Doing Business In Russia

Tax Planning

GSL Law & Consulting specializes in tax law of Russia and foreign countries, tax schemes advice and examination, analysis of risks and evaluation of tax consequences, tax structuring of investment projects, transfer pricing, controlled foreign companies, holdings, contractual relationship in the context of VAT, excise and customs duties, import and export operations, taxation of securities transactions, financing schemes for business activity.

TAXATION IN RUSSIA

In General

The Tax Code of the Russian Federation is the basic legal act regulating relations arising with regard to levy, introduction and collection of taxes and duties in the Russian Federation, as well as the relations arising in the course of tax control implementation, appeals against acts of tax authorities and actions (omissions) of their officials, and liabilities for tax offences. Currently, Russian tax legislation is almost all codified, ie, included in the Tax Code. The only two taxes still regulated by a separate law are individual property tax and land tax.

There also are specific features of legal regulation governing payment of duties. Customs duties are regulated by the Customs Code and a number of federal laws and Russian Government decrees. The Russian Government also is empowered to determine rates of some other duties. However, in the majority of cases, rules of levy of tax and duties are set out at a legislative level.

The Russian Tax Code consists of two parts. Part One (the so-called general part) contains general rules of calculation and payment of taxes, rights and obligations of taxpayers and tax authorities, rules of conduct of tax audit, what constitutes a tax offence and liability for it.

Part Two sets forth the rules of calculation and payment of specific types of tax. The main provisions of the Tax Code have come into force and have been in place for quite a long time. Despite that, at this stage of development of the Russian tax system, the Russian Federation Tax Code is a legal act that constantly undergoes changes. It is, therefore, crucial to ensure timely tracking of such changes and to bear them in mind when making commercial operations. In particular, in autumn 2008, due to the effects of the world financial crisis, the Tax Code was amended to relieve the tax burden. Thus, the corporate profit tax was reduced from 24 per cent to 20 per cent; VAT was allowed to be paid by installments; and the list of deductible expenses and amounts for individuals was extended.

Types of Taxes and Duties

The Russian Federation has the following types of taxes and duties — federal, regional and local. No federal, regional, or local tax and no duties can be imposed which are not specified in the Tax Code. A tax is deemed to be imposed only where its taxpayers and the following tax elements are determined:

• Object of taxation;
• Tax base;
• Tax period;
• Tax rate;
• Tax calculation procedure; and
• Tax payment procedure and deadlines.

Where necessary, the tax legal act imposing a tax also may provide tax relief and the grounds for claiming the same by the taxpayer.

Federal taxes and duties are taxes and duties which are levied by the Tax Code and payable in the entire territory of the Russian Federation. The federal taxes and duties include:

• VAT;
• Excises;
• Individual income tax;
• Security contributions (as of 1 January 2010, they replaced Unified social tax);
• Corporate profit tax;
• Mineral extraction tax;
• Water tax;
• Charges for use of fauna and water biological resources; and
• Government fees.

Regional taxes are taxes levied by the Tax Code and the tax laws of the Russian Federation subjects and payable in the territory of the relevant Russian Federation subjects. Regional taxes are introduced and abolished in Russian Federation subjects in accordance with the Tax Code and tax laws of such federal subjects. When regional taxes are imposed by legislative (representative) government authorities of the Russian Federation subjects, the following tax elements are determined in the manner and within limits specified in the Tax Code — tax rates, tax payment procedure and deadlines. Other tax elements of regional taxes and their taxpayers are determined by the Tax Code. The regional taxes include:

• Corporate property tax;
• Tax on gambling; and
• Transport tax.

Local taxes are taxes levied by the Tax Code and tax regulatory acts of representative bodies of municipal districts and are payable in the territory of the relevant municipal districts. Local taxes are introduced and abolished in the territory of municipal districts in accordance with the Tax Code and tax regulatory acts of municipal representative bodies. The local taxes include:

• Land tax; and
• Individual property tax.

The Tax Code also establishes special tax regimes which may provide for exemption from certain federal, regional, or local taxes and duties. The special tax regimes include:

• Tax system for agricultural producers (uniform agricultural tax, UAT);
• Simplified tax system (STS);
• Tax system in the form of unified tax on imputed income for certain types of business (UTII); and
• Tax system for production sharing agreements (PSA).

Characteristics of Main Taxes Generally Payable by a Foreign Company Carrying on Business in Russia

In General

Companies and entrepreneurs must register for tax at the place where the company is situated, at the place where the company's separate subdivision (including permanent establishment of a foreign company) is situated, at the place of residence of an individual, and at the place where the immovable property or transport vehicles owned by them are located.

