1. Introduction
    1. Political and administrative structure
    2. Legal environment
  2. Common forms of business structures for foreign investors
    1. Main types of structure
    2. Registration, liquidation and reorganisation of business structures
    3. Shareholders’ and participants’ agreements
    4. Strategic industries
  3. Anti-monopoly issues
    1. General legal and regulatory framework
    2. Scope of application of the Competition Law
    3. Anti-competitive practices and restriction of competition
    4. Liability
  4. Tax system
    1. General approach
    2. Corporate taxation
    3. Incentives
    4. Special tax regimes
    5. Taxation of individuals
    6. Double taxation treaties
  5. Customs regulations
    1. General approach
    2. Trade between EEU and non-EEU countries
    3. Mutual trade between the EEU members
  6. Currency control
    1. Foreign currency transactions
    2. Consequences of breach/Penalties
  7. Lending in Russia
    1. Lending documents and governing law
    2. Jurisdiction
    3. International finance transactions and repatriation requirements
    4. Security interests
    5. Recognition of security trusts
    6. Syndicated loans
    7. Enforcement
    8. Suretyships and guarantees
    9. Bankruptcy considerations
    10. Other lending related issues
  8. Employment and migration
    1. Formalising the employment relationship
    2. Managing employment relationships
    3. Terminating an employment agreement
    4. Specifics of employing foreign nationals
  9. Personal data protection
    1. General approach
    2. Scope of the Data Protection Law
    3. Liability
    4. Right to be forgotten
  10. Intellectual property
    1. General approach
    2. Contractual aspects of intellectual property rights
    3. Rights over the results of intellectual activity
    4. Company names, trade names, trademarks and appellations of origin
    5. Intellectual property rights infringements
    6. IP Court
  11. Advertising issues
    1. General approach
    2. Scope of application of the Advertising Law
    3. Violations of the Advertising Law
    4. Liability
  12. Anti-corruption and compliance
    1. General approach
    2. Legal framework
    3. Compliance requirements for companies
    4. Concept of corruption in Russian law
    5. Possible targets of bribery
    6. Liability and penalties for corruption
    7. Example of sector-specific anti-corruption measures
  13. Real estate and construction
    1. Rights to real estate
    2. Real estate transactions
    3. Resolution of real estate disputes
    4. Planning and construction issues
  14. Corporate bankruptcy
    1. Insolvency criteria
    2. Stages of bankruptcy proceedings
  15. Import substitution and production localisation in Russia
    1. Measures affecting goods importation and current import substitution legislation
    2. Localisation incentives
    3. Sector-specific impact of import restrictions and localisation requirements
  16. Banking sector
    1. Legislative and regulatory framework
    2. Licensing and operations
    3. Deposit insurance
    4. The anti-money laundering law
    5. Bank secrecy
    6. FATCA and CRS
  17. Environment, energy efficiency and renewables
    1. Environment
    2. Energy efficiency
    3. Renewables
  18. Infrastructure and public private partnerships
    1. General approach
    2. Key PPP legislation
    3. Russian PPP environment
    4. Financing
    5. Legal issues
    6. Prospects for infrastructure projects
  19. Oil & gas
    1. Legislative framework
    2. Ownership and licensing
    3. Restrictions on foreign investors
    4. Licences
    5. PSAs

Key contacts

Contact
Tissot Dominique
Dominique Tissot
Partner
Head of Tax | Head of Energy Efficiency & Renewables
Safaryan Hayk
Hayk Safaryan
Partner
Head of Customs

General approach

Recent developments

The most important amendments to taxation laws over the last three years include:

  • Since 2019, foreign companies and foreign intermediaries providing e-services are obliged to register for VAT purposes in Russia. This obligation applies to all types of clients of such foreign companies (i.e. Russian legal entities, individual entrepreneurs and individuals).
  • Special administrative areas were created on Russky Island (Primorsky Krai) and Oktyabrsky Island (Kaliningrad Region). Residents of these areas who meet specific requirements can enjoy some tax benefits.
  • A new tax on the added revenue from the sale of hydrocarbon products at a rate of 50% was introduced for oil and gas producers.
  • General transfer pricing control was abolished for domestic intragroup operations (except in specific cases).
  • Organisations active on the financial market are now under an obligation to collect financial information about their customers, as well as their customers’ beneficiaries and controlling persons, and to provide such information to the tax authorities. If, at the request of such an organisation, a customer, beneficiary or controlling person refuses to disclose the required information, operations between the customer and the organisation must be suspended.

