Taxation in the RF

The Federal Law dated 21 November 1996 № 129-FZ "On Accounting" provides for the unified legal and methodological requirements for the accounting and reporting practices in the Russian Federation. Statutory financial statements of an organisation  consist of the following:

A reporting year for all organisation s is the calendar year – starting from January 1 until December 31 inclusive. The monthly and quarterly reports are intermediary and are prepared on a progressive total basis starting from the beginning of the reporting year. 

All organisation s must submit quarterly accounting reports within 30 days after the last day of the quarter, and the annual reports – within 90 days after the end of the year, unless otherwise provided for by the Laws of the Russian Federation. The submitted accounting reports must be duly approved in accordance with the constituent instruments of the organisation  in question. 

The Ministry of Finance of the Russian Federation develops and approves the following documents which are binding for all organisation s operating in the territory of the Russian Federation:

In accordance with the Tax Code of the RF a tax return is a taxpayer’s written statement listing taxable items, income received and expenses made, sources of income, taxation base, tax concessions, accrued taxes, and/or other data that serves as the basis for the tax calculation and payment.  

The tax return must be filed by every taxpayer with regard to each tax payable by the said taxpayer within the timeframe as set forth by the Tax Code of the RF. 

The contents and periodicity of submitting tax returns are determined on a case by case basis for each business entity individually depending on the type of business, the nature of business operations, and the applicable taxation regime.

The answers to your questions were provided by the RusBusinessNews legal department jointly with Maxim Stepanov, the Director General of the consulting company OOO Nalogi i Pravo (Taxes and Law) (e-mail: m_stepanov@rusnalog.ru ). 

Under the Tax Code of the RF dividend is defined as any income received by a shareholder (member) from an organisation  as a result of allocation of the net profit (including profit in the form of interest on preferred shares) with regard to the shares (units) held by such shareholder (member) in proportion to the share of such shareholders (members) in the registered (pooled) capital of the organisation.

If a foreign national (or a foreign legal entity) holds a stake in the registered capital, or shares in a legal entity incorporated in the territory of the Russian Federation, it means that the allocation of profit from the operations of such legal entity will generate income for such foreign persons.

A Russian organisation  that pays dividends is treated as a tax agent and shall calculate the amount of tax (corporate and personal income tax respectively) separately for each taxpayer and each payment instance.

In case dividends are paid by the Russian organisation – tax agent to a foreign organisation and/or foreign individual who is not a resident of the Russian Federation, the taxation base of the taxpayer – receiver of dividends shall be determined, in respect of each such payment, as the sum total of dividends paid with the applicable tax rate of 15 percent.

For the tax purposes the tax residents of the Russian Federation are the individuals actually residing in the Russian Federation for not less than 183 calendar days during any 12 successive months. The calculation of the period of the individual’s stay in the Russian Federation shall not be interrupted for the periods of his short-term absence from the RF (less than 6 months) related to medical treatment or education.

The tax rate applicable to the income received in the form of dividends by an individual tax resident of the Russian Federation is 9 percent.

In addition to this under the Tax Code of the Russian Federation foreign organisations carrying out business in the Russian Federation via their permanent representative offices and/or receiving income from the sources in the Russian Federation shall have an obligation to pay corporate income tax.

Such income is taxable at source, unless it is related to the operations of a foreign organisation in the Russian Federation carried out through a permanent representative office. The source of income shall be a tax agent that has an obligation to determine the amount of tax due, to withhold this amount from the taxpayer's (the foreign organisation’s) income, and to pay taxes to the budget.

The Tax Code of the Russian Federation defines types of income subject to corporate income tax at the source of payment in the Russian Federation, the types of income exempt from taxation, as well as different tax rates depending on the type of income received.

In case of a foreign organisation receiving income from a tax agent, and such income under the provisions of international treaties (agreements), is taxable in the Russian Federation at a reduced rate, than the calculation and withholding of such tax by the tax agent shall be made at the applicable reduced rates provided that the foreign organisation submits relevant confirmation to the tax agent.

According to the information published on the web site of the Federal Tax Authority of the RF as of June 2003, the Russian federation had 60 valid international double taxation avoidance agreements.

The answers to your questions were provided by the RusBusinessNews legal department jointly with Maxim Stepanov, the Director General of the consulting company OOO Nalogi i Pravo (Taxes and Law) (e-mail: m_stepanov@rusnalog.ru ).