Recently I have answered several questions concerning personal income tax in Russia and now I want to post these answers here for a common use.
All the answers concern the next situation: One person is being send by his company from abroad to work in a subsidiary company in Russia. He expects that he will acquire his work permit in several month. Until then he will be reciting in Russia with a one year visitors visa and during that time he will be receiving his salary in his company abroad. After that date he will be receiving his income in Russia.
And he expects that by the end of 2010 he will have lived in Russia for around 200 days.
The answers and the questions:
1. Will I be considered as a Russian resident for tax purposes or do we count only the period after i have received my work permit?
For tax purposes only periods of a presence in Russia matter. It means that the period before receiving a work permit also counts.
2. As I expect to stay in Russia for more than 183 days during the 2010 calendar year, do I have to lodge a preliminary personal income tax return with the tax authorities within one month of my arrival in Russia even if I do not have a work permit yet?
According to the Russian Tax Code we do not have an institution of the preliminary income tax return for the category of taxpayers you belong to. That is why you do not have to lodge it.
3. How should I expect to be charged? Is it correct that I will file a preliminary tax return indicating expected income for the year, and pay tax on this preliminary tax assessment at the rate of 13% as I expect to stay in Russia for more 183 days till the year end? Is it also right that at the year end I have to file a final tax with actual income received and calculate actual tax at rates of 13% on actual income?
Since in Russia we do not have the institution of the preliminary tax returns you do not have to file any of it and pay income taxes on this tax assessment. Despite this you will be charged by the source of income. It means that they have to deduct taxes from your salary and to transfer these money to state budgets. I think that your employer (a subsidiary company in Russia) would be this source of the income. This subject in the Russian tax law has a special name, which in English, I think, is “a fiscal agent”.
But before you acquire your work permit you will get income which will be considered as income gained out of Russia and it means that it will not be charged by Russian income tax.
And if the only source of you income is this subsidiary in Russia, you will not be obliged to lodge a final income tax return except a situation you have been overcharged and you want to get a refund.
4. How do I calculate my taxable income? Can I deduct my accommodation cost (rents) which I will be paying myself?
You can not deduct your accommodation cost (rent) as well as a lot of other costs: transport, food, etc.
5. For the months January until April (until today) I have received income and paid tax abroad. Do I include this income on my preliminary and final tax assessments and is tax paid until now abroad set off against tax in Russia?
This income will not affect tax assessments in Russia. And this paid taxes will not set off against income tax in Russia. It is so because at that time you was not a tax resident of the Russian Federation.
6. What deductions am I allowed in calculating taxable income (if any)?
In Russia we have few tax deductions:
– The standard tax deductions (it is like Personal Allowance in the UK) are available for everybody, but they are very limited: about 10 Euro per month until income is under 1000 Euro. Other standard tax deductions concern only specific groups of taxpayers, such as veterans of wars (for example, WWII), disabled people etc.
– The tax deductions on spending on a medical treatment and medicines.
– The tax deductions on buying an apartment or a house.
– Some other tax deductions.
But in Russia we do not have such range of tax deductions for income taxation as some European countries do. For instance, you are not allowed to deduct you accommodation costs and transport costs even if these costs are essential.
If you have any other questions or you need some additional information on the questions above use this way to ask me.