At the end of last week, the Russian Government introduced a draft law to the State Duma, Federal Law No. 1022669-7 “On Amending Part 2 of the Russian Tax Code as Related to the Taxation of Individual Income in Excess of RUB 5 million for a given tax period”. About six months ago, against the backdrop of the COVID-19 pandemic and the increase in budget expenditures on preventing, treating and combating the spread of the infection, President Putin put forward an initiative to introduce a progressive personal income tax system. Effective from 1 January 2021, annual income of up to RUB 5 million will still be taxed at 13%, whereas income above the limit will be taxed at 15%.
Until recently, it was unclear as to what types of income would be taxed at progressive rates, how personal income tax will be organised once the progressive tax system would be implemented, and whether the rates for tax residents and non-residents would be the same. The Draft Law sheds light on the authorities’ intentions in respect of these and some other related issues.
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