Chapter 23. Personal Income Tax

Article 207. Taxpayers

Taxpayers of the personal income tax (hereinafter in the present Chapter referred to as the tax) shall be defined as natural persons being tax residents of the Russian Federation and also natural persons receiving incomes from sources in the Russian Federation who are not tax residents of the Russian Federation.

Article 208. Incomes From Sources in the Russian Federation and Incomes from Sources Outside the Russian Federation

1. For the purposes of the present Chapter, the following shall be referred to as incomes from sources in the Russian Federation:

1) the dividends and interest received from a Russian organisation, as well as interest received from Russian individual businessmen and (or) from a foreign organisation in connection with the activity of its permanent representation in the Russian Federation;

2) insurance disbursements, given the onset of an insured accident, received from a Russian organisation and/or from a foreign organisation in connection with the activities of its permanent establishment in the Russian Federation;

3) incomes received from the use of copyright and other adjacent rights in the Russian Federation;

4) incomes received from the lease or another use of an asset located in the Russian Federation;";

5) incomes from the sale of:

real estate located in the Russian Federation;

in the Russian Federation, shares or other securities and also shares in the charter capital of organizations;

rights of claim to a Russian or foreign organization in connection with activity of its permanent agency on the territory of the Russian Federation;

other property located in the Russian Federation and owned by the natural person;

6) compensation for the performance of labour or other duties, performed work, rendered services, performance of action in the Russian Federation. In so doing, the compensation to directors and other similar disbursements received by members of a body of management of an organization (of board of directors or another similar body) - of the tax resident of the Russian Federation whose location (seat of management) is the Russian Federation shall be regarded as incomes received from sources in the Russian Federation irrespective of the place where the managerial duties conferred to such persons were actually performed or whence the disbursements of said compensations were effected;

7) pensions, allowances, grants and other similar disbursements received by taxpayers according to the effective Russian legislation or received from a foreign organisation in connection with activity of its permanent agency in the Russian Federation;

8) incomes received from the use of any vehicles including sea, river, air vehicles and motor road vehicles in connection with carriage to the Russian Federation and/or out of the Russian Federation or within the boundaries thereof and also fines and other sanctions for demurrage (delay) of such vehicles at loading/unloading points in the Russian Federation;

9) incomes received from the use of pipelines, electrical transmission lines, optical fibre and/or wireless communication lines, other communication facilities including computer networks, on the territory of the Russian Federation;";

10) other incomes received by the taxpayer as a result of an activity he performed in the Russian Federation.

2. For the purposes of the present Chapter, incomes of a natural person received by him as a result of conducting foreign trade operations (including commodity exchange) performed solely on behalf of and in the interests of this natural person and connected solely with the purchasing (acquiring) of goods (performance of works, rendering of services) in the Russian Federation and also with the import of goods in the Russian Federation shall not be referred to incomes received from sources in the Russian Federation.

This provision shall apply to operations involving the import of goods to the territory of the Russian Federation under the customs treatment of release for free circulation only if the following conditions are met:

1) the delivery of goods is performed by a natural person not from places of storage (including bonded warehouses) located on the territory the Russian Federation;

2) the operations are not covered by provisions of Item 3 of Article 40 of the present Code;

3) the goods are not sold through a permanent agency in the Russian Federation.

If any one of said conditions is not met, the part of received incomes referred to as activity of the natural person in the Russian Federation shall be regarded an income received from sources in the Russian Federation in connection with the sale of the goods.

In case of subsequent sale of goods acquired by the natural person through foreign trade operations defined by the present Item, to incomes of such natural person received from sources in the Russian Federation shall be referred any incomes from any sale of these goods, including their resale or pledge from warehouses or other places of location and storage of such goods which are situated on the territory of the Russian Federation, owned by this natural person, leased or used by him, except for their sale outside the Russian Federation from bonded warehouses.

3. For the purposes of the present Chapter, to the incomes received from sources outside the Russian Federation shall be referred:

1) the dividends and interest received from a foreign organisation, with the exception of interest envisaged by Subitem 1 of Item 1 of the present Article;

2) insurance disbursements in the case of onset of an insured accident, received from a foreign organisation, save the insurance disbursements specified in Subitem 2 Item 1 of the present article;

3) incomes from the use of copyright and other adjacent rights outside of the Russian Federation;

4) incomes received from the lease or another use of an asset located outside of the Russian Federation;";

5) incomes from sales of:

real estate located outside the Russian Federation;

shares outside the Russian Federation and other securities and also shares in the authorised capitals of foreign organisations;

rights of claim to a foreign organization except for rights of claim specified in paragraph four of Subitem 5 of Item 1 of the present Article;

other property situated outside the Russian Federation;

6) compensation for the performance of labour or other duties, performed work, rendered services, or performance of action outside the Russian Federation. Here, compensation to directors and other similar disbursements received by members of a body of management of a foreign organization (of a board of directors or another similar body) - of the tax resident of the Russian Federation whose location (seat of management) is the Russian Federation shall be regarded as incomes received from sources located outside the Russian Federation irrespective of the place where the managerial duties conferred to such persons were actually performed;

7) pensions, allowances, grants and other similar disbursements received by the taxpayer in accordance with the legislation of foreign states;

8) incomes received from the use of any vehicles including sea, river, air vehicles and motor road vehicles and also fines and other sanction for the demurrage (delay) of such vehicles at loading/unloading points, save those specified in Subitem 8 Item 1 of the present article;

9) other incomes received by the taxpayer as a result of an activity he performed outside the Russian Federation.