Corporate Profit Tax

Taxpayers for corporate profit tax are Russian companies and foreign companies that carry on business in Russia through a permanent establishment and/or derive income from Russian sources. Some companies are exempt from corporate profit tax. These are companies that:

• Apply the tax system for agricultural producers;
• Apply the simplified tax system;
• Apply the tax system in the form of unified tax on imputed income for certain types of business; or
• Carry on gambling business.

The object of taxation for corporate profit tax is the profit received by the company. Generally, the profit is defined as the difference between income and expenses of the company. If the taxpayer is a foreign company which operates in Russia through a permanent establishment, its profit is the difference between the income of this establishment and its expenses.

If the company does not have a permanent establishment in Russia, its taxable profit is its income derived in Russia. The income is generally defined as economic gain either in money or in kind. However, not every economic gain will qualify as the company's income, but only the gain that can be valued and determined by the rules of the Tax Code. Some income is tax exempt. Such income is listed in the Tax Code. In particular, income which is not included in the tax base is income in the form of:

• Property and proprietary rights received as pledge or deposit;
• Contributions to the company's charter capital;
• Property received under credit or loan agreements; and
• Other income provided by the Tax Code.

The list of exempt types of income is complete and cannot be subject to extended interpretation. Therefore all other types of income which are not on this list have to be included in the corporate profits tax base. The requirements for expenses made by the company are that expenses be justified, be evidenced by documents, and relate to the business aimed at making profits.

The tax base for the corporate profit tax is a taxable profit expressed in money. Generally, profit is the difference between income and expenses of the company. It should be calculated as a cumulative total from the start of the tax period (calendar year). The general tax rate is 20 per cent.

The laws of Russian Federation subjects may provide for a reduced rate for some categories of taxpayers to the extent of tax payable to the budgets of such federal subjects. However, the reduced rate cannot be less than 13.5 per cent. For example, from 2008, the City of Moscow introduced a reduced tax rate for companies that primarily deal in car production. The tax is payable to the Moscow budget at the rate of 13.5 per cent. (Law Number 39 of 10 October 2007 of the City of Moscow). The tax period for corporate profit tax is a calendar year.

Value-Added Tax

The taxpayers of value added tax are companies, individual entrepreneurs, and persons who convey goods across the Russian customs border. Persons conveying goods across the border (importing them) pay tax only where required by the Russian Federation Customs Code. Therefore, the said persons calculate and pay VAT as determined not only by the tax legislation, but also by the customs laws.

Conditionally, all VAT taxpayers can be divided into taxpayers of internal VAT, i.e. VAT payable at the sale of goods (works or services) in Russia, and taxpayers of import VAT, i.e. VAT payable at the customs when importing goods into Russia. The list of companies and entrepreneurs exempt from tax on transactions inside Russia includes the companies and entrepreneurs that:

• Apply the tax system for agricultural producers;
• Apply the simplified tax system;
• Apply the tax system in the form of unified tax on imputed income for certain types of business; and
• Are exempt from VAT taxpayer obligations.

VAT taxpayers must register for tax with a tax office. However, this obligation arises out of the general procedure established for all taxpayers by Part One of the Russian Federation Tax Code. Special registration for tax is available only for foreign companies which have a right to register for VAT at the place where their permanent establishments in Russia are situated. If a foreign company has several subdivisions in Russia, it may choose the one to which it will submit tax returns and pay tax on operations of all Russian subdivisions.

There is no special tax registration procedure for the rest of VAT taxpayers. Thus, VAT registration happens automatically alongside general tax registration of a company or entrepreneur. The Tax Code provides for a right to exemption from VAT taxpayer obligations, which includes the possibility not to pay VAT on transactions in the internal Russian market during 12 calendar months or not to submit VAT returns to the tax office. Exemption from VAT taxpayer obligations can be granted to companies and entrepreneurs with small sales turnover. The total of their revenue in three successive calendar months should not exceed RUB 2-million, excluding VAT. The list of transactions which constitute the object of taxation for VAT is as follows:

• Sale of goods (works or services) and transfer of proprietary rights in Russia;
• Transfer in Russia of goods (performance of works or services) for own needs;
• Performance of construction and installation works for own use; and
• Importation of goods into Russia.

