Taxation of individuals in Russia

26 March 2018

Tax year and payment dates

1. When does the official tax year start and finish in your jurisdiction and what are the tax payment dates/deadlines?

The tax year runs from 1 January in each current year and ends on 31 December of that year.

Personal income tax declarations must be submitted to the Federal Tax Service of Russia (the Russian tax authority) from the individual's place of residence no later than 30 April of the year following the year in which the relevant income was received. If 30 April falls on a weekend or non-working holiday, the declaration must be submitted no later than the next working day.

If a tax deduction is required, a tax return can be submitted to the tax authority at anytime during the tax year.

The amount of personal income tax calculated by an individual is payable at their place of residence no later than 15 July of the year following the year of receipt.

Domicile and residence

2. What concepts determine tax liability in your jurisdiction (for example, domicile and residence)? In what context(s) are they relevant and how do they impact on a taxpayer?

Domicile

Russian law does not recognise the concept of domicile. Tax liability depends on residence status.

Residence

Russian law recognises the concept of residence. Tax residents are individuals who are present in the Russian Federation for at least 183 calendar days during the year. If a foreign national lives in Russia for less than this time, they are considered a non-resident for tax purposes.

The period of stay for a natural person in the Russian Federation excludes any periods of their travel outside the territory of the Russian Federation for:

• Short-term (periods of less than six months) treatment or training.

• The performance of labour or other duties related to the work (rendering services) in offshore hydrocarbon fields for the processing of raw materials.

Taxation depends on the taxpayer's residential status in Russia. The status of a tax resident of the Russian Federation is not dependent on having Russian citizenship.

Taxation on exit

3. Does your jurisdiction impose any tax when a person leaves (for example, an exit tax)? Are there any other consequences of leaving (particularly with regard to individuals domiciled in your jurisdiction)?

There is no exit tax in Russia. However, renunciation of the citizenship of the Russian Federation is not allowed if the citizen of the Russian Federation has an obligation established by federal law (including a tax obligation) that remains unfulfilled.

Temporary residents

4. Does your jurisdiction have any particular tax rules affecting temporary residents?

Taxation of temporary residents depends on the individual's status as a tax resident in Russia. A person is recognised as tax resident if they live in Russia for more than 183 days per year. If a foreign national lives in Russia for less than this time, they are considered non-resident for tax purposes.

For temporary residents who are tax residents, the general Russian rules of taxation apply.

For temporary residents who are not tax residents, specific rules apply in relation to:

• Personal Income tax (PIT). Non-residents must pay PIT at a rate of 30% for 2017 (section 3, Article 224, Tax Code of the Russian Federation (Tax Code)). However, certain exceptions may apply in some cases for individual taxpayers. Such people include:

Highly qualified specialists

The PIT rate for highly qualified specialists is 13%, regardless of their tax status.

Foreign nationals with parents

A visa-free foreign national must obtain a patent for work in the Russian Federation. For the period of the patent's validity, the migrant pays fixed advance payments on their PIT. The amount of payment will depend on the region (for example, for the Moscow region the monthly amount is RUB5,000 for 2018). The employer also calculates PIT on the migrant's salary and reduces its size by the amount of advance payments.

Refugees

The PIT rate for refugees is 13%.

Citizens of the Eurasian Union

Citizens of Armenia, Kazakhstan and Belarus have the same rate of PIT as Russians, at 13%.

• Dividends. The tax rate will be equal to 15% if individuals who are not recognised as residents of the Russian Federation receive dividend income as participants in Russian companies (clause 3, Article 224, Tax Code).

• Tax on real estate. For taxation on the income of non-residents obtained from the sale of property, the tax rate is 30% (see Question 5).

Taxes on the gains and income of foreign nationals

5. How are gains on real estate or other assets owned by a foreign national taxed? What are the relevant tax rates?

Gains on real estate are taxed as personal income tax (PIT) in Russia. Gains from the sale of residential property, apartments, rooms, country houses, garden cottages or allotments, and shares are subject to PIT at the following rates:

• For foreign nationals that are non-residents of the Russian Federation: 30% rate.

• For foreign nationals that are tax resident in the Russian Federation: 13% rate.

For the taxation on income of non-residents obtained from the sale of real estate, the period of ownership of the property does not matter, and PIT is still collected on the sale.However, for foreign nationals that are tax residents in the Russian Federation, there is significant difference for such transactions, as exemptions from PIT may apply. For such an exemption to apply to a tax-resident foreign national, clause 17.1 of Article 217 of the Tax Code requires a minimum period of ownership of:

• More than three years for real estate acquired up until 2016.

• More than five years for real estate acquired after 2016, (Federal Law "On Amendments parts one and two of the Russian Federation Tax Code" from 29.11.2014 number 382-FZ) (however, a three-year term may apply for certain types of property).

