International taxation and tax system in Russia
Understanding the intricacies of international taxation in Russia demands a thorough grasp of the global tax system, strict adherence to both local and international requirements, and the capability to capitalize on tax optimization opportunities. Regardless of whether your company functions as a multinational corporation or a non-resident entity, it is crucial to have a solid knowledge of Russia’s international tax laws to ensure compliance and improve your global tax strategy. This guide provides a summary of Russia’s international tax environment, covering aspects such as tax treaties, transfer pricing, and resources to assist you in effectively managing your international tax matters.
International tax system
Russia imposes a standard withholding tax on dividends at 15%, on interest at 20%, and on royalties at 20% for foreign entities, although reductions may be available through Double Tax Treaties (DTT). The country operates a credit tax system for residents and taxes global income earned by individuals worldwide. According to CFC rules, Russian tax residents must report and pay taxes on the profits from foreign entities they control.
Tax exempt
Double Tax Treaties (DTT) that Russia has established with more than 80 countries provide exemptions. These treaties may lower or completely remove withholding taxes on dividends, interest, and royalties. Additionally, there are participation exemptions for corporate income tax if specific conditions are satisfied, including maintaining share ownership for five years.
Tax return
People living in Russia must declare their global income, which includes earnings from overseas, on their yearly tax filings. Typically, non-residents do not need to submit a tax return unless they have income originating from Russian sources that needs to be reported. Additionally, residents may also need to fulfill reporting obligations related to Controlled Foreign Company (CFC) declarations.
Tax compliance and reporting obligations
Meeting Russia’s international tax regulations necessitates fulfilling various reporting and documentation obligations. This encompasses submitting annual tax returns, creating transfer pricing documentation, and complying with reporting requirements under the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). Corporations must guarantee that all filings are correct, submitted on time, and fully in line with the applicable regulations to prevent penalties and ensure seamless operations.
International tax for non-residents
Individuals who are not residents typically face withholding taxes on income sourced from Russia, with rates set at 15% for dividends and 20% for interest and royalties. These rates can potentially be lowered or waived according to relevant Double Tax Treaties. Additionally, non-residents are taxed on income generated from selling shares in companies that possess significant Russian real estate.
Managing international tax risks
Proper management of international tax risks is essential for maintaining the financial stability and compliance of your business. Such risks can emerge from shifts in legislation, intricate international transactions, and changing global tax regulations. If these risks are not managed adequately, your business may face unforeseen liabilities, penalties, and harm to its reputation.
To reduce these risks, companies ought to regularly oversee their global tax practices, keep abreast of changes in regulations, and maintain compliance with all applicable local and international tax laws. Creating a strong international tax strategy, backed by comprehensive documentation and proactive adjustments to business operations, can aid in avoiding expensive tax problems.
International tax services
Our team of specialists offers a complete array of international tax services customized to meet the unique requirements of businesses linked to Russia. We support tax compliance, strategic planning, and the implementation of double taxation treaties, along with minimizing tax liabilities via optimized structuring. Our offerings encompass the preparation and filing of international tax returns, representation in interactions with tax authorities, and continuous advisory assistance to keep your business compliant with Russia’s international tax regulations. Additionally, we provide advice on leveraging tax incentives, navigating cross-border tax responsibilities, and refining your global tax strategy to be in harmony with your business objectives.
Contact us
If you require support in handling Russia’s international tax commitments while improving your global tax strategy, we are ready to assist you. Reach out to us for more details about our offerings or to arrange a meeting with one of our international tax experts. We can help you navigate the intricacies of international taxation in Russia, enabling you to concentrate on what is most important—expanding your business internationally.
Disclaimer
Tax laws and regulations are always evolving and can differ depending on individual situations. The information presented here serves as general guidance and may not represent the latest updates. It is strongly advised to seek the assistance of a qualified tax professional for specific and current advice tailored to your circumstances.