Personal Income Tax: interest on deposits and income from securities
Pepeliaev Group advises that the State Duma has adopted amendments to the Russian Tax Code which impose a new taxation regime for income in the form of interest on deposits placed into deposit bank accounts, as well as for certain types of income from securities.
Interest on deposits
In accordance with the new developments[1], tax on personal income in the form of interest received under deposits with banks located in the Russian Federation will be assessed on the excess amount of the interest that the taxpayer received on all deposits of an individual over the amount of interest calculated as the product of RUB 1,000,000 and the key rate of the Russian Central Bank in effect as at the first day of the tax period. If such income is denominated in foreign currency, it should be converted into Rubles at the official rate of the Central Bank in effect as at the date of the actual payment.
Any deposits on which the interest rate will not exceed 1% during the entire tax period will not be included in the calculation of the tax base for personal income tax in the form of interest on deposits. The income from such deposits will not be taxed. Similar regulations are also provided for deposits on escrow accounts.
The tax authority will calculate the aggregate tax amount in relation to all deposits of an individual based on the information provided by banks. This calculation will be carried out no later than 1 February of the year following the year when the income was actually received.
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The tax will be calculated as follows: if the 6% key rate of the Central Bank remains unchanged, personal income tax at 13% will be applied to interest income from all deposits of an individual which exceed RUB 60,000 per year. |
Income from securities
According to the amendments adopted, from now on interest income in the form of a coupon or discount received by an individual in relation to securities during the tax period will be included in the income of individuals relating to transactions with securities without any exception. Any relief from personal income tax provided for by legislation will become void. Thus, such income received starting from 1 January 2021 will be subject in full to personal income tax at 13%, whereas the tax will become payable in 2022.
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Therefore, starting from 1 January 2012, interest income in the form of coupons or discounts in relation to securities will be classified as income of individuals from transactions involving securities. This, for instance, makes it possible, when calculating the tax base during the preparation of a tax return in accordance with the 3-NDFL form to decrease the amounts of such income by the amounts of the expenses incurred. |
Help from your adviser
Pepeliaev Group's team will readily assist private clients and family offices in advising on the taxation of income in the form of interest on deposits opened with banks located in the Russian Federation, as well as on the taxation of income from transactions involving securities and on issues relating to the calculation of the tax base.
[1] Federal Law “On amending parts one and two of the Russian Tax Code and certain items of Russian legislation”.