Taxation of individuals in Russia
Updated: Jan 27, 2022
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
This type of will is drafted and signed by the testator and then given to a notary in front of witnesses. A closed will is drawn up in private by the testator. It must be handwritten and signed. The will is sealed in an envelope and given to a notary in the presence of two witnesses. The witnesses sign the envelope and the notary then places it inside another envelope. The notary adds an annotation detailing the date and place, along with personal details of the two witnesses. Following the death of the testator, a notary opens the will in front of two witnesses.
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.
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
This means that the testator was in a state of delusion about what they were doing.
The will was issued by the testator under the pressure of third parties.
With the challenge, the influence of a psychological, physical and financial nature will be taken into account.
Inadequacy of the testator at the time of signing
This type of challenge does not refer to legal incapacity. It refers more to the fact that the testator was mentally incapable of making the will. For example, the testator couldn't refresh his/her memory about his relatives.
Pretence or imaginary nature of a deal.
This foundation is rarely used when challenging a will. An example of such a situation would be the concealment of the fact of the sale of property by drafting a will. A will drafted in such a transaction will be cancelled by the court.
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?