On 12 July 2024, a landmark law (Federal Law No. 176-FZ of 12.07.2024) entered into force, introducing a progressive scale for the taxation of personal income, along with other significant amendments to key federal taxes and special tax regimes. Most of the amendments will apply to tax periods commencing from the next calendar year.

1. Progressive Scale for Personal Income Tax (PIT)

1.1 New Progressive PIT Scale

Perhaps the most publicly discussed provision is the amendment to the PIT chapter, substantially increasing the tax burden on individuals.

The law introduces a progressive scale of taxation for the main category of personal income, namely:

• salaries;
• income from performing work or providing services;
• income in the form of undistributed profits of controlled foreign companies (CFCs);
• income from participation in an investment partnership;
• income in the form of lottery winnings and similar gains;
• other income not expressly listed in the category of income taxable at other rates.

These types of income will be taxed at the following rates:

• 13% — up to RUB 2.4 million per year;
• 15% — from RUB 2.4 million to RUB 5 million per year;
• 18% — from RUB 5 million to RUB 20 million per year;
• 20% — from RUB 20 million to RUB 50 million per year;
• 22% — above RUB 50 million per year.

The higher rates will not apply to the taxpayer’s entire income, but only to the portion exceeding the relevant threshold.

The rate of 15% (and 13% for the first RUB 2.4 million of income) will continue to apply to the following income:

• income from the sale of property, and property received by way of gift;
• income from securities transactions;
• dividends;
• interest on deposits with Russian banks;
• income in the form of insurance payouts and pension benefits;
• income from REPO transactions and securities lending;
• income from transactions with digital financial assets;
• income from securities transactions recorded on an individual investment account;
• income from the sale of equity interests in Russian companies;
• interest on deposits with Russian banks.

The same rate (15%/13%) will apply to that portion of income from the sale of shares or equity interests held for more than five years which exceeds RUB 50 million. Thus, the long-term holding benefit (more than five years) for shares and equity interests will apply only to the first RUB 50 million of income from their disposal. For non-residents, no tax-exempt threshold applies to income from the sale of shares or equity interests.

Income of non-residents from Russian sources will continue to be taxed at 30%. As under the current rules, the only exceptions are income from the provision of services or performance of work in the Russian segment of the Internet, and income of remote employees working under employment contracts with Russian organisations. These categories will be taxed at the same progressive rates as those for the main category of income for Russian residents (see above). Dividends and interest received by non-residents on deposits with Russian banks will continue to be taxed at 15%.

Under voluntary life insurance agreements, only that portion of payouts from the insurance company which does not exceed the amount of insurance premiums previously paid will now be exempt from tax. (Previously, the tax-exempt amount also included interest calculated on the sum of the insurance premiums.)

More>>

__________

This material has been prepared solely for informational and/or educational purposes and does not constitute legal advice or a legal opinion. EPAM Law, its management, lawyers, and staff cannot guarantee the applicability of such information to your specific circumstances and accept no liability for any decisions you make, or for any direct or indirect losses and/or damages arising from the use of the information contained in these materials, in whole or in part.