Capital costs for residential property located in Russia are eligible for a one-off deduction for costs up to RUB 2 million.The same deduction is allowable for property documented investments in residential property. Interest on a loan to construct or acquire such property is also deductible. If the mortgage contract was concluded before 2014, there is no limit for the interest deduction. However, if it was concluded after 2014, the interest deduction is available only up to RUB3 million.

Special rules also apply to the taxation of transactions with securities. Generally, income on the sale of securities is calculated by deducting the documented expenses, including those incurred on the acquisition and sale of securities. These deductions can be claimed either through Russian payroll (if locally employed) or by filing an annual tax return, depending on the type of the deduction and the particular situation.

If foreign nationals are not recognised as residents of the Russian Federation, they are not entitled to PIT deductions.

6. How is income received by a foreign national taxed? Is there a withholding tax? What are the income tax rates?

Foreign nationals can be tax resident in Russia. These individuals are generally taxed at 13% on their worldwide income paid in cash and in-kind.

Non-resident foreign nationals are taxed at 30% on all Russian-sourced income. Russian-sourced income is defined as income related to duties performed or services rendered in Russia, income from property located in Russia and so on (regardless of where such income is paid).

A 35% tax rate applies to:

• Interest on bank deposits that exceeds the established limits.

• Deemed income resulting from a beneficial loan (with the exception of deemed income from loans used to buy real estate or from credit cards during the established grace period).

7. What is the basis of the inheritance tax or gift tax regime (or alternative regime if relevant)?

There is no inheritance or gift tax in Russia: such taxes have been abolished in Russia since 1 January 2006.

However, personal income tax (PIT) applies to certain gifts. Any gifts from family members or close relatives are not subject to PIT (paragraph 2, clause 18.1, Article 217, Tax Code). Family members and close relatives are (paragraph 3, Article 14, Family Code of the Russian Federation (Family Code)):

• Spouses, parents and children (including adopting parents and adopted children).

• Grandfathers, grandmothers and grandchildren.

• Full-blooded and half-brothers and sisters (that is, with a common father or mother).

Gifts of real estates, vehicles, and quoted or unquoted shares between non-family members are subject to PIT at 13%. The tax is payable by the donee. Gifts of other assets are exempt.

8. What are the inheritance tax or gift tax rates (or alternative rates if relevant)?

There is no inheritance or gift tax in Russia.

Gifts of real estates, vehicles, and quoted or unquoted shares between non-family members are subject to personal income tax (PIT) at 13%. The tax is payable by the donee. Gifts of other assets are exempt. Gifts from family members or close relatives are not subject to PIT.

Tax free allowance

Not applicable.

Exemptions

Not applicable.

Techniques to reduce liability

Not applicable.

9. Does the inheritance tax or gift tax regime apply to foreign owners of real estate and other assets?

There is no inheritance or gift tax regime in Russia. However, gifts may be subject to personal income tax (PIT). Gifts from a close relative are not subject to taxation and declaration. Gifts from organisations for amountsup to RUB 4,000 are not subject to PIT.

For taxation of income of non-residents obtained from the gift of propertythe PIT rate is 30%.Non-resident foreign nationals are taxed at 30% on all Russian-sourced income.

10. Are there any other taxes on death or on lifetime gifts?

No other direct taxes are payable on the death of an individual. Heirs do not have to pay personal incometax (PIT) for the deceased. For example, if the testator did not receive a salary at work that was accrued to them after death, the employer must transfer such salary to the heirs without withholding PIT.

When an heir inherits real estate, they become a payer of land tax and/or property tax from the date of the testator's death (from the date of opening the inheritance), even if a certificate of ownership of land/apartment or other real estate is received later. The heir will only pay transport tax on an inherited car from the date of re-registration of the car in their name.

Taxes on buying real estate and other assets

11. Are there any other taxes that a foreign national must consider when buying real estate and other assets in your jurisdiction?

No other taxes are due when buying real estate or other assets. This general rule applies toboth Russians and foreign nationals.

A foreign national can buy an apartment, a country house, a garage and evenland (for private housing construction or private subsidiary farming) in Russia without additional permits. However, for foreign nationals in Russia, there are restrictions on the acquisition of real estate in the border areas and regions with a special regime (such as Zheleznogorsk, Solnechnyy, Zvezdnyy Gorodok and so on).

Foreign nationals are forbidden from acquiring land:

• For agricultural purposes (only rent is possible).

• In border zones.

• On subsoil, continental shelf and forest fund.

• In state nature reserves.

• In territory where there are objects of the defence industry, or transport infrastructure.

• In closed administrative areas (a list of cities and districts can be found in Government Decree 508 of 5 July 2001).

12. What tax-advantageous real estate holding structures are available in your jurisdiction for non-resident individuals?

There are no such structures in Russia.

Taxes on overseas real estate and other assets

13. How are residents in your jurisdiction with real estate or other assets overseas taxed?

Russian tax consequences associated with the purchase, possession and sale of foreign real estate are only applicable to tax residents of the Russian Federation.

To determine the final tax obligations in the Russian Federation, a tax resident is generally recognised as a natural person who is present in the territory of the Russian Federation for at least 183 calendar days during the calendar year.

