Russian taxes paid by a foreign company not operating in Russia

If your overseas company receives some income in Russia, you are also supposed to pay taxes on it, even though the company does not operate in the country.

WHAT IS TAXED?

Firstly, on what income should foreign corporations not operating in Russia pay taxes? And how much?

This tax is from 10 to 25%:

1) Dividends paid to a foreign corporate holding a share in a Russian company - 15%.

2) Income from trust management of a mutual investment fund.

3) Income received as a result of the distribution of profits or property of an organization,

4) 20% tax on interest income from debt obligations of any kind, such as bonds, or government and municipal securities.

5) Debt obligations of companies that have a representative office in Russia, if this debt is related to the activities of this representative office;

6) Income from the use of rights to intellectual property in the Russian Federation.

7) 20% tax on income from the sale of a company's shares, BUT only when more than 50% of the assets consist of real estate located in Russia. Here, the value of the company's shares will be determined by the balance sheet of the enterprise.

8) Income from the sale of Russian real estate. The market value of the property, determined by the assessment, is used to calculate the tax. This is also 20%.

9) 25% of income from leasing or subleasing property used in Russia.
But the tax will be just 10% of income from leasing operations, from the rental of sea and air vessels and vehicles, as well as containers used in international transportation.

10) Income from international transportation (including demurrage and other payments related to the transportation).

11) Note that even fines and penalties for violation of contractual obligations by Russian individuals, government agencies and local government executive bodies;

12) Income from the sale of investment units of funds, more than 50 percent of whose assets consist of Russian real estate;

13) Income from transactions with digital financial assets or digital rights;

14) Income from the performance of work or services or the sale of goods in Russia through an affiliated party. That is, the buyer of the works carries out activities in Russia.

15) Income from mining digital currency through a mining pool;

HOW IS IT PAID?

You probably wonder how a foreign company will pay these taxes if it does not operate in Russia, and how can Russia demand these taxes? Very easy. Taxes are withheld at the source of income payment. That is, for an overseas company, the tax is withheld from the Russian payer, whether it is the lessee, the customer of transportation or the buyer of shares / real estate.

To do this, a Russian tax resident must submit a tax calculation to the Federal Tax Service and withhold it. If they fail to do so, they will be fined for non-payment, and the fine is from 5 to 30% of the amount of unpaid tax. In addition, the accounts of a Russian legal entity may be blocked.

WHEN MAY YOU NOT PAY IT?

You are exempt from this if there is a zero-tax treaty between Russia and the country of location of the foreign company, or there is a valid double taxation treaty.

To exercise this right, the foreign corporation must provide the Russian taxpayer with an extract on the country of actual business activity. This document will serve as the basis for non-withholding of the tax.

In addition, if the overseas company does not pay tax based on a Double Taxation Treaty, then to be exempt from paying tax or to pay it in a smaller amount, it must provide proof that it paid the tax in its country, at a rate HIGHER than in Russia. If the rate is LOWER than in Russia, then the Russian counterparty pays the difference in taxes here.

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