Corporate income tax

The standard rate of corporate income tax (CIT) in Russia is 24%.  Regional Governments have the authority to reduce their portion of the tax by up to 4%, thus potentially reducing the effective tax rate to 20% depending on the location of the business.

Resident companies and non-resident companies which trade in Russia through a permanent establishment, or that otherwise receive income from Russian sources, are subject to CIT.  Rental payments made to non-resident companies without a presence in Russia are subject to 20% withholding tax.

Capital gains

Capital gains on the disposal of Russian property by both residents and non-residents which that trade in Russia through a permanent establishment are subject to CIT at the standard rate.  If Russian property is sold by non-resident companies with no permanent establishment in Russia to an entity which is subject to Russian CIT, withholding tax should apply at either 24% tax on the capital gain or 20% on total proceeds.  There is no relief from this tax via double tax treaties.  However, protection may be available under certain treaties when shares of a property holding company are sold.

Property tax

Annual property tax is levied at up to 2.2% on the book value of fixed assets.  Non-resident companies with no permanent establishment in Russia are only subject to property tax on Russian real estate. Plots of land are exempt from Russian property tax.

However, land tax is payable by all companies and individuals which own or have a permanent right to use land.  No tax is due if land is being used free of charge or is being temporarily used or rented.  The tax rate is established by the local authorities, depending on the nature of the land and cannot exceed limits set by the national Tax Code.

VAT

VAT is charged at the standard rate of 18% on the sale of Russian real estate (excluding land) and is payable by Russian-resident companies and Russian permanent establishments of non-resident companies.

From 1 January 2006, VAT incurred on capital construction and installation works can be reclaimed immediately after such works have been completed and invoiced. However, the Russian tax authorities are still reluctant to provide cash VAT refunds, preferring to offset any refund due against future VAT liabilities or other federal taxes.  Furthermore, from 1 January 2006, VAT will be payable or recoverable on an accruals basis rather than a cash basis.


The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice.

This article is from 'European Property', published annually by Freeman Business Information plc, www.efreeman.co.uk.

Return to the list of European real estate tax guides.