Some transactions of selling (transferring) goods (works or services) do not constitute an object of taxation for VAT. Consequently, no VAT needs to be calculated or paid on them. These are, for example:

• Circulation of Russian or foreign currency (excluding numismatics purposes);
• Transfer of fixed assets, intangibles and/or other property of the company to its legal successor(s) at the company's reorganization; and
• Transfer of property, if such transfer is an investment in nature (in particular, contributions to the charter capital of business companies).

The sale of goods (works or services) only attracts VAT when performed in the territory of the Russian Federation. In the majority of cases, where transactions aimed at sale of goods (performance of works or services) are made between Russian companies and entrepreneurs and are actually carried out in Russia, there is no problem in identifying the place of supply.

However, for conflict resolution purposes, the Tax Code establishes special rules on how to determine a place of supply of goods (works or services). Thus, the territory of the Russian Federation is the place of supply if the goods are located in the territory of the Russian Federation and are not shipped or transported, and the goods at the start of shipment or transportation are located in the territory of the Russian Federation. The place of supply of works (services), depending on their type, may be determined as:

• Place of business of the supplier of works (services);
• Place where the property for which works (services) are supplied is located;
• Place where works (services) are performed;
• Place of business of the recipient of works (services); or
• Point of departure (destination).

Companies and entrepreneurs are not obligated to charge and pay VAT on some transactions on which VAT is chargeable. Such transactions are called exempt transactions and do not attract any VAT. Their list is complete and includes, eg, transactions with some medical-care products. Generally, the VAT tax base is the value of the object of taxation. Therefore, tax is mostly calculated based on the value of goods (works or services) which you supply (sell). For certain transactions, the Russian Federation Tax Code establishes a special procedure of determining the tax base.

There are five tax rates for value added tax. Three rates (0, 10, and 18 per cent) are main rates, and two rates (10/110 and 18/118) are settlement rates. The 18 per cent VAT rate applies in all cases not specifically determined, ie, is a basic rate. The list of goods (works or services) whose supply is taxed at 0 per cent VAT rate is established by the Russian Federation Tax Code. Such goods (works or services) are:

• Exported goods;
• Works and services of forwarding, transportation, loading and reloading of exported and imported goods; and
• Other goods (works or services) specified in the Tax Code.

The 10 per cent VAT rate applies in the following cases:

• Supply of food products from the List approved by the Russian Federation Government Decree;
• Supply of children's goods from the List approved by the Russian Federation Government Decree;
• Supply of periodical printing publications and books from the List approved by the Russian Federation Government Decree; and
• Supply of medical-care products from the List approved by the Russian Federation Government Decree.

Settlement rates are determined as a percentage ratio of the main tax rate (10 or 18 per cent) to the tax base taken as 100 and increased by the relevant amount of tax rate (10 or 18 per cent). Thus, settlement rates are calculated under the following formulas:

• 18/(100 + 18); and
• 10/(100 + 10).

Settlement rates apply in the cases provided in the Tax Code, in particular in settlements with foreign companies which are not registered for tax in Russia. The VAT amount is determined as the tax base multiplied by the tax rate (article 166 of the Russian Federation Tax Code, paragraph 1). VAT is paid to budget in the following manner. Tax legislation gives the right to reduce the VAT, calculated for payment to budget, by tax deductions. Deductible are the amounts of tax which:

• Were charged by the suppliers (contractors) at purchase of goods (works or services) and proprietary rights in Russia;
• Paid at the importation of goods into Russia under the customs regime of release, temporary entry or processing outside the customs territory; and
• Paid at the importation into Russia of goods which are conveyed across its customs border without customs control or registration.

All other VAT amounts paid upon purchase of goods (works or services) and proprietary rights are not deductible. The amount of tax that should be paid to the budget is the difference between the total VAT amount calculated at the end of the tax period and the amount of tax deductions. From 1 January 2008, there is a single tax period — quarter —  for all taxpayers. This means that, according to the general rule, a taxpayer will calculate VAT for payment to the budget at the end of each quarter.

Corporate Property Tax

For Russian companies, the object of taxation is any movable or immovable property which is included on its balance sheet as a fixed asset. Besides, the object of taxation includes the property which is transferred to other persons into temporary possession (use, management) or for fiduciary management or is contributed for joint activity. The object of taxation for foreign companies varies depending on the following criteria:

• Whether the company carries on any business in Russia through a permanent establishment; or
• Whether the company owns immovable property in Russia, if it does not have a permanent establishment.