Under general rules, a purchase ofreal estate abroad is not taxed in Russia. However, an exception to this could be a deal involving a loan becausein such casethe buyer can receive a taxable benefit from savings on the loan/credit interest. Where an individual takes a loan to purchase real estate abroad, and the rate on a loan in the foreign bank is less than 9% per annum (for a loan in foreign currency) or less than two thirds of the refinancing rate of the Central Bank of the Russian Federation (for a loan in rubles) on the date of the actual receipt by the taxpayer of the income (that is, on the last day of each month of using the loan), the taxpayer will have a taxable material benefit in the form of savings on interest for the use of credit facilities. The personal income tax rate for material benefits is 35%.

Income froma Russian tax resident leasing foreign real estate is considered income for tax purposes in the Russian Federation and is taxed at a personal income tax (PIT) rate of 13%. At the same time, such income may be subject to taxation in the territory of the foreign state where the real estate is located.

To avoid double taxation in the country of source and the country of residence (Russia), it is necessary to analyse the possibility of offsetting the tax paid abroad when paying PIT in Russia. For this, a bilateral agreement on avoidance of double taxation must be concluded between Russia and a foreign country. Also, the taxpayer will need to submit the relevant documents confirming the payment of tax on income abroad.

Income from the sale of real estate by a physical personwho is a resident of the Russian Federation (who is not an individual entrepreneur) and who owns foreign real estate for more than five years (in some cases, more than three years), will be exempt from PIT in the Russian Federation. If the tenure of real estate is less than five years, then such income is subject to taxation at a PIT rate of 13%.

International tax treaties

14. Is your jurisdiction a party to many double tax treaties with other jurisdictions?

Russia has signed double tax treaties (DTTs) with 80 countries. DTTs concluded between Russia and other states are based on the Organisation for Economic Co-operation and Development (OECD)Model Double Taxation Convention on Income and on Capital 1977 (OECD Model Tax Convention 1977), approved by resolutions of the Russian Governmentin 2010 (currently in effect). Despite the fact that Russia does not participate in the OECD, the OECD Model Tax Convention 1977 and the commentary in relation to it are used by Russian courts when making decisions in disputes involving the application of DTTs.

Wills and estate administration.

Governing law and formalities

15. Is it essential for an owner of assets in your jurisdiction to make a will in your jurisdiction? Does the will have to be governed by the laws of your jurisdiction?

There is no requirement for individuals resident in Russia to make a will, although it is advisable. Notaries certify wills drawn up in accordance with the requirements of Civil Law of the Russian Federation for Citizens, as well as by foreign citizens and stateless persons.

A will made in Russia, in compliance with the Civil Law, is capable of making a disposal of an individual's worldwide assets.

16. What are the formalities for making a will in your jurisdiction? Do they vary depending on the nationality, residence and/or domicile of the testator?

The general rules for writing a Russian will include the following:

• A Russian will must be given by the testator, signed and include the date and place.

• Witnesses to the will cannot include the notary, a beneficiary of the will, minors, illiterate persons or anyone without the capacity to understand the nature of the event.

• The absence of witness for the relevant parts will render a Russian will null and void.

There are two main types of Russian will:

Standard notarial will

This type of will is drafted up under guidance from a Russian notary and registered. A notarial will can be handwritten or typed (either by the testator or by the notary acting on the testator's instructions). If the will is written out by a notary, the testator must read it back to the notary before signing it. A witness can be present if the testator wishes. The witness will also sign the will. Once the will has been written and signed, the notary will include the will in its register.

Closed will

There is no requirement under Russian inheritance law for an executor of a will to be appointed, but a testator can name one in their Russian will if they so wish. If an executor has not been named, a notary will administer the estate.

The formalities for making a will do not vary depending on nationality or residence.

Redirecting entitlements

17. What rules apply if beneficiaries redirect their entitlements?

In the case of inheritance, the testator's property passes to the heirsaccording to the order of universal succession (unchanged as a single unit and at the same time) (Article 1110, Civil Code).

In addition to accepting the inheritance, it is possible for the beneficiaries to renounce their inheritance either entirely, or in favour of other heirs (which cannot be later undone). In a situation where heirs are legally and legally absent, the inheritance is deemed to be escheat and the inheritance will be transferred to the state.

Beneficiaries, after accepting the inheritance, can dispose of it freely unless the testator has imposed specific conditions or other limitations (for example, to be passed to heirs that are minors).

Validity of foreign wills and foreign grants of probate

18. To what extent are wills made in another jurisdiction recognised as valid/enforced in your jurisdiction? Does your jurisdiction recognise a foreign grant of probate (or its equivalent) or are further formalities required?

Russia's inheritance laws cover all official residents, both Russian nationals and foreign nationals in the country, as well as non-residents who own property in Russia. In such cases at least part of the estate will be dealt with under Russian inheritance law. Russia's inheritance law applies to all worldwide assets of Russian residents (both national and foreign) with the exception of real estate located overseas.

