Entering the Russian market brings many opportunities, but also requires strict compliance with local tax laws and accounting standards. For foreign companies planning operations in Russia, understanding the tax system and financial reporting obligations is essential for successful and lawful business activity.
Key Corporate Taxes in Russia
Corporate Profit Tax
Rate: 20%
Levied on net profit (income minus expenses). Foreign company branches may be taxed differently depending on whether they constitute a permanent establishment in Russia.
Value Added Tax (VAT)
Rates: 0%, 10%, or 20%
Applied to most sales of goods, services, and works. VAT registration is mandatory when turnover exceeds certain thresholds or by specific conditions.
Property Tax
Rate: Up to 2.2% of cadastral property value
Applied to real estate owned by the company.
Social Insurance Contributions
Employers must pay contributions to pension, health, and social insurance funds. The total rate can reach 30% of the payroll fund.
Accounting Requirements
Russian law mandates that companies maintain accounting records in accordance with Russian Accounting Standards (RAS). Even if a company uses IFRS globally, it must still report under RAS for Russian authorities.
Key elements include:
Maintaining both accounting and tax records
Preparing financial statements
Filing reports electronically via certified operators
Storing source documentation (for 5+ years)
Considerations for Foreign Companies
Permanent Establishment (PE): If a foreign company maintains a fixed office or significant presence, it must register with the Russian tax authorities and pay local taxes.
Legal Entity Registration: Registering a Russian LLC or branch office often simplifies tax matters and enables more flexible operations.
Controlled Foreign Companies (CFC): Russian shareholders in foreign entities must declare their involvement and profits if certain criteria are met.
Recommendations
Work with experienced local accountants and legal consultants.
Set up your accounting systems to align with Russian regulations from day one.
Monitor legal and tax changes, which are frequent in Russia.
Avoid “grey” practices — Russian tax authorities actively use digital systems for compliance monitoring.
Conclusion
Proper tax planning and transparent accounting are not only legal requirements but also foundations for long-term success in the Russian market. Partnering with local experts helps foreign companies minimize risks and navigate the complex Russian regulatory environment confidently.