If a foreign company carries on business in Russia through a permanent establishment, its object of taxation is any movable or immovable property which forms part of fixed assets in accordance with accountancy rules. For the purposes of tax calculation, such companies must use Russian accounting principles for accounting of fixed assets. This is why the object of taxation for such foreign companies is determined in the same way as that of the Russian taxpayers. For foreign companies which do not have a permanent establishment in Russia, the object of taxation arises only where they own property that meets certain conditions, and namely:

• The property is immovable. The immovables comprise objects which are closely connected with land and which cannot be moved away without being damaged;
• The property is located in Russia. Here, Russia includes territories of its subjects, inland waters, and territorial sea and the air space over the same; or
• The company holds legal title to the property.

If at least one of these criteria is not met, the property does not constitute an object of taxation. The following property does not constitute an object of taxation:

• Land plots; and
• Other environmental facilities (water objects and other natural resources).

The tax base for each category of taxpayers of property tax is determined differently. It varies for Russian companies, for foreign companies that carry on business in Russia through a permanent establishment, and for foreign companies that do not have a permanent establishment in Russia, but own immovable property in Russia.

Russian companies determine the tax base themselves at the end of the tax or accounting period. At the end of the tax period, the tax base is calculated based on the annual average value of taxable property. A foreign company is subject to tax if it meets at least one of the following conditions:

• The company has a permanent establishment in Russia; or
• The company owns immovable property in Russia.

The tax base for such foreign companies varies depending on these conditions. The tax base for foreign companies that have a permanent establishment in Russia is determined as the average annual value of movable or immovable property, and the tax base of foreign companies that do not have a permanent establishment as inventory value of immovable property (this is normally lower than the average annual value).

The tax rate for property tax is fixed by regional laws in the territory of the relevant Russian Federation subject. However, the rate is limited and cannot be more than 2.2 per cent. As for the minimum tax rate, the Russian Federation Tax Code does not fix that. Therefore, the rate can be 0 per cent.

Transport Tax

Taxpayers are persons registered, in accordance with the laws of the Russian Federation, as owners of transport vehicles that constitute the object of taxation. The object of taxation is automobiles, motorcycles, motor scooters, buses and other self-powered pneumatic and caterpillar machines and mechanisms, aircraft, helicopters, motorships, yachts, sailing ships, launches, snowmobiles, motor sledges, motor boats, non-self-powered ships (tugboats), hydrocycles and other water and air transport vehicles, registered as determined by the laws of the Russian Federation.

The tax base for transport vehicles with engines is determined as the power of the vehicle engine expressed in horsepower. There also are some other rules for the determining of the tax base. The tax period is a calendar year. The tax rates are fixed by the laws of Russian Federation subjects based on the engine power and other indicators.

Unified Social Tax (replaced by Security contributions as of 1 January 2010)

Security Contributions

The system of contributions is similar to Unified social tax (the tax object generally remains the same and the same exemptions apply). As of 2011, the following security contributions are set (as percentage of remuneration payable for employment):

• 26 per cent – to the Russian Federation Pension Fund (for mandatory pension insurance);
• 2.9 per cent – to the Russian Federation Social Security Fund (for mandatory social security in case of temporary disability or in connection with maternity);
• 2.1 per cent – to the Federal Fund of Mandatory Medical Insurance (for mandatory medical insurance); and
• 3 per cent – to the territorial funds of mandatory medical insurance (for mandatory medical insurance).

This makes the total rate of 34 per cent as of 2011 (26 per cent in the transient 2010 year). For specific categories (companies which are resident in technology-innovative zones etc), reduced rates apply during 2010 – 2014.

There is no regressive scale for contributions. But the tax base for security contributions for each individual is capped at RUB 415,000 on an accrual basis starting from the beginning of the year (with annual indexation according to the increase of average salary), so no contributions are charged on the excess of that amount. Thus, for each individual the security contribution tax base, including the indexation, will not exceed

• as of 1 January 2011 – 463 000 roubles (Russian Federation Government Decree Number 933 of 27 November 2010);
• as of 1 January 2012 – 512 000 roubles (Russian Federation Government Decree Number 974 of 24 November 2011).

