Taxes, Page 2
6.2.3 Profit Tax
Profit tax is levied on an entity's gross profit reduced (increased) in accordance with the currently accepted procedure for its computation. Expenses deducted from the taxable base must comply with a special lisi adopted by the Government of the Russian Federation, If the expenses do not comply with the list, they may not be deducted from the entity's taxable profit.
Some expenses are only deductible for tax purposes within defined limits or standards (e.g. advertising expenses, training expenses, entertainment expenses, etc.). If an entity
exceeds the limits established for these types of expenses, they also may not be deducted from the entity's taxable profit.
The current profit tax rate for all taxpayers in St. Petersburg (including foreign legal entities performing their activities in St. Petersburg through representative offices) is 30%. Pursuant to legislation, a reduction in the income tax rate will come into effect in 2001, namely rates of 29% in 2001 and 2002, and 28% in 2003.
A higher tax rate of 33°4 is applied to income generated by stock exchanges, brokerages, banks and insurance companies and also through agency activities. No further reduction to the rate is stipulated by legislation for these categories of businesses.
Profit may be distributed in the form of dividends among shareholders after profit tax has been paid.
6.2.4 Value-Added Tax
Value-added tax (VAT) is an indirect tax. VAT is levied on turnovers from the sale of goods, work and services as well as on imported goods brought into the Russian Federation. VAT subject to be paid to the budget is considered to be the difference between tax amounts received from customers and tax amounts paid to suppliers and/or customs authorities.
VAT is applied at a rate of 20% on most goods and services. Certain items, such as food and goods for children, are subject to a rate of only 10%. Goods imported into Russia are taxed for VAT at the time customs duties are paid.
Fixed assets (other than excisable goods) imported by a foreign investor as a contribution to the charter capital of a legal entity at the time it is being created are not subject to import VAT.
Foreign legal entities which carry out business activities in the Russian Federation should pay VAT. If the foreign legal entity is not registered with the tax authorities, the responsibility for paying VAT is assumed by the Russian legal entity To do this, the Russian legal entity must withhold the VAT amount when making a payment to the foreign legal entity and then
remit the VAT to the budget of the Russian Federation.
The following goods are excisable:
alcohol, spirits, beer, tobacco goods, jewellery oil, gas condensate, natural gas, petrol, vehicles with an operating engine capacity of 2500 cubic cm. When excisable goods are brought into the Russian Federation, the excise is paid to the customs authorities at the same time the customs payments are made.
An excise rate may be set either as a percentage or as a fixed amount in relation to a set volume of excisable goods being sold. For example, the excise rate for jewellery amounts to 5% of its cost, for petrol, from 455 to 585 roubles per tonne. The excise rate for beer is equal to 90 kopecks for one litre, ranges from 19 to 60 roubles per 1000 units for filtered cigarettes, and is seven roubles per 1000 units for non-filtered cigarettes.
For companies producing excisable goods from tolled raw materials, the maximum selling prices of similar goods that they produce themselves are used to determine the taxable base. If the company does not produce its own similar goods, market prices used in the particular region for similar goods should be used.
6.2.6 Tax on Stock
and Commodity Exchange Operations
Tax on stock and commodity exchange operations is levied on the amount of par value of securities announced by the issuer.
The tax amounts to 0.8% of the par value of issued securities. The taxpayer calculates the tax on his own on the basis of the par value of the issued securities and the appropriate tax rate. The taxpayer remits tax to the federal budget at the same time he submits documents for the registration of the issue. Should the registration of the issue be denied, the tax is not returned.
6.2.7 Customs Duties
Customs duties (customs tariffs) are levied on goods that cross the customs border of the Russian Federation. More detailed information
about customs duties is presented in section 11.2 of the guide.
6.2.8 Fees for Reproducing Mineral Resources
Fees for reproducing mineral resources are established as a percentage of the cost of the primary product produced from the mineral resources and sold.
6.2.9 Fees for Using Natural Resources
Fees for using natural resources are established by taking into account the type of natural resource, the amount and quality of its supply as well as the natural, geographical, mining and economic conditions with regard to its handling and development and the level of risk involved.
Individual Income Tax
Individuals who both have and do not have permanent residency in the Russian Federation are required to pay income tax. Individuals residing in the Russian Federation for a period of no less than 183 days in a calendar year are considered to have permanent residency
Individual income tax is levied on the aggregate annual income earned in a calendar year:
- for individuals with permanent residency in the Russian Federation - from sources both in the Russian Federation and abroad; and
- for individuals without permanent residency in the Russian Federation - only from sources in the Russian Federation.
In 2000, if an individual's aggregate annual income exceeds 150,000 roubles, the maximum tax rate is applied. In this case, the individual income tax is calculated as follows: 26,000 roubles plus 30% of the amount exceeding 150,000 roubles.
At the present time, a draft law has been prepared to change the tax rates. This draft law is intended to establish a single tax rate of 13% regardless of the size of income.
Foreign citizens residing in Russia in
excess of 183 days in a calendar year are required to file tax returns with the tax authorities regarding estimated and actual income earned.
Within a month of arriving in the Russian Federation, a foreign individual is required to file a preliminary tax return on his/her estimated annual earnings. Then, at the end of the year, the foreign individual must file a final tax return on his/her actual annual earnings. If the foreign citizen or individual without citizenship intends to stay in the Russian Federation for more than 183 days in the following calendar year, together with the final tax return, he/she is required to file a preliminary tax return on his/her estimated annual income for the following calendar year.
6.2.11 Taxes Remitted to the Road Funds
Road users tax
The tax is established at the rate of:
- 2.5% of revenue from selling goods (work, services);
- 2.5% of the difference between the selling and purchase prices of goods sold as a result of commercial activities.
Vehicle owners tax
Rates are established depending on the horse power of individual vehicles. In St. Petersburg, the minimum rate is 2.4 roubles per horse power and the maximum rate is 12 roubles per horse power. In 2001, this rate will range from 2.4 roubles to 24 roubles.
Vehicle acquisition tax
Vehicle acquisition tax for legal entities in St. Petersburg is set at 2% of a vehicle's purchase price (excluding VAT and excise tax).
Tax on selling combustive and lubricating materials
Tax on the sale of combustive and lubricating materials (petrol, diesel, lubricants, compressed and liquefied gasses) is paid by entities who sell the above-mentioned materials at a rate of 25% of the amount of sale.
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