Validity of foreign wills

For foreign nationals that live or own real estate in Russia, it can sometimes be worth considering writing a Russian will. Foreign wills will be recognised in Russia if they comply with Russian national standards but, as Russian inheritance law will apply to all of the assets (except real estate located abroad), foreign nationals will have to pay to have a foreign will translated and may also have to wait for other documents, such as grant of probate, before things can proceed.

Validity of foreign grants of probate

See above, Validity of foreign wills.

Death of foreign nationals

19. Are there any relevant practical estate administration issues if foreign nationals die in your jurisdiction?

There are no specific estate administration issues if foreign nationals die in Russia. The general rules involve obtaining the death certificate of the deceased and the further procedures under Federal Law 15.11.1997 N 143-FZ on Civil Status Acts.

The state registration of death is carried out by the civil registration authority at the last place of residence of the deceased.

A declaration of death must be made no later than three days after the date of death or day the body of the deceased is discovered. A second certificate of state registration of the civil status act is issued to the deceased's relative.

Foreign nationals and Russian nationals are treated the same in estate administration issues.

Administering the estate

20.Who is responsible for administering the estate and in whom does it initially vest?

Responsibility for administering

The testator may entrust the execution of the will to the citizen-executor (executor) indicated in the will, irrespective of whether this person is an heir. This person's consent to be the executor of the will can be expressed:

• In their own inscription on the testament itself.

• In the application attached to the will.

• In the application submitted to the notary within a month from the date of opening the inheritance.

A person is also recognised as having given consent to be executor of a will if, within one month from the date of opening the inheritance, they have actually begun to execute the will.

After the opening of the inheritance, the court can release the executor from his duties either:

• At the request of the testamentary executor.

• At the request of the heirs, due to circumstances preventing the executor from being able to properly discharge their duties.

Unless otherwise provided in the will, the executor must take the necessary measures for executing the will. These duties include:

• Ensuring the transfer of the hereditary property to heirs due to them in accordance with the will of the testator expressed in the will and by law.

• Taking, independently or through a notary, measures to protect the estate and manage it in the interests of the heirs.

• Receiving funds and other property due to the testator for transfer to their heirs, if this property is not transferable to other persons.

• Executing a testamentary assignment or demanding from the heirs (as applicable) a testamentary refusal (Article 1137, Civil Code) or testamentary assignment (Article 1139, Civil Code).

The executor has the right to conduct cases in connection with the execution of the will (in court, as well as through other state bodies and state institutions).

Vesting

On the deceased's death, the estate vests jointly in the heirs. The heirs could use and administrate the estate from the day of the opening of inheritance, even where the certificate of the right to inheritance has not yet been received. Where there is a violation, it is possible to apply to a notary at the place of opening the inheritance in order to protect their rights as heirs(Article 1171,Civil Code). In such cases the notary will take the necessary measures to protect the estate and manage it.

21. What is the procedure on death in your jurisdiction for tax and other purposes in relation to:

• Establishing title and gathering in assets (including any particular considerations for non-resident executors)?

• Paying taxes?

• Distributing?

After the Russian legislature adopted Federal Law 01.07.2005 N 78-FZ, significant changes were introduced into the Tax Code. Under the new regime, inheritance tax by law and testament is no longer collected from the heirs (as was previously the case) (Clause 18, Article 217, Tax Code). However, Russian law does not identify heirs of a certain line or degree of kinship. They have equal rights.

If an heir wishes to make a sale (alienation) ofthe hereditary property, theymust pay a 13% personal income tax (PIT) in accordance with Federal Law 212-FZ on 23 July 2013. This condition applies only to property sold within three years from the death of the testator. The heir selling the property is also subject to a tax deduction within three years from the death of the testator.

The heir is expected to pay a sum of money to the state for the hereditary certificate. This document is issued to the heir by a notary after verification of the title documents. The amount of the fee directly relates to the degree of kinship to the deceased (paragraph 22, Article 333.24, Tax Code). This means that the cost of the federal fee is calculated in accordance with the status of the heir and their position in the family of the testator. Therefore, the Tax Code specifies that 0.3% of the price of the property, but not more than RUB100,000, is payable by the following group of beneficiaries(paragraph 1, item 22 of Article 333.24):

• Native and adopted children of the testator.

• Spouse.

• Parents.

• Brothers and sisters.

All other beneficiaries must pay 0.6% of the price of the inheritance, capped at RUB1 million (paragraph 2, item 22, Article 333.24, Tax Code).

22. Are there any time limits/restrictions/valuation issues that are particularly relevant to an estate with an element in another jurisdiction?

There are no time limits, restrictions or valuation issues that are particularly relevant to an estate with an element in another jurisdiction.