Unlike Unified social tax which used to be dealt with by the Federal Tax Service of the Russian Federation, security contributions will be controlled by various authorities: contributions for mandatory pension and mandatory medical insurance – by Russian Federation Pension Fund, contributions for mandatory social security – by Russian Federation Social Security Fund. Reduced rates (total rate starting from 14 per cent) apply to a few categories of taxpayers:

• a number of agricultural producers;
• security contribution payers that make payments and other allowances to disabled individuals;
• IT organisations;
• non-profit organisations etc

Simplified Tax System

The simplified tax system (STS) is a special tax regime applicable by small businesses at their choice and it gives certain reliefs (simplified accounting, calculation and payment of tax). Companies applying STS do not pay corporate profit tax, VAT, or UST.

Unified Tax on Imputed Income

In General

Unified tax on imputed income (UTII) also is one of the special tax regimes; transition to UTII is only possible for a very limited number of activities (eg, retail trade on a small space). UTII payers pay a fixed amount of tax monthly. Companies applying UTII do not pay corporate profit tax, VAT or UST.

When planning and carrying on business in Russia, it also is necessary to take into account the judicial doctrines which are currently applied by Russian tax authorities and courts.

Unjust Tax Advantage Doctrine

Tax advantage means reduction of tax liabilities, particularly because of reduction of the tax base, granting of tax deduction or tax relief, application of a lower tax rate, as well as granting of a right for refund (credit) or compensation of tax from the budget.

Tax advantage can be recognized as unjust, in particular where, for tax purposes, transactions are assessed not according to their actual economic substance, transactions performed are not connected with actual entrepreneurial or other economic activity, the taxpayer is incapable of performing such transactions, there are no appropriate conditions for achieving the results of the relevant economic activity, the taxpayer assesses for tax only transactions directly relating to tax advantage, if this kind of activity also requires performance and assessment of other transactions, performance of transactions with goods that were not and could not have been produced in the amount shown in the taxpayer's accounting documents, or the activity of the taxpayer and his related and affiliated parties is aimed at performance of transactions relating to tax advantage, predominantly with agents who do not fulfil their tax liabilities. However, the following circumstances alone cannot be the grounds for recognizing tax advantage as unjust:

• Set-up of an entity shortly before the transaction;
• Parties to the transaction are related;
• Irregular character of transactions;
• Breach of tax laws in the past;
• One-off nature of the transaction;
• Performance of the transaction outside the taxpayer's place of business;
• Making of payments using one and the same bank;
• Making of transit payments between parties to interrelated transactions; or
• Use of intermediaries in the transactions.

Substance over Form Doctrine

This doctrine means that a tax authority may re-qualify a transaction for tax purposes if it should think that such transaction covers another one or in fact does not aim at achievement of the legal implications that arise out of its form.

Business Purpose Doctrine

This doctrine is applied together with the above doctrines and assumes that the taxpayer should carry out transactions with a reasonable business purpose. The court establishes if the taxpayer acted with reasonable economic or other reasons (business purpose), taking into account the circumstances evidencing his intention to achieve economic effect as a result of actual entrepreneurial or other economic activity.

Courts need to take into account that tax advantage cannot be regarded as an independent business purpose. Therefore, if the court decides that the main purpose pursued by the taxpayer is deriving income solely or primarily from a tax advantage in the absence of intention to carry on actual economic activity, the court may refuse to recognize such purpose as just. Justness of tax advantage cannot be made dependent on methods of raising capital for economic activity (equity, loans, securities issuance, charter capital increase) or on effectiveness of capital use.

Taxation of Individuals

Individual Income Tax

In General

Taxpayers of individual income tax (IIT) are those who are citizens of the Russian Federation, foreign citizens, or stateless persons. Minors also are liable to IIT; however, they can be represented before tax authorities by their legal representatives, in particular by their parents. Individuals also include individual entrepreneurs, but they, apart from payment of IIT in general, may apply a simplified tax system regime.

The payers of IIT are individuals who are tax residents of the Russian Federation and individuals who are not tax residents of the Russian Federation but derive income in Russia.

Determination of Tax Residence

Whether or not an individual holds Russian Federation citizenship is irrelevant in determining his status as tax resident of the Russian Federation. In other words, both foreign citizens and stateless persons can be recognized as Russian tax residents. On the opposite, a Russian citizen may not be a tax resident of the Russian Federation. Similarly, such factors as place of birth or place of residence also are irrelevant in determining a person's status as tax resident of the Russian Federation (unless otherwise provided by an international treaty).

Tax residents are individuals who are present in the Russian Federation not less than 183 calendar days within 12 successive months. Irrespective of actual period of presence in Russia, the following are regarded as Russian Federation citizens:

• Russian military men who serve abroad; and
• Government or municipal officials sent to work outside the Russian Federation.

