Русский
2024 saw the biggest tax base reform in Russia for the last twenty years, with numerous changes. The tax innovations will affect all Russian citizens, foreigners working in the country, individual entrepreneurs, as well as small and large businesses.
The move to “a fairer distribution of the tax burden” for those with higher personal and corporate incomes was proposed with the aim of reducing the tax burden on families, including through allowable deductions. The Kremlin is particularly interested in increasing Russia’s birth rate and has introduced fiscal measures to incentivize this. There are also tax incentives to move to the Far East. We outline how Russia’s broader national tax base, which comes into effect on January 1, 2025, is currently being implemented.
Individual Income Tax
The previous two-tiered (13% for everyone and 15% for incomes over ₽5 million per year) tax regime was replaced by a five-tiered personal income tax scale. Effective January 1, the new personal income tax rates are as follows:
A 7% personal income tax deduction is allowed for families with two or more children and a joint income below one and a half subsistence minimums per person.
Corporate Income Tax
The corporate profit tax (CPT) rate in Russia has increased from 20 to 25%.
For the information technology industry, which enjoys preferential treatment, the CIT rate increased from zero to 5%.
Dividends Tax
Investors will now have to pay tax on dividends at an increased rate of 15% if their income exceeds ₽2.4 million. However, any increase in the size of dividends will not lead to a progression of personal income tax, as 15% is the maximum possible income tax rate.
VAT
For small businesses, the thresholds for applying the simplified taxation system are expanded, with the introduction of the need to pay VAT on annual income over ₽60 million. The VAT threshold rate remains as follows:
- 0% – exports and related services; suburban rail passenger transportation (until 2029)
- 16.67% – foodstuffs; livestock; certain baby products; medicines; water; books;
- 20% – all other taxable goods and services.
Investment Tax Refunds
A refund of 3% of the amount spent on new equipment and intangible assets is permitted, These funds are distributed from a special national fund of up to ₽150 billion. When this fund is exhausted, the refund will be discontinued until the following year. Therefore, it is best to claim such expenditures at the beginning of the fiscal year.
Anomalies
There are some anomalies within this new system, however we recommend both individuals and corporates start taking into account the tax rates discussed to avoid accounting shocks later on. When it comes to individuals confronting the state on the issue of tax collection, the state invariably wins.
However, there are issues with the efficiency of tax collection in Russia that may delay the transition to the new rates. Whatever the case, the best option is to prepare for compliance and have some cash reserves to cover any penalties if previous bookkeeping and accounting was focused on the gray economy.
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Further Reading
