30 April 2011 is the deadline for individuals to file income tax returns (tax returns for paying additional tax) with regard to income received in 2010

Pepeliaev Group reminds you that tax rights and obligations depend on tax status, rather than on citizenship.

Any individual residing in Russia for more than 183 days in a calendar year is treated as a tax resident of the Russian Federation at the end of the year.

If an individual is classified as a tax resident based on result of 2010, this individual will have to pay taxes on all income received from sources in the Russian Federation and abroad.

If the outcome of the year 2010 is that an individual is not classified as a tax resident, such individual will only have to pay taxes on income received from sources in the Russian Federation.

If in 2010 individuals only received income from employment in a Russian company, they do not need to file tax returns. In such a case the employer withholds taxes and pays them to the budget.

However, if individuals are Russian tax residents, they need to file tax returns if in 2010 they received income, inter alia, from the following sources:

• A foreign company
• The sale of securities, participation interest in the companies’ issued capital, accounts receivable (in Russia and/or abroad)
• The lease or sale of any property[1] to individuals or companies (in Russia and/or abroad)
• Material gain from savings on interest
• Gains paid by organisers of lotteries, totalisators and other types of gambling.

Please bear in mind that individuals having status of the Russian tax resident are not only obliged to pay tax to the state budget, but also are entitled to tax refunds from the budget to their bank account through social and property-related tax deductions.

Such deductions comprise amounts paid for:

• Charity (expenses actually incurred, but not more than 25% of income received in the tax period)
• Purchase of real estate (expenses actually incurred, but not more than RUB 2,000,000)
• Payment of interests on loans to purchase real estate (expenses actually incurred)
• Sale of real estate (expenses actually incurred to purchase property or RUB 1,000,000)
• Sale of other property (expenses actually incurred to purchase property or RUB 250,000)
• Expensive medical treatment for the individual in question/ spouse/ parents/ children (expenses actually incurred)
• Pension contributions for the benefit of the individual in question/ spouse/ parents/ disabled children (expenses actually incurred with due account of the restrictions imposed by clause 2, article 219 of the Russian Tax Code).
• Insurance contributions (expenses actually incurred with due account of the restrictions imposed by clause 2, article 219 of the Russian Tax Code)
• Medical treatment for the individual in question/ spouse/ parents/ children (expenses actually incurred with due account of the restrictions imposed by clause 2, article 219 of the Russian Tax Code)
• Education for the individual in question/ his(her) brother (sister) (expenses actually incurred with due account of the restrictions imposed by clause 2, article 219 of the Russian Tax Code)
• Education for children (expenses actually incurred, but not more than RUB 50,000 per child)

The deadline for claiming tax deductions is three years. Therefore, in 2011 tax deductions may be claimed for expenses incurred between 2008 and 2010.

In practice, submitting income tax returns and claiming tax deductions entail certain difficulties. Many issues arise with regard to reporting income from operations with financial assets and/or income from foreign sources, as well as with regard to documentary proof of the right to tax deductions.

Pepeliaev Group lawyers have extensive experience of solving complicated issues. For many years, we have helped individuals who are our VIP clients to correctly fill in their tax returns (determine the tax base and calculate the tax amounts that must be additionally paid to the budget or could be refunded). We do not just fill in the tax return – we regard our task as being completed after the tax return has been accepted, any potential disagreement with the tax inspectorate has been settled and the money has been credited to the taxpayer’s bank account.

Pepeliaev Group lawyers will be happy to assist you with the following before 30 April 2011:

• Prepare your tax return
• Prepare an amended tax return if you doubt that the tax return you have filled in and submitted yourself is complete or correct.

Moreover, Pepeliaev Group lawyers are always happy to assist you to:

• Obtain tax deductions
• Avoid double taxation based on international treaties concluded between the Russian Federation and other states;
• Settle your debts to the budget for the previous periods, including reconciling with the tax authority personal income tax, property tax, transport tax and land tax paid to the budget.

[1]Taxable income from the sale of movable and immovable property is calculated in each specific situation and depends on the type of property and the length of time for which the seller has possessed this property.

For further information, please contact:

in Moscow – Ivan Khamenushko, Senior Partner, at: (495) 967-0007 or by i.khamenushko@pgplaw.ru; Elena Panevina, Associate, at: (495) 967-0007 or by e.panevina@pgplaw.ru

in St Petersburg - Sergey Sosnovsky, Head of Tax Practice (St. Petersburg), at (812) 640-60-10 or by s.sosnovsky@pgplaw.ru