23. Is it possible for a beneficiary to challenge a will/the executors/the administrators?

The grounds for recognising a will as being invalid (on the basis ofit being challenged) are set out in Article 166 of the Civil Code. For a will to be challenged, the document must violate the legitimate interests of the claimant. This rule can be open to interpretation. For example, if the claimant is sure that their rights were infringed on by the will, they have the right to apply to the court for restoration. However, the following will not be recognised by the court as cause for a claim:

• The fact that an heir is not included in the list of beneficiaries.

• General dissatisfaction with the conditions the section provided in the will.

In practice, the court considers the following as reasonable grounds for challenging a will:

When drafting the will, the testator was not in control of their actions

In this form of challenge, facts can be used to confirm that when the will was drafted, the testator did not control their actions (for example, due to powerful drugs, narcotic substances and so on).

When drafting the will, the testator was not aware of the consequences of their actions

The will was issued by the testator under the pressure of third parties.

Inadequacy of the testator at the time of signing

Pretence or imaginary nature of a deal.

However, the reasons for going to court to challenge a willare infinite and not limited by law.

In contrast to the grounds listed above, it is possible for beneficiaries to argue that the testament was void. With this approach, the beneficiary would claim that the willis unconditionally invalid, based on actual circumstances. In such circumstances, the claimant does not need to prove their position: insignificant wills (based on actual circumstances) do not need proof, and therefore the mere circumstances are sufficient to show that the will is invalid (such as the absence of a signature, a violation of the form of compilation, and so on).

However, it is necessary to go to court to cancel the action. Circumstances that make a testament void are as follows:

• Violation of the form of the document.

• Lack of signature of the testator.

• The drafting of a will after the deceased was legally incapacitated.

• The content or circumstances of the execution of a will violate legal norms.

If any of the reasons listed above are present, the last will will be cancelled.

Succession regimes

24. What is the succession regime in your jurisdiction (for example, is there a forced heirship regime)?

The Civil Code provides for a common succession regime. Heirs are legally called to inherit in order of priority.

Under Article 1149 of the Civil Code, minors or disabled children of the testator, their disabled spouse and parents, as well as the disabled dependants of the testator (who are called to inherit on the basis of clauses 1 and 2 of Article 1148), inherit at least half of the will share, which would be due to each of them when inheriting by law (mandatory share).

Forced heirship regimes

25. What are the main characteristics of the forced heirship regime, if any, in your jurisdiction?

Russia's forced heirship regimes relates to the beneficiaries'right to a portion of the hereditary property assigned to themunder Article 1149 of the Civil Code.

The right to a portion of the hereditary property belongs to the minor children of the deceased, their disabled children, parents and spouse, their adopted minors and/or adopted disabled children. In addition, the disabled adoptive parents of the deceased may be expected to receive an obligatory share of the inheritance (paragraph 1, Article 1149, Civil Code). In addition, disabled citizens who were dependent on the deceased will have such right (Article 1148, Civil Code).

The hereditary portion of the inheritance must be for no less than half of what the heir could receive by inheritance under law.

Avoiding the regime

Minor children of the deceased, their disabled children, parents and spouse, their adopted minors and adopted disabled children, and/or the disabled adoptive parents of the deceased may be deprived of an obligatory share in the inheritance, or their mandatory share in the inheritance may be reduced, if they:

• Committed acts directed against the testator.

• Maliciously avoided fulfilling the duties on the maintenance of the testator under the law.

The above circumstances are subject to court judgment.

Assets received by beneficiaries in other jurisdictions

The forced heirship rules apply to assets received by beneficiaries in other jurisdictions.

Mandatory or variable

The rights on the forced heir are mandatory.

Real estate or other assets owned by foreign nationals

26. Are real estate or other assets owned by a foreign national subject to your succession laws or the laws of the foreign national's original country?

Foreign nationals and non-residentscan inherit and bequeath property on a common basis with Russian citizens. As a general rule, granting to a foreign national in the sphere of inheritance relations is not dependent on their residence in the Russian Federation.

For cross-border inheritance, the regulation on successions is determined by the law of the country where the testator had their last residence (paragraph 1, Article 1224, Civil Code).

The inheritance of immovable property is determined by the law of the country where this property is located, and Russian law is applied to the inheritance of immovable property registered in the state register of the Russian Federation.

27. Do your courts apply the doctrine of renvoi in relation to succession to immovable property?

Russian law recognises the doctrine of renvoi (Article 1190, Civil Code). However, the succession of a person's immovable property is governed by the law of the country in which that property is located.

Intestacy

28. What different succession rules, if any, apply to the intestate?

If a person dies without leaving a will, the estate is distributed according to the Russian laws of intestate succession.

The order of statutory inheritance with heirs is divided into eight groups. The whole estate is divided between all surviving heirs of the highest available group. Heirs from lower groups only inherit if there are no surviving members of higher groups, or if everyone from higher groups has rejected their share.

The groups are as follows:

Group 1

This includes the deceased's children, spouse and parents. Grandchildren and their descendants inherit by right of representation.

