Business taxation is lower than in Europe; small businesses can enjoy a “simplified accounting system”. Tax evasion is frequent both for firms and the citizens. Many companies have a double accounting.

Taxes reforms have been implemented in order to reduce the amount of taxes paid by companies. During the last ten years, the government has put emphasis on reducing regulation and lowering taxes.

Depending of the company’s location, the tax can vary. A thorough tax code has been implemented including a VAT law and a profits tax law. The VAT is quite similar to the EU model, however, input VAT is only recoverable when paid whereas output VAT can be accrued on a cash or accrual basis.

A representative branch of a foreign business is considered a foreign legal entity. In this case, the company is subject to withholding tax ranging from 10-20 %. A company must perform certain activities as similar to those mentioned in the OECD Model Tax Convention to be subject to the Russian tax on its net income.

On the contrary to the personal income tax rate which is low (13 % in 2012), employers have to pay relatively heavy payroll taxes that reach 30 % of the employee salaries (10 % above RUR 512,000). This cover pension fund, social insurance fund, medical insurance and employment fund.

A 20% tax is applied on corporate profits.

sThe excise taxes are heavy, especially on alcohol and cigarettes.

 

Other useful sections of the website

 

Business and trade in Russia

Law and justice in Russia

 

To go further

ey.com/RU/EN - Ernst and young Russia

eng.nalog.ru - Federal Tax service of Russia

fre.mazars.ru - Accounting news, from Mazars Russia