Corporate income tax in Russia
Who must pay income tax?
All types of Russian legal entities and foreign branches must pay income tax.
Taxpayers must pay income tax for a calendar year, and they cannot change their taxable year.
How is taxable income calculated?
Taxable income is calculated as taxable revenues and gains minus deductible expenses and losses.
All revenues from sales of goods or services are generally recognized as taxable income.
Taxable gains include:
- Transactional gains from foreign exchange;
- Interest earned from loans, bonds, deposits;
- Gains from financial instruments;
- All ordinary and necessary expenses (reasonable allowance) paid or incurred during the taxable year while carrying out any trade or business activities are deductible.
Taxpayers may deduct the following expenses:
- Cost of materials;
- Wages and salaries;
- Social taxes;
- Other direct expenses;
- Foreign exchange losses, payable interest are also recognized as deductible expenses.
This basic rule is, of course, subject to many exemptions, exclusions and limitations on deductions for income tax purposes.
What are the limitations on deductions?
Examples of limitations on deductions:
Companies may deduct hospitality expenses only in an amount not exceeding 4% of total wages and salaries.
Medicare insurance expenses must not exceed 6% of total wages and salaries.
Such limitations must be taken into account when calculating income tax.
What are applicable tax rates?
The general income tax is set at 20%, and there are several special rates. For example, foreign companies pay 15% income tax on dividends.
How can Accountor help?
Accountor Russia provides expert support to help you navigate income tax complexities. We have been providing tax planning and consulting to foreign companies in Russia since 1992.