Group 2

Group 3

Groups 4 to 8

If there are no disputes, Russian inheritance cases do not need to be heard by a court and will be dealt with by a Russian notary. Inheritance must be accepted within six months of the opening of succession. Heirs are free to reject their inheritance under Russian inheritance law.

There are no restrictions on donation of assets during a person's lifetime under Russian inheritance law, provided such donations do not affect the portion reserved under forced heirship.

29. Is it possible for beneficiaries to challenge the adequacy of their provision under the intestacy rules?

It is impossible for beneficiariesto completely challenge the adequacy of their inherited property under the law. However, a separate procedure has been devised in relation to the property rights of each claimant.

If all representatives of the first stage of inheritance are deemed unworthy, the rights to property are received by the participants of the second stage. However, the legality of this can be contested on the following grounds:

• The person exerted pressure on the testator and heirs in order to obtain a larger share.

• The person did not render the necessary assistance in the last years of the deceased's life.

• The parents of the testator were deprived of parental rights.

If there is evidence of sufficient grounds (set out in Article 1117 of the Civil Code), unworthy heirs should be deprived of property in whole or in part.

To challenge the inheritance, a standard period of three years is proposed by law. However, in some cases, the deadline for filing a statement of claim in court is only six months and it will depend on the grounds on which the inheritance is being contested incourt.

Trusts

30. Are trusts (or an alternative structure) recognised in your jurisdiction?

There is no regulation of trusts in Russia. The reason why trusts cannot be establishedin Russia is the existence of paragraph 4 of Article 209 of the Civil Code (on content of ownership), which applies in determining rights of ownership of Russian citizens for property located in Russian territory by virtue of the provisions on the choice of the applicable law. Under Article 209, an owner can transfer their property to the trust management of another person (trust manager), but such transfer does not entail the transfer of ownership to the trustee.

31. Does your jurisdiction recognise trusts that are governed by another jurisdiction's laws and are created for foreign persons?

Section VI of the Civil Code (on private international law) generally allows for the application of foreign law to civil relations with the participation of Russian individuals (citizens) and legal entities complicated by a foreign element, provided the application of the right does not contradict the "imperative norms" of Russian legislation, as well as the public order of the Russian Federation.

Since the foreign trust in which the trustee or property is located outside the Russian Federation is covered by the notion "legal relationship complicated by a foreign element", the foreign trust will be subject to the rules on the choice of the applicable law. Therefore, it is possible that, in spite of the absence of the concept of "trust" in domestic Russian law, foreign trusts, nevertheless, can be recognised in Russia on the basis ofsection VI of the Civil Code.

However, if a foreign trustis used by a Russian citizen for hereditary planning, the recognition of the foreign trust in the Russian Federation may be hampered by the rules relating to forced heirship/mandatory hereditary share established by Russian law. Therefore, in the event of a dispute, the Russian courts will most likely not recognise the existence of a foreign trust to the extent that it violates the rights of the mandatory heirs. Furthermore, it is more than likely that the courts of the Russian Federation will not consider cases with trusts, or they will interpret the law not in favour of the trust.

32. What are the tax consequences of trustees (for example, of an English trust) becoming resident in/leaving your jurisdiction?

Under current Russian tax rules, foreign trustees are only required to submit annual reporting and pay property tax for Russian real estate held directly by the trust.

There are cases in Russia where subsidiary liability is assessed on third parties connected with the taxpayers, and therefore it is possible that trustees couldbe involved in tax disputes over outstanding Russian tax liabilities of settlors and beneficiaries of the trusts in the future. However, whether any such claims would be successful, or whether they would be assisted by foreign courts, remains to be seen.

33. If your jurisdiction has its own trust law:

• Does the law provide specifically for the creation of non-charitable purpose trusts?

• Does the law restrict the perpetuity period within which gifts in trusts must vest, or the period during which income may be accumulated?

• Can the trust document restrict the beneficiaries' rights to information about the trust?

There is no trust law in Russia. However, there are no restrictions preventing residents of Russia from entering into legal arrangements under foreign law, provided this does not contradict the public policy in Russia. The new term "non-corporate structure" was introduced into the Tax Code in 2015, which defines trusts and similar structures for tax purposes in Russia.

34. Does the law in your jurisdiction recognise claims against trust assets by the spouse/civil partner of a settlor or beneficiary on the dissolution of the marriage/partnership?

Russian law is unclear on whether it recognises claims in relation to trust assets by the spouse of a settlor or beneficiary on the dissolution of the marriage, as there is no such definition as "trust assets" under Russian law. However, the spouse has the right to apportion property acquired within marriage.

35. To what extent does the law of your jurisdiction allow trusts to be used to shelter assets from the creditors of a settlor or beneficiary?

Russian law does not include specific asset protection rules.

Charities

36. Are charities recognised in your jurisdiction?

Charities are recognisedin Russia. The main law regulating charities is Federal Law 11.08.1995 135-FZ on Charitable Activities and Charitable Organizations (Charities Law).

