Taxation on personal income: Russia

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The Russian government, like any other country, charges income tax on local and foreign citizens within the state. This tax is essential as it contributes significantly to the GDP of Russia. In this article, an in-depth analysis of Russia's personal income tax will be made.

The term personal income tax (PIT) refers to a fee payable to a nation’s government. The fee is payable by domestic or indigenous individuals within the country as long as they earn an income. The incomes include salaries, wages, dividends, royalties, rents, and leadership fees, to mention a few.

In formal employment, salary deductions referred to as “pay as you earn” (PAYE) are employed to deduct PITs. The fee is mandatory except in the case of dividends or when one is self-employed.

Russia's Taxation

Russian nationals must pay income tax according to their income, including financial gains from outside of Russia. Foreigners residing in Russia, however, may only pay tax related to the income they earn within Russia. The list of revenues liable for tax payments is endless, but some of them include funds generated due to Russian infrastructure, money made from activities done in Russia, and dividends from companies registered in Russia.

All these fees are payable in the country’s official currency, the ruble. The Central Bank of the Russian Federation is responsible for determining the tax payments for entities operating outside of Russia. This is done according to the exchange rates prevailing at the time.

PIT payments

The amount of PIT payable depends on the income of the citizens. Brackets have been created to differentiate high-income earners from low-income ones. As of the year 2021, citizens earning anything below RUB 15 million per year will be liable to pay 13% of their gross income. Citizens earning an income above this figure will be expected to pay 15% of their gross income.

Several exceptions are, however, made in this regard. If one were to receive money in the form of gifts, awards, advertisements, and promotional prizes, they would have to pay 35% of the value in the form of taxes. If the funds are generated from sales or sent property, 13% of the fee would have to be paid in taxes.

With regards to beneficial loans, all repayments are made with a 9% tax fee. This would be for loans granted in foreign currency. If the loan was given in the Russian official currency, 33% of the loan amount is payable. For all foreign nationals residing in Russia, all income received comes with a 35% tax fee.

This figure also has exceptions. If a company is of Russian origin, 15% tax is charged on all its income. For critical skills, employees originating from foreign countries are charged 15% of their income tax. Foreign nationals residing in Russia as refugees are taxed 15% of their income. More exceptions are available depending on the circumstance.

Special tax

At the end of 2018, a special tax was introduced in Russia. It took effect in Moscow, Kaluga, and Tatarstan. Residents of Russia and those originating from Belarus, Kazakhstan, Armenia, and Kyrgyzstan were included in the bracket of those liable for paying for this fee. In the middle of 2020, the rest of Russia was also expected to abide by this tax regulation.

The law revolving around this special tax stated that if an individual did not have an employer or if an employee was not under any binding contract, a tax had to be paid for any income revenue fee above RUB 2,4. Supposing the entity in question rendered services to individuals, they would be expected to pay a tax rate of 4%. If they offered services to registered organizations, a 6% tax payment would be liable.

Entities paying this special tax would, however, not be expected to pay the general personal income tax. If a Russian national or a foreign national falls in the bracket of special tax, they can apply with the recognized authority to be placed in the requested bracket.

Critical skills personnel

To secure a competitive workforce, Russia has offered a platform for foreign nationals possessing special skills to thrive in the Federation. These individuals may have accomplishments, skills, or the experience required to make a difference in the Russian workforce. A 15% tax of the critical skills holder's income is charged on their gross income. This is a significant difference compared to the usual 30% tax fee charged on individuals who do not hold this status.

Additionally, foreign nationals coming from countries where a visa in Russia is not required may apply for special tax. This bracket also includes those who hail from the Eurasian commonwealth Union countries such as Ukraine and Uzbekistan.
A maximum of 15% tax is expected to be paid from nationals falling under this bracket.

Conclusion

When deciding to move to Russia or any other country, information on how the government regulates its tax payment policies is essential. In Russia, how much you pay depends on the bracket you fall in.

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