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Finance and Payments

Russian money

 

Supported by Baker & McKenzie


Introduction

Banking in Russia is primarily regulated by the Central Bank of the Russian Federation, one of the few State institutions largely under the control of the Russian legislature, as opposed to the executive branch. This body is responsible for oversight of the entire financial segment of the Russian economy.

 

The foundations of the Russian banking system are provided by the territory’s federal laws, and the banking sector is subject to stringent regulation, though this has been relaxed somewhat in recent years.

The Russian banking sector is dominated by state-owned financial giants such as:

  • Sberbank
  • VTB Bank
  • Gazprombank
  • Vnesheconombank (VEB)
  • Rosselkhozbank

Payments

Russia is unique in its payments landscape and time should be taken to research this area thoroughly, particularly as retailers in Russia are almost unanimous in the identification of this as a key area of difficulty.

 

80-95% of eCommerce transactions involving physical goods are paid for using cash on delivery, and putting mechanisms in place to facilitate this is a must when trading online in Russia.

Current tax year: 1 January 2015 – 31 December 2015. A financial year in Russia corresponds exactly to the calendar year.


Tax overview

The Tax Code sets forth three levels of taxation: federal, regional and local. Currently, federal taxes include VAT, excise taxes, profits tax, individual income tax, mineral extraction tax, State duty, special tax regimes, and several other taxes. Regional taxes include corporate property tax, transportation tax, and gambling tax, while local taxes include land tax, individual property tax, and the trade levy. Social security contributions are payable to the State Pension Fund, Social Security Fund, and Federal Mandatory Medical Insurance Fund.

 

There are five types of special tax regimes that may be applicable to certain activities and/or categories of taxpayers: single agriculture tax, simplified system of taxation, single tax on imputed income from certain kinds of activity, taxation of production sharing agreements, and the patent system of taxation. These special tax regimes have the status of a federal tax and may provide exemptions from certain federal, regional, and local taxes.


Taxation of foreign companies

Russian legislation taxes profits derived from a “permanent establishment” in Russia, as well as certain other types of income derived without a permanent establishment in Russia. Importantly, whether a permanent establishment exists under Russian tax law is unrelated to whether a foreign company’s office has been registered in Russia. A permanent establishment may exist even if the office is not registered, and the existence of a registered office may not necessarily give rise to a taxable permanent establishment.

 

Profit derived by foreign legal entities from their permanent establishments in Russia is generally taxed at the same profits tax rates applicable to Russian taxpayers. As of 1 January 2012, a new rule was included in the Tax Code requiring that the income of a permanent establishment be determined taking into account the functions performed in Russia, the assets used and commercial risks assumed, which is generally in line with the OECD approach.

 

Unless an applicable double taxation treaty provides for a lower rate, dividends payable by Russian companies to foreign shareholders are subject to a 15% withholding tax. Other listed income received by foreign legal entities from Russian sources is subject to either a 20% withholding tax (for most categories of income, including royalties and most types of interest) or a 10% withholding tax (for income from freight and lease of transportation vehicles), subject to any reduction available under an applicable double taxation treaty.

 

The corporate profits tax is payable and reported on a quarterly basis based on actual results for the first three months, the first six months, the first nine months and the year or on a monthly basis based on actual results for the previous month. The annual tax return and a report on a foreign legal entity’s activity in Russia must be submitted to the tax authorities by 28 March of the year following the close of the taxable year.


Further information

If you'd like to see an extended version of this information, please see the 'Finance and Payments' section of our passport.

Additional areas covered include:

  • Russian currency control
  • Non-cash payments and electronic wallets
  • Bank cards and online banking
  • Cash payment terminals, mobile point of sale and SMS payments
  • Corporate profits tax
  • Controlled foreign companies rules
  • New tax residency rules for foreign companies based on effective management
  • New beneficial ownership rules
  • Double taxation treaties
  • VAT
  • Corporate property tax
  • Social security contributions
  • Individual income tax
  • Regional and local taxes

To access the Full Report, follow this link here to register and download.

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