unavailable (from 20% to 40%, depending on the type of intellectual property). Individuals who provide services or perform work under relevant civil-law contracts may claim an expenses deduction (supported by documentation) directly related to their provision of services / performance of work. Investment tax deductions Certain deductions are available with regard to investments/financial results from the sale of specific types of securities via individual investment accounts opened in Russia. Tax residents can benefit from claiming standard, social, property-related and investment deductions, as well as professional deductions. KPMG ©2016 KPMG. All rights reserved.

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