CIT, VAT and withholding tax — filed right, and defended when the FTS asks.
Two things changed the arithmetic of Russian tax for foreign groups: the CIT rate rose to 25% in 2025, and the double tax treaties with 38 countries were suspended in 2023, so the withholding relief you used to rely on is gone. We run the compliance, model what the changes cost you, and defend the position when the FTS opens an audit — which, for a foreign-owned company, is a question of when.
For a foreign-owned company, Russian tax stopped being routine in the space of eighteen months. The corporate income tax rate rose to 25% in January 2025 — the first increase in sixteen years — and back in August 2023 Russia suspended the operative provisions of its double tax treaties with 38 countries, so the reduced withholding rates that made profit repatriation affordable simply stopped applying. If your tax planning still assumes a 5% dividend rate and a 20% CIT rate, it is describing a country that no longer exists. The work now is knowing what actually applies, and being able to defend it.
Corporate income tax has been 25% since 1 January 2025, under Federal Law No. 176-FZ. The increase is structurally federal — the federal share rose from 3% to 8% while the regional share stayed at 17% — and that detail matters, because regions can still reduce their 17%, but not the new federal 8%. Two reliefs are worth knowing precisely rather than vaguely.
Accredited IT companies kept the 5% rate. A Russian LLC owned by a foreign parent can qualify on its own — foreign ownership does not disqualify it — provided it is accredited, has at least seven employees and draws at least 70% of revenue from qualifying IT activity. It has to be genuine; the FTS reads revenue-mix engineering through a transfer-pricing lens.
Regional investment reliefs still exist on the 17% portion — the Far East free port and certain SEZs bring the combined rate into low single digits — but they require real investment agreements and suit manufacturing and logistics rather than service operations.
On 8 August 2023, Decree No. 585 suspended the income articles — dividends, interest, royalties, capital gains — of Russia's tax treaties with 38 "unfriendly" countries, effective immediately. The affected list is essentially all of the EU and EEA, the UK, the US, Japan and others; Denmark and Latvia went further and terminated their treaties outright from 2024. With the income articles gone, Russian domestic withholding rates apply in full: 15% on dividends to any non-resident corporate shareholder regardless of stake, where treaties had offered 5% or zero; 20% on interest and royalties.
The trap is what happens at the other end. Most EU countries exempt inbound dividends under a participation exemption regardless of the treaty — which sounds like relief, but means there is no home-country tax to credit the Russian 15% against. The withholding becomes an absolute, unrecoverable cost. For interest and royalties the credit mechanism itself is disrupted, because it refers to tax paid "pursuant to the treaty" and the treaty is suspended. This is not a rate change to absorb; it is a structural cost that has to be modelled, and sometimes restructured around.
The common response is to interpose a holding company in a jurisdiction whose treaty still works — Turkey at 10% on dividends, the UAE at 5–10% under the 2025 treaty, China or India at 10%, Kazakhstan at 10%. It can work. It also fails cleanly if done carelessly, because Russia's beneficial-ownership rule in Article 7(2) requires the recipient to be the genuine beneficial owner with real substance — staff, office, decision-making, banking — not a registered address created to route a dividend. We model the whole chain, including the intermediate country's own tax, before anyone incorporates anything. A structure that saves 5% and collapses under a substance challenge was never a saving.
Two Russian mechanisms reclassify things you thought were settled, and both hit intra-group arrangements first.
Thin capitalisation: related-party debt above a 3:1 debt-to-equity ratio has its excess interest disallowed and reclassified as a dividend — which then carries 15% withholding. Groups that funded the Russian entity with intercompany loans rather than equity are the ones caught.
Loss carryforward is allowed indefinitely but capped at 50% of the current year's base per year, so a large historic loss shelters only half of today's profit. It is a real asset, but a slower one than groups assume when they plan around it.
The FTS runs a published 12-criterion risk model and an increasingly automated scoring system, and foreign-owned companies light up several criteria by their nature: large deductible payments to related foreign parties — management fees, royalties, interest — a VAT deduction ratio above 89%, losses across two or more years, and a tax burden below the sector average. A desk audit follows every declaration automatically (three months, one for a clean VAT return); a field audit reaches back three years and, from 2026, can run cross-regionally, with document seizure now possible even while audit materials are being considered.
The single most important procedural moment is the one month to file written objections after the audit act. Points not raised there are far harder to raise on appeal. Most of the audit damage we are asked to fix was decided in that month, before we were called.
We run the compliance — CIT, VAT at 22%, withholding, property tax — and keep it defensible rather than merely filed: the position documented at the time, not reconstructed later. We model what the rate rise and the treaty suspension actually cost your group, and where restructuring is worth it we build it to survive a substance challenge. When an audit comes, we represent you through it under power of attorney, from the first document request to the objections and, if needed, the appeal. Our advisers trained at the Big Four and work in English, Russian, Chinese and Turkish.
The full compliance calendar at the 25% CIT and 22% VAT rates — advances, returns and property tax — with the position documented at the time rather than reconstructed when the FTS asks.
What actually applies to dividends, interest and royalties now the treaties are suspended — and an honest view of whether the home-country credit still works or the cost is now absolute.
Restructuring around the suspension through active-treaty jurisdictions, and the IT 5% accreditation where it applies — modelled against beneficial-ownership and transfer-pricing rules before anyone incorporates.