4. If provisions of the present Code do not allow to attribute unequivocally the incomes received by the taxpayer either to incomes received from sources in the Russian Federation or to incomes from sources outside the Russian Federation, the Ministry of Finance of the Russian Federation shall make the attribution. Similarly shall be defined the share of said incomes which can be referred to incomes from sources in the Russian Federation and the share which can be referred to incomes from sources outside the Russian Federation.

5. For the purposes of the present chapter the term "incomes" shall not include incomes from transactions relating to property and non- property relationships of natural persons recognised as family members and/or close relatives under the Family Code of the Russian Federation, except incomes received by the said natural persons as a result of their concluding between themselves agreements of civil legal nature or labour agreements.

Article 209. The Item of Taxation

The item of taxation shall be defined as an income received by taxpayers:

1) from sources in the Russian Federation and/or from sources outside the Russian Federation - for natural persons who are tax residents of the Russian Federation;

2) from sources in the Russian Federation - for natural persons who are not tax residents of the Russian Federation.

Article 210. The Tax Base

1. When determining the tax base taken into account shall be all incomes the taxpayer has received both in cash and in kind or the right to dispose of which he has acquired, and also incomes in the form of material benefit defined according to Article 212 of the present Code.

If any deductions are made from the taxpayer's income by his order or by a court ruling or decisions of other bodies, such deductions shall not reduce the tax base.

2. Tax base shall be defined separately for each type of income concerning which various tax rates are established.

3. For incomes concerning which the tax rate established by Item 1 of Article 224 of the present Code is stipulated, the tax base shall be defined as the pecuniary form of such taxable incomes reduced by the tax deductions stipulated by Articles 218-221 of the present Code with allowance for features established by the present Chapter.

If the amount of tax deductions in a tax period will exceed the amount of taxable incomes covered by the tax rate established by Item 1 of Article 224 of the present Code, over the same tax period the tax base shall be defined as having zero value. The difference between the amount of tax deductions in this tax period and the amount of taxable incomes concerning which the tax rate established by Item 1 of Article 224 of the present Code is stipulated, shall not be rolled over into the following tax period, unless otherwise is stipulated by the present Chapter.

4. For incomes concerning which other tax rates are established, the tax base shall be defined as a pecuniary form of taxable incomes. Thus, the tax deductions stipulated by Articles 218-221 of the present Code, shall not apply.

5. Incomes (expenses accepted for deduction according to Articles 218-221 of the present Code) of the taxpayer expressed (nominated) in foreign currency are converted into roubles at the rate of the Central Bank of the Russian Federation established on the date of actual receipt of the incomes (on the date of the actually incurred expenses).

Article 211. Features of the Determination of the Tax Base When Receiving Incomes in Kind

1. If the taxpayer receives an income from organizations and individual entrepreneurs in kind in the form of goods (works, services) and other property, the tax base shall be defined as the cost of these goods (works, services) other property calculated on the basis of their prices defined in accordance with the procedure described in Article 40 of the present Code.

Thus, the cost of such goods (works, services) shall include corresponding amount of the value added tax, excise tax and sales tax.

2. Incomes received by the taxpayer in kind, in particular shall include:

1) payment (full or partial) made for him by organizations or individual entrepreneurs in goods (works, services) or property rights, including municipal services, meals, rest, and training in the interests of the taxpayer;

2) goods received by taxpayers, works performed in the interests of the taxpayer, and services rendered in the interests of the taxpayer on a gratuitous basis;

3) wages in kind.

Article 212. Features of the Determination of the Tax Base When Receiving Incomes in the Form of Material Benefit

1. Incomes of the taxpayer received in the form of material benefit shall be:

1) material benefit received from economic gain on the interest for use by the taxpayer of borrowed (credit) funds, received from organisations or individual entrepreneurs;

2) material benefit received from the purchase of goods (of works, services) from natural persons under an agreement having civil legal nature as natural persons are concerned, organizations and individual entrepreneurs being related to the taxpayer;

3) material benefit received from acquiring securities.

2. When the taxpayer receives an income in the form of material benefit specified in Subitem 1 of Item 1 of the present Article, the tax base shall be defined as:

1) excess of amounts of interest for the use of borrowed funds expressed in roubles calculated on the basis of three quarters of the current refinancing rate established by the Central Bank of the Russian Federation on the date of receipt of such funds over the amount of interest calculated on the basis of terms and conditions of the contract;

2) excess of the amount of interest for the use of borrowed funds expressed in foreign currency calculated on the basis of 9 per cent per annum, over the amount of interest calculated on the basis of terms and conditions of the contract.

The taxpayer shall determine the tax base when receiving an income in the form of material benefit expressed as the gain on interest at the receipt of borrowed funds within the times defined by Subitem 3 of Item 1 of Article 223 of the present Code, but at least once in a tax period established by Article 216 of the present Code.

3. When the taxpayer receives an income in the form of material benefit specified in Subitem 2 of Item 1 of the present Article, the tax base is defined as the excess of the price of the identical (homogeneous) goods (works, services) sold by persons being related to the taxpayer, under usual conditions to persons who are not related, over the prices of sale of identical (homogeneous) goods (works, services) to the taxpayer.

4. When the taxpayer receives an income in the form of material benefit specified in Subitem 3 of Item 1 of the present Article, the tax base is defined as the excess of the market value of securities determined with the account taken of the security market price variation limits above the amount of actual expenses of the taxpayer for their purchase.