The overall tax burden for corporate taxpayers remains essentially the same, but a number of developments over the past years (both at legislative level and in terms of practice by the tax authorities) may be viewed as having negatively affected the tax climate for such corporate taxpayers:

  • The rules for calculating penalties on the amount of tax debt have been amended. Further, tax administration and tax control in respect of insurance payments have been expanded.
  • Court and administrative tax practices are becoming more comprehensive. In particular, most court cases of transfer pricing in Russia were lost by taxpayers to the tax authorities.
  • The tax authorities continued to conduct pricing audits primarily in relation to taxpayers engaged in foreign trade transactions in respect of mineral resources.
  • The concept of an “unreasonable tax benefit” was introduced in the Russian Tax Code. The new provisions will lead to an increase in the scope of the tax authorities’ control on aggressive tax minimisation schemes used by taxpayers. Some significant aspects of criminal liability for tax crime were clarified by Resolution No. 48 of the Plenum of the Russian Supreme Court dated 26 November 2019. Failure to pay taxes, fees or insurance contributions could lead to criminal liability for persons duly authorised to sign documents submitted to the tax authorities on behalf of the company (for example, directors or authorised representatives).

Amendments to Russian tax legislation have brought it closer to the best practices developed by the OECD . In particular, in recent years:

  • Requirements on a “three-tier documentation system” for multinational groups of companies have been implemented in Russia. The new rules impose additional reporting obligations on participants in and parent companies of such groups.
  • In 2018, Russia began to automatically exchange financial information with more than 75 countries and territories¹.
  • It is planned that Russian tax legislation will be amended for the purpose of ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS.

Core legal framework

Part I of the Tax Code dated 31 July 1998 has been in force since 1 January 1999; and Part II of the Tax Code dated 5 August 2000 has been in force since 1 January 2001 (together, the “Tax Code”). The Tax Code sets out general tax principles and applicable taxes, as well as the rights and obligations of taxpayers and the state tax authorities.

According to the Tax Code, taxes in Russia may be categorised as follows:

  • Federal taxes applied throughout Russia at uniform rates, such as VAT. Certain taxes have a federal and a regional component (e.g. corporate profits tax) and may have their regional component reduced at the discretion of the relevant regional authority.
  • Regional taxes and local taxes determined by the Tax Code and the local or regional government authorities, which are collected locally or regionally. Lower-tier authorities may not grant concessions for taxes governed by a higher authority.

Federal taxes

Regional taxes

Local taxes

Corporate profits tax
VAT
Excise duties
Payroll-related levies
Taxes on natural resources
Excess-profits tax on hydrocarbon production
State duties
Personal income tax
Water tax

Corporate property tax
Transport tax
Gambling tax

Land tax
Individual property tax
Sales duty

As a result of this tax structure, taxpayers may face tax and administrative burdens (including making tax filings and paying tax) both at federal and regional levels. Several tax payments may need to be made when a company has separate subdivisions in more than one Russian region.

In this chapter we provide an outline of the following aspects:

  • corporate taxation;
  • taxation of individuals;
  • special tax regimes;
  • tax incentives; and
  • DTTs.

[1] Order No. ММВ-7-17/[email protected] of the Federal Tax Service dated 4 December 2018. Back↑

Key contacts

Tissot Dominique
Dominique Tissot
Partner
Head of Tax | Head of Energy Efficiency & Renewables
Safaryan Hayk
Hayk Safaryan
Partner
Head of Customs