The personal income tax rate (personal income tax) will increase in Russia

For 20 years, Russia has maintained a flat scale of personal income tax (personal income tax) — regardless of the amount of income, all citizens paid a tax of 13% of their income to the state budget.

On June 23, 2020, the President of the Russian Federation in his next televised address announced an increase in the personal income tax rate from 13 to 15%. This measure will affect only citizens who receive incomes over five million rubles a year (approximate income — from 417 thousand rubles a month). Moreover, according to Putin V.V., the 15% rate will apply only to the amounts of income exceeding 5 million rubles. Thus, incomes up to 5 million rubles will be taxed at the previous rate (13%), and everything above that at the new rate (15%).

It is assumed that for the first time in the history of the Russian tax system, all funds received as a result of paying personal income tax at an increased rate will be directed to a specific goal – the treatment of children with severe rare diseases (the purchase of expensive medicines, equipment, rehabilitation equipment, high-tech operations).

It is obvious that the increase in personal income tax will primarily affect Russian citizens with incomes much higher than average, including those with business abroad. Realizing that this fact can provoke a new wave of business emigration, which will result in significant losses for the Russian budget, the authorities decided to give business an additional "carrot", which cannot but please.

Instead of complicated and confusing reporting and personal income tax payments for controlled foreign companies (CFC), it is proposed to levy a fixed tax of 5 million rubles per year from Russians developing business abroad without additional reporting. This measure will make life easier for owners of foreign companies living in the Russian Federation and receiving significant income from business abroad.

As you know, the exemption of profits of foreign companies (CFC) from the tax burden on the territory of the Russian Federation is also possible if the foreign company is registered in a country that has signed a Double Taxation Agreement with the Russian Federation. Moreover, now the Russian Federation is actively reviewing agreements on the avoidance of double taxation with other countries, for example, with Cyprus and Malta. Such changes, of course, will affect all businessmen who have structures abroad.

Antwort company will help you calculate the profit for your foreign enterprises and prepare the CFC reports as soon as possible. Our specialists are always aware of new changes in legislation. We will professionally advise you on any issues of your foreign business. Antwort always has the right answer.