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Payroll & Tax in Russia

Russia payroll & taxation

Russian legislation on taxes for foreign companies operating in Russia is relatively straightforward in that profits generated by foreign legal entities in Russia in most cases are taxed at the same profit tax rates for Russian taxpayers.

Your Payroll Options in Russia

Remote Payroll

A remote payroll in Russia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Russia. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Russia is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration

In some cases, a company will register their business in Russia under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll

Larger companies with a commitment to Russia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Russian payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Russian employment laws.

Fully Outsourced Payroll & Employment

Companies can outsource the employment and payroll of their staff in Russia to a GEO, like Shield GEO. This is possible for both foreign workers and Russian nationals. This is the easiest, fastest and safest way to payroll staff in Russia.

Shield GEO manages all aspects of payroll for workers in Russia, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

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Setting up payroll in Russia

Information Explanation
Currency ?

Russian Ruble (RUB, ₽)

Tax Figures

Information Explanation
Corporate Income Tax ?

The corporate tax rate in Russia ranges from 15.5 – 20%

2% is payable to the federal budget and 18% payable to the regional budgets. Regional authorities may lower it to 13.5% at their discretion.

Income Tax Rate ?
Grossed income Tax Rate (%)
Most types of general income - Residents 13
Most types of general income - Non-Residents 30
Highly Qualified Foreign Specialists 13

Russia’s tax system is based on a flat tax based on the residency of the individual and the nature of their work rather than progressive income brackets.

Payroll Tax ?

N/A

Sales Tax ?

Applies to all individuals and companies importing goods into the Russian Federation.

 

VAT rate: 18% for taxable sales of most goods, work and services.
VAT rate: 10% for certain foods, children’s goods, medical/pharmaceutical products and certain books.
VAT rate: 0% for certain sales of goods, work and services exported outside the Russian Federation. E.g. Transportation services via railway or sea ports.

Withholding Tax ?

Under Russia’s double taxation treaties, certain classes of income paid to non-residents apply.

 

Dividends: Dividends paid to a foreign entity or to a non-resident individual are subject to a 15% withholding tax, unless the rate is reduced via a tax treaty.

Interest: Interest paid to a non-resident is subject to a 20% withholding tax, unless the rate is reduced via a tax treaty.

Royalties: Royalties paid to a non-resident is subject to a 20% withholding tax, unless the rate is reduced via a tax treaty.

Employee Social Security (EE SS)

Employees are not required to contribute to social security as it is made by the employer. However, voluntary contributions may be made by individuals.

 

Social Security Rate (Employees): 0%

Employer Social Security (ER SS)

Social Security Rate is tax charged to companies related to labour income. They are in the form of social contributions to the pension fund, social insurance fund and mandatory medical insurance funds.

 

Social Security Rate (Employers): 30%

 

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