37. If charities are recognised in your jurisdiction, how can an individual donor set up a charity?

Charitable organisations are regulated by the Charities Law, which provides that charitable organisations can be created in the form of public organisations (associations), funds, institutions and other forms provided for under federal laws.

State registration of charities is carried out by the Ministry of Justice in accordance with the Federal Law on Non-Profit Organizations. In order for a non-commercialorganisation to be registered, the following documents must be submitted to the authorised body or its territorial body when setting up the charity:

• Application for registration, signed by the authorised person.

• Constituent documents of the organisation (three copies).

• The decision to establish the organisation and the approval of its constituent documents with an indication of how the elected (appointed) bodies will be composed (two copies).

• Information on the founders (as indicated in the application) (two copies).

• Document on payment of state fee.

• Information on the organisation's permanent address (location) through which communication is to be carried out with the organisation.

• If the name of a citizen is to be used in the name of the organisation, the symbols protected by Russian laws on the protection of intellectual property or copyrights, as well as the full name of another legal entity as part of its own name, and the documents confirming the right to use them.

• An extract from the register of foreign legal entities of the relevant country of origin, or other document (equal in legal force) confirming the legal status of the founder if the founder is a foreign national.

The documents will be checked within a month. If the Ministry of Justice has any comments on the application, any shortcomings will be set out in its correspondence and the applicant will be asked to correct them. If the Ministry decides to register the organisation, it will send the documents to the Russian Tax Inspectorate for tax registration.

38. What are the benefits for individuals when setting up charitable organisations?

There are no special benefits when setting up charitable organisations. However, there are some tax benefits. These include:

• Tax-free charitable assistance in favour of individuals.

• The ability for charitable foundations to establish scholarships and not be taxed in relation to the expenses of running the scholarship.

• The right to make insurance payments on obligatory insurance using the lower tax tariff of 20%.

Under Article 219 of the Tax Code, Russian citizens who provide charitable assistance are entitled to a tax deduction on the amount of charitable assistance given. This means taxpayers are entitled to a deduction topersonal income tax (PIT) paid for the year (13% deduction of their charity expenses).

Citizens can also reduce their PIT by providing gratuitous assistance to organisations whose activities are socially oriented (that is, activities in connection with a socially disadvantagedgroup, or for the purposes of culture, sport, art, ecology and so on) (paragraph 1, Article 219, Tax Code).

In relation to PIT deductions, the amount the taxpayer spends from their personal funds is deductible, although the total amount of the benefit cannot exceed 25% of the annual income, and this restriction extends to all costs associated with charity and donations. At the same time, only income subject to tax at the rate of 13% is taken into account. Therefore, taxpayers that are non-residents of the Russian Federation (to whom the PIT rate is different) cannot benefit from a deduction.

Ownership and familial relationships

Co-ownership

39. What are the laws regarding co-ownership and how do they impact on taxes, succession and estate administration?

According to Russian law, there are three forms of ownership:

Individual ownership

This is where one owner owns property and disposes of it independently.

Shared ownership

Joint ownership

A residential home could be in common ownership (with a definition of each owner's ownership right (shared ownership)) or without determining the shares (joint ownership). Joint ownership of marital property can only arise after official registration of marriage. In other cases, property is consideredindividual for tax purposes, succession and estate administration.

If the ownership right of the property is registered as shared ownership,the tax on the property is paid by each co-owner in accordance with their share. If the right to the property is registered as common joint ownership, the tax is paid by each spouse in equal shares (clause 3, Article 408, Tax Code).

In the case of death of one of two spouses who own their property jointly, the inheritance will be applied in the usual order. Therefore, if there is a will, the persons indicated in it will be called to inherit. If the deceased spouse has not left a will, inheritance will be carried out by law (that is, the right to share in common property passes to the heirs of the first stage, to which the widow (widower) also belongs).

Familial relationships

40. What matrimonial regimes in trust or succession law exist in your jurisdiction? Are the rights of cohabitees/civil partners in real estate or other assets protected by law?

In Russia, there is no regulation of the matrimonial regime, rights of cohabitees in real estate or other assets.

Civil partnerships are not recognised in Russia.

Is there a form of recognised relationship for same-sex couples and how are they treated for tax and succession purposes?

There is no form of recognised relationship for same-sex couples in Russia.

41. How are the following terms defined in law:

Married

The term "marriage"under family law is understood as being a voluntary union of a woman and a man whose purpose is to create a family, raise children and conduct joint business. Marriage is a legal fact that is subject to registration by certain state bodies and with the onset of which is associated the emergence of rights and obligations. Marriage is subject to mandatory state registration. Only a registered marriage can lead to the onset of certain consequences. After marriage, a man and a woman become spouses and are endowed with the same rights and duties with respect to each other.

Divorced

From a legal point of view, "divorce" refers to the formal termination of a valid marriage between living spouses. In the Russian Federation, divorce is carried out in two ways:

Divorce through registrar

This type of divorce can be performed where the spouses do not have minor children and there is a mutual consent among the spouses. It should be noted that divorce through registrar, even without the presence of children, cannot be carried out if one of the spouses is recognised by the court as incompetent, is missing or has been convicted for committing a crime and faces imprisonment.

