By 30 April, you should have filed your Russian personal income tax return. Do you really need to do this? Below is a short introduction.

The first thing to determine is whether you are a ‘Russian tax resident’. The conventional wisdom is that you are if you have stayed in Russia for 183 days or more during the past year. This is true in most cases but it may not be true if your family still lives in your home country.

If you are indeed a ‘tax resident’, you have to pay tax on your worldwide income in Russia. This includes any income received anywhere in the world and also material benefits (the company paying for your apartment for example).

If all of your income has been paid by a Russian based employer who can issue you a confirmation of income and tax paid (“Справка 2 НДФЛ”) all the Russian tax due on your salary has already been paid on your behalf. But if you were paid by the head office, or were seconded to a Russian company, or have spent a few months on a business visa because your work permit did not get through, not all Russian tax due has been taken from your salary and therefore you need to file a declaration.

At that point, one very substantial question will start nagging you: should I declare any income at all because nobody is paying taxes here and if you will declare your income “they” will be all over you? Could I get away with not filing?

First of all, yes you should pay your taxes, because hey, it’s the law. Secondly, paying tax in Russia means you can usually claim a deduction, exemption or even a refund from tax paid in your home country. With a tax rate of only 13% on most types on income, Russia has one of the mildest tax regimes in the world.

And finally, to give some comfort on the “raising your profile” concern: last year a tax inspector in central Moscow only wanted to see those taxpayers in person who had declared over half a million Euro in taxable income. The bulk of tax declarations just get checked for internal consistency. But do not expect any mercy if you should have paid but didn’t.

By 30 April, your personal income tax declaration must be filed.  This deadline is “fatal”: if you miss it, a late filing penalty of 5% of the taxable amount will apply immediately.

Filling out the declaration can get a little cumbersome. You are supposed to declare not only your total amount of taxable income received, but for every single payment received, the source (so who paid it), date of payment and currency should also be stated. 

Payment must be made by 15 July. You have to make the payment yourself and from a Russian bank account. This is because only payment instructions from Russian banks allow you to fill in all the details which will help the tax authorities to properly “allocate” the payment received to your tax declaration. This still turn out to be a real piece of work: there is no website or call center.  At this point, you may decide that it pays off  to appoint  a representative who can prepare and file the declaration on your behalf, make sure your declaration is in the computer of the tax authorities and that your tax payment gets allocated correctly.

Written in association with:
Bauke van der Meer Tax & Legal Services,
Ul. Bol. Yakimanka 31/18, off 203B, Moscow.
tel. (+7) 495 935 76 21, www.bvdmeer.nl