Representation through desk and field audits under power of attorney — from the first document request to the written objections, whose one-month window decides most of what follows.
Administrative appeal and litigation of assessments — argued on the record built during the audit, which is why we would rather be in the room before the act than after it.
Loss carryforward under the 50% annual cap and related-party interest under the 3:1 rule — planned so the shelter you are counting on is actually available when you need it.
Your dividend is now taxed at 15% where the treaty used to give you 5%, and nobody has modelled the cost.
You are considering a holding company in Turkey or the UAE to route dividends and want to know if it survives scrutiny.
The FTS has sent a document request and you are not sure what you can decline.
Your Russian entity funded itself with intercompany loans and interest is being reclassified as dividends.
You have an audit act in hand and one month to object.
Recognise your situation? A position documented from the start is a conversation with the FTS; one reconstructed under audit is an argument.
30 minutes with a senior adviser — or send a note instead, if you would rather write.
The group had repatriated dividends at 5% for years under the Russia-Germany treaty and planned the next distribution on the same basis. The treaty had been suspended; the rate was now 15%, and Germany's participation exemption meant there was no German tax to credit it against — the withholding was an absolute cost. We modelled the exposure, tested an active-treaty holding structure against the beneficial-ownership rule, and found that in their case genuine substance in the intermediate jurisdiction was achievable rather than cosmetic. The restructured route cut the effective rate materially, and it was built to survive a challenge rather than to look good until one came.
What actually applies now — the 25% rate, the suspended treaty, the WHT cost, the intra-group exposures — modelled for your structure.
Where restructuring is worth it, built to survive a beneficial-ownership challenge rather than to look good on a slide.
CIT, VAT, withholding and property tax on the calendar, with the position documented at the time.
When the audit comes, representation from the first request through objections and, if needed, appeal.
25% since 1 January 2025, up from 20% — the first change in sixteen years. The increase is federal (the federal share went from 3% to 8%; the regional 17% is unchanged), so regional reductions still apply only to the 17% portion. Accredited IT companies kept a 5% rate, and a foreign-owned Russian LLC can qualify on its own if it meets the accreditation, headcount and 70%-revenue tests.
For 38 "unfriendly" countries, no. Decree No. 585 of 8 August 2023 suspended the income articles of those treaties, so Russian domestic rates apply: 15% on dividends regardless of stake, 20% on interest and royalties. Denmark and Latvia terminated their treaties entirely. If your planning still assumes a 5% or zero dividend rate, it needs revisiting.
Often not, and this is the trap. Most EU countries exempt inbound dividends under a participation exemption regardless of the treaty — which means there is no home-country tax to credit the Russian 15% against, so it becomes an absolute cost. For interest and royalties the credit mechanism is disrupted because it refers to tax paid "pursuant to the treaty." It needs to be modelled per jurisdiction rather than assumed.
It can, if it is real. Interposing a holding company in an active-treaty jurisdiction — Turkey, the UAE, China, India, Kazakhstan, all around 10% or lower — is the common approach. But Article 7(2) of the Tax Code requires the recipient to be the genuine beneficial owner with real substance: staff, office, decision-making, banking. A shell created to route a dividend fails the test, and the intermediate country's own tax has to be modelled too. We build the whole chain before anyone incorporates.
The FTS uses a 12-criterion risk model, and foreign-owned companies commonly trip several: large deductible payments to related foreign parties (management fees, royalties, interest), a VAT deduction ratio above 89%, losses across two or more years, and a tax burden below the sector average. A desk audit follows every declaration automatically; a field audit reaches back three years and, from 2026, can run cross-regionally.
You have one month from the act to file written objections, and it is the most important step in the whole process: points not raised there are far harder to raise on appeal. We represent companies through this under power of attorney — the objections, the consideration hearing, and the administrative appeal or litigation if it goes further. The earlier we are involved, the better the record we have to argue from.
Yes — the majority of our tax clients are from China, UAE, Turkey and India. These are the jurisdictions with active Russian tax treaties and growing bilateral trade. We have specific expertise in the Russia-China DTT (0% interest, 6% royalties), the new Russia-UAE treaty (in force January 2026) and the Russia-Turkey treaty. We work in English, Russian and Chinese.
Yes. We handle regularisation for companies with historical filing errors — incorrect rates, missed deadlines, incomplete returns. We calculate the correct position, file amended returns, calculate penalty exposure and advise on the best approach to minimise FTS sanctions. The three-year statute of limitations applies in most cases.
Both. Ongoing compliance (CIT, VAT) is typically a monthly retainer. Project work (structuring advice, audit defence, WHT analysis) is quoted separately based on scope. We agree the fee structure upfront before any work begins — no surprises.
Yes — transfer pricing is a separate practice area. See our transfer pricing service page for details on TP documentation, controlled transaction analysis and FTS audit defence. Many clients engage us for both ongoing tax compliance and annual TP documentation.
By email, WhatsApp, Telegram or WeChat. Describe your situation briefly — we don’t need everything upfront.
A named adviser replies — not a generic inbox. We confirm whether we can help and propose a call if needed.
We ask about your situation, Russian entity structure and what you need. No charge. In English, Russian or Chinese.
Clear scope, fee and timeline. We start on receipt of the signed letter. No retainer lock-in on project work.
Practical support for international business in Russia.