Divorce through the court

Adopted

Adopted children are treated as the legitimate  children of the adopters (if married or joint adopters) or adopter (if single) from the date of adoption, and of nobody else. Adoption is a priority form of placement of children left without parental care.

Adoption is carried out by the court upon the application of persons (persons) wishing to adopt a child. Consideration of adoption is carried out by a court using special proceedings.

The adoption of children will be considered by the court with the mandatory participation of the adoptive parents themselves, guardianship and trusteeship agencies, as well as the prosecutor.

Legitimate

There is such term as "legitimate" in the Russian Federation.

Civil partnership

Civil partnerships are not recognised by law in the Russian Federation.

Minority

43. What rules apply during the period when an heir is a minor? Can a minor own assets and who can deal with those assets on the minor's behalf?

Only legally-capable persons can accept inheritance. A child under14 years of age does not have legal capacity. A minor aged from 14 to 18 years of age has only partial capacity (Articles 26 to 28, Civil Code). Adolescents up to 18 years of age, who are in a registered marriage, are recognised as legally capable and can independently accept their inheritance.

Emancipation is another legally recognised basis for determining legal capacity (including in relation to inheritance). Emancipation can be declared if a child of 16 to 18 years of age independently works under an employment contract and/or performs entrepreneurial activities.

If a minor heir is not included in a will, the child has the right to their hereditary share. If the testator left the minor child with less than what they are entitled to have by law, then the part of the child's property will be increased to the size of their mandatory part (Article 1149, Civil Code). The child's right to receive inheritance is not affected by whether or notthe parents werein a registered marriage. The obligatory rule is that the deceased must be listed as the parent in the birth certificate of the child.

Transactions on behalf of a minor (up to 14 years of age) are committed by parents, guardians, trustees or other persons determined by law in the sole interests of minors and in special cases with the prior permission of the guardianship and trusteeship authority and/or the court. A teenager from 14 to 18 years of age can inherit propertypersonally, but only with the consent of the legal representative (Articles 26 to28, Civil Code).

If the interests of a child of 14 to 18 years of age are represented by a third person by proxy, the teenager must personally be present at the notary, or the application for the inheritance must be signed by a minor certified by another notary.

The costs of maintaining the inherited property are borne entirely by the child's representative. When a minor reaches 18 years of age, they will dispose of their share without restrictions.

Capacity and power of attorney

44. What procedures apply when a person loses capacity? Does your jurisdiction recognise powers of attorney (or their equivalent) made under the law of other jurisdictions?

The procedure and grounds for determining whether a person has legal capacity are enshrined in Russian civil procedural law. Under Article 29 of the Civil Code, only a court can determine when a person losses legal capacity. To recognise a person as being incapable, the court must establish the availability of legal and medical criteria.

A notary cannot issue a power of attorney if a person does not have legal capacity. All actions in the interests of the incapacitated will be performed by their guardian.

A power of attorney issued by a competent authority of a foreign state to a Russian citizen or foreign national can be recognised in Russia in the following instances:

• Legalisation by diplomatic or consular service in a foreign country.

• Apostille by the competent authority of the state in which this document was made. The document bearing the apostille can only be used in the countries participating in HCCH Convention Abolishing the Requirement of Legalisation for Foreign Public Documents 1961 (Apostille Convention).

• Where the states have concluded an international treaty on legal assistance (for example, a treaty from the Commonwealth of Independent States (CIS)) there is no requirement for legalisation.

A power of attorney issued by a competent authority of a foreign state must be translated into Russian, and the translation must be notarised.

Proposals for reform

45. Are there any proposals to reform private client law in your jurisdiction?

Tax on income of individuals for the purpose of social assistance may soon be abolished. The corresponding bill is currently being considered in the lower house of the Russian parliament.

The Russian authorities plan to conduct a unique experiment to introduce a system where foreign nationals will be able to recover VAT from purchases made in Russia. The bill specifies an amount that will need to be spent in order to receive a refund (about RUB10,000 per day). Owners of retail stores that have become part of the system will be able to apply for the right to deduct VAT and experts from the Ministry of Industry and Trade will approve a list of applicable companies. The experiment began in October 2017.

The government is currently considering replacing the transport tax on environmental charges andtax deductions from PIT on individual pension capital (no more than 6%). Under these draft laws, it is envisaged that the tax system of the Russian Federation will be improved and modernised.

Online resources

Federal Tax Service of Russia

W www.nalog.ru/eng/

Description. Website of the Federal Tax Service of Russia.

Tax Code of the Russian Federation

W http://nalog.garant.ru/fns/nk/

Description. Tax Code of the Russian Federation (in Russian).

Civil Code of the Russian Federation

W www.zakonrf.info/gk/

Description. Civil Code of the Russian Federation (in Russian).