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At a glance: an overview of key tax measures
In the past 10 years Russia has seen fundamental changes in both its tax system and tax administration. Taxand Russia highlights the key tax measures multinationals should be aware of.
Generally foreign investors may carry out business in Russia directly through a branch or establish a company in Russia. In the latter scenario the Russian subsidiary may be fully owned by a foreign company. It is also possible to establish a non-commercial organisation to carry out non-commercial activities. There are some special restrictions that apply in order for foreign investors to be able to participate in certain areas of business or to own certain types of assets. In general, all income from commercial activities is subject to the same taxation regime irrespective of the form of the company.
Corporate tax measures
- The general corporate income tax (CIT) rate is 20%
- Dividends received by Russian companies are taxed at a rate of 9%, unless a participation exemption applies
- Dividends are taxed at the rate of 15% at source by way of withholding
- The dividend withholding tax may be lowered to 10% or 5% under many double taxation treaties (DTTs)
Capital and income
Capital gains are included in taxable profits and taxed under general rates. Russian law provides a participation exemption that generally applies to capital gains derived from the sale of shares in joint-stock companies and LLCs that are owned by the company for more than 5 years, and such shares are not publicly traded.
Losses can be carried forward for up to 10 years. There are no loss carry-back provisions. According to recent case law, in order to carry forward losses the company must keep accounting documents confirming the amount of the losses during all 10 years.
It is possible to run a business in Russia via opening a branch. In defining when a permanent establishment (PE) exists, Russia generally follows the OECD Model Convention standards.
Also published in Thomson Reuters' Taxnet Pro, 31 January 2014
Quality tax advice, globally
It is expected that the quality of Russia’s tax administration will continue to improve, including the current institutions, alongside the development of new processes for matters including tax ruling and consolidation. In addition, the tax system will continue to focus on the development of international communication in the area of DTTs and combating tax evasion.