Object of Taxation

The object of taxation for IIT is the income received by an individual. The income can be derived from sources both in the Russian Federation and sources outside the Russian Federation. Besides, certain taxpayers should pay IIT on two above-mentioned types of income, whereas others only pay this on income received from Russian source. This depends on whether the taxpayer is a resident of the Russian Federation or not.

The income is generally defined as economic gain expressed either in money or in kind. However, not every economic gain will qualify as the individual's income, but only the gain that can be valued and determined. Some income is exempt from IIT, as listed in the Tax Code. In particular, IIT-exempt income includes income in the form of:

• Maternity allowance;
• Alimony; and
• Payment for medical treatment and services.

The list of exempt income is complete. Therefore, all other income which is not on this list is subject to IIT. For tax purposes, income received from transactions connected with property and non-property relations between family members and/or close relatives is not regarded as income.

According to the Family Code of the Russian Federation, the family members are spouses, parents and children, adoptive parents and adopted children. Close relatives are direct relatives in the ascending and descending line. They include parents and children, grandparents and grandchildren, siblings and half-siblings (having a common father or mother). The family is viewed as a whole and, therefore, includes parents of both spouses. However, income received by these individuals from the making between them of civil law or employment agreements is regarded as income and is subject to IIT as is generally established.

Income of individuals taxed at the IIT 13 per cent rate can be reduced. Reduction is achieved by means of so-called deductions. The Russian Federation Tax Code provides for four groups of deductions, namely:

• Standard tax deductions;
• Social tax deductions;
• Property tax deductions; and
• Professional tax deductions.

Deductions are not applicable to an individual's income taxed at IIT rates of 9, 15, 30, and 35 per cent. Such income includes, among others, income of non-residents (both foreign citizens, stateless persons and Russian Federation citizens), dividends, material gain from interest savings and others. The IIT tax base is a money equivalent of the taxpayer's income; and where income is taxed at the IIT 13 per cent rate, the tax base is the money equivalent of the difference between income and tax deductions. The date of receipt of income is the date on which the income is deemed to be actually received for the purposes of including it on the IIT tax base. The tax period is a calendar year.

The tax rates applicable at calculation of individual income tax are established in the Russian Federation Tax Code. If an individual is a tax resident of the Russian Federation, the majority of his income will be taxed at the rate of 13 per cent. For example, such income includes salary, remunerations under civil law agreements, and income from sale of property. The tax rate of 9 per cent applies to receipt of dividends.

The tax at the rate of 15 per cent is charged on dividends received from Russian companies by individuals who are not tax residents of the Russian Federation. All income received by individuals who are not tax residents of the Russian Federation is taxed with IIT at the rate of 30 per cent. The exception is the dividend income of non-residents from participation in Russian companies. Such income is taxed at the 15 per cent IIT rate.

Also, in certain cases the employment income of non-residents is taxed as that of Russian residents – at the rate of 13 per cent. For example, according to Protocol of 24 January 2006 to the Agreement of 21 April 1995 between the Government of the Russian Federation and the Government of the Republic of Belarus for the Avoidance of Double Taxation and Prevention of Tax Evasion with respect to Taxes on Income and Property, the remuneration derived by a resident of Belarus from employment exercised in Russia for at least 183 days within a calendar year or uninterruptedly within this period starting in the preceding calendar year and ending in the current one, can be subject to IIT at the rate provided for Russian residents – 13 per cent. Pursuant to paragraph 2 of article 1 of the Protocol, such tax regime applies from the first date of employment which is said in the employment agreement to continue for at least 183 days. Also, the rate of 13 per cent applies to income from employment as highly qualified specialist within the meaning of Federal Law Number 115-FZ of 25 July 2002 on Legal Status of Foreign Citizens in the Russian Federation and in a number of other cases.

The maximum rate of IIT is 35 per cent. It applies in the following cases:

• Receipt of gain and prizes in contests, games and other events conducted for the promotion of goods, works or services. The tax is paid on the amount of such gain or prizes in excess of RUB 4,000; and
• Receipt of interest income from bank deposits to the extent it exceeds the interest amount calculated depending on the Central Bank of Russia refinance rate.

Individual Property Tax

The rate of this tax is small and ranges from 0.1 to 2 per cent. The tax is charged on immovable property. The amount of tax payable is insignificant because assessment is based not on the market value, but ‘technical value’ which is many times lower than the market one.

Transport Tax

The calculation and payment procedure is similar to that for transport tax for corporate bodies.