Accounting, Payroll, Tax & Legal since 1989

Payroll taxes and cost of employment in Russia

Some of the most important information for foreign investors when considering investment projects in countries concern the cost of labor and employment. We put together here a quick guide to payroll taxes and other employment costs in Russia.

In general, the payroll tax structure is similar as in other countries in the region. The social contribution the employer pays from the employees´ gross salary is relatively higher in comparison with countries in the region. The employee´s income taxes are on a comparable level when looking at neighboring countries.

For a standard limited liability company the payroll tax structure in Russia is as follows (for convenience, we include as example a salary of 1000 units).

Employee´s monthly gross salary in their employment agreement: 1000 units

The company is liable to pay the following taxes:

-         Compulsory social security contribution 30 %

Total company cost per month: 1300 units

The employee is liable to pay the following taxes (employer usually takes care of these on the employee´s behalf)

-         Personal income tax 13 %

Total net salary received by employee: 870 units

It is interesting to know that companies registered as small and medium enterprises may apply a lower social contribution rate of 15 %, which is applicable for payments above the minimum wage. However, this registration is only available for companies which fulfill very stringent conditions and is in most cases not applicable even if the company is small in size.

A recent change in taxation stipulates that individuals earning over 5 million rubles per year need to pay a 15 % personal income tax contribution from the part that exceeds 5 million rubles.

In Russia the compulsory social security contributions are throttled lower after limits which result in lower contributions paid by the employer when annual salaries exceed 912 000 rubles.

The 13 % personal income tax applies to residents of Russia, while a 30 % rate is applied for non-residents. Foreigners who hold a highly qualified specialist work permit (HQS) are generally treated as tax residents and pay 13 % personal income tax.


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