Rates amended for insurance contributions in 2012 – 2013

Pepeliaev Group advises that on 23 November, the State Duma adopted a Federal Law that amends the rates of insurance contributions payable to the state social security funds.

The most significant amendments provided for by the Federal Law On amending certain items of Russian Federation legislation in relation to establishing the rates of insurance contributions to state social security funds are:

- a temporary reduction (fr om 34% to 30%) of the main rate of insurance contributions payable by employers for their employees in 2012 and 2013. This rate will be applied until payments for the employee reach the maximum lim it for the insurance contributions to be assessed (for 2012 this is RUB 512,000);

- all payments in a year in excess of the threshold will be subject to a rate of 10%, with no restrictions. Moreover, the additional amounts of insurance contributions are regarded as general insurance contributions, i.e. they in no way affect the amount of the employee’s future pension;

- the new provisions establishing additional rates of insurance contributions do not affect employers who pay insurance contributions at reduced rates. In addition, the list of categories of those who are eligible for reduced rates has been extended, in particular to include non-profit organisations who use the simplified taxation system as well as organisations that provide engineering services;

- within the scope of mandatory pensions insurance, from 2012, foreign citizens or stateless persons who are temporarily residing in Russia (save for highly-qualified foreign professionals) will also be treated as insured persons if they have an employment contract for an indefinite period or for a term of at least six months. Under the general rule, employers will have to pay contributions to the Russian Pension Fund at rate of 22% on payments made to such foreign citizens (until the amount of payments in the year reaches the basic threshold for insurance payments to be assessed) and at the rate of 10% (on payments in excess of the threshold).

The law also introduces liability for failure to supply the controlling authorities on a timely basis with information that an account has been opened or closed in a bank – the fine is RUB 5,000.

The law has been sent for approval to the Council of the Federation, after which it is expected to be signed by the Russian President and officially published.

For further information, please contact:

in Moscow – Andrey Nikonov, Senior Partner, at: (495) 967-0007 or by e-mail; Vladimir Voinov, Senior Associate, at: (495) 967-0007 or by e-mail;

in St Petersburg - Sergey Sosnovsky, Head of Tax Practice (St. Petersburg), at (812) 640-60-10 or by e-mail