Income tax is a payment to the budget of all legal entities registered in the Russian Federation and applying the general taxation system (OSN). Such a tax payment is not accrued by individual entrepreneurs who are required to pay personal income tax.
Income tax is calculated based on the tax base. In the event that the company does not have a profit, the tax, accordingly, is not withheld.
In this article, we will take a detailed look at what is the procedure for calculating income tax and how to pay it.
Subjects of income tax
The specified tax is charged and paid to the budget by Russian and foreign organizations operating in Russia. In the event that a foreign organization has a branch or representative office in the country, they also charge income tax.
There is a category of organizations that may not calculate income tax. This applies to companies that have the right to a zero income tax rate.
The payers of income tax are also not:
- Leading gambling business.
- Using a special taxation regime: ECN, simplified taxation system.
The zero income tax rate is provided for companies that:
- Work in the Skolkovo business cluster.
- Conduct their own business in the field of healthcare or education.
- Participate in social programs.
- Work in the hotel business in the Far Eastern District.
- Sell goods of personal agricultural production.
Income and expenses: types
Income is the company’s revenue from its core business. This can include the sale of goods, the provision of services or the performance of work. Also, income can be from additional sources — non-operating income, for example, bank interest, leasing of property. When the taxable profit is calculated, the income is taken into account without VAT and excise taxes, confirmed by primary accounting documents, payment orders and others.
When determining the company ‘s income , the tax base is determined by the method:
- During the sale of goods, property rights, such as apartment rentals.
- Non—operating income – this means income that is not directly related to the work of the organization, for example, a loan.
It is important to take into account that income when calculating income tax is indicated without VAT and excise taxes.
Expenses are the costs of the company’s activities. Expenses include only those that are documented. You cannot include payments for a personal car or goods for your own use as part of the company’s expenses.
It is not possible to take into account a number of categories of funds in full in the expenses of the company. For example, funds received on credit will not be considered income, which in turn has a mirror effect: the money that goes to repay loan obligations will not be an expense of the organization in this sense.
In general, expenses include:
- Raw materials and equipment costs.
- Legal costs.
- The difference in the exchange rate.
- Interest on loans.
To calculate the income tax base, it is important to deduct expenses from income. The finance department should be attentive to the papers that confirm all expenses. This is due to the fact that it is allowed to reduce income for expenses only if the conditions prescribed in Article 252 of the Tax Code of the Russian Federation are met: justify spending — prove economic feasibility and issue primary documents.
The following expenses can be deducted:
- Commercial, transportation, production costs. This applies to the costs of raw materials, wages, depreciation, rent, services of third-party lawyers, representation expenses.
- Interest on loans and promissory notes.
- Advertising costs.
- Purchase of insurance.
- The costs of spending on research.
- Costs of education and training of personnel.
- Software and database acquisition costs.
At the same time, the list of expenses that cannot be deducted from income is quite extensive. It includes:
- Income of members of the Board of Directors.
- Payment of the authorized capital.
- Contributions to the securities reserve.
- Environmental payments for violation of regulations.
- Losses related to economic activities in the communal-housing and socio-cultural spheres.
- Penalties and fines paid.
- Funds and assets transferred to the settlement of loans and borrowings.
- Payment for expensive notary services.
- Prepayment for a product or service.
- Expenses for the implementation of internal social programs.
- Voluntary membership fees to public funds.
- The amount of revaluation by the Central Bank.
- Expenses for the transfer of donated property.
- Payment for travel of employees to work and home.
- Allowances to pensions of former employees.
- Payment for vacations not provided for by law.
- Spending on the organization of sports and cultural events within the team.
- Payment for personal consumption goods.
- Subscription to newspapers and other literature.
- Payment for corporate meals.
The amount of income tax
As a general rule, the amount of income tax is 20%. The following formula is used: 17% of the tax amount goes to the regional budget and only 3% to the federal budget. Moreover, the regions have the right to reduce the income tax rate.
The federal tax rate can also be changed downwards. For example, for IT companies — residents of the Russian Federation – the tax rate is 3%. The same rate applies to companies in the field of design of electronic products.
When is income and expenses recognized?
The moment of recognition is the period (usually a calendar year) in which income or expense accounts are recorded for calculating income tax. There are two such periods. They depend on the method of recognition of income and expenses: cash or accrual method.
Each company must choose its own method and reflect it in the accounting policy for calculating profits on tax accounting. After choosing the method, the amounts will be taken into account at different times.
So, the cash method assumes that:
- Income is taken into account at the time of receipt of money to the cash register or to the settlement account.
- Expenses are taken into account at the time of debiting from the account or issuing from the cash register.
- When paying tax, the amounts are taken into account by the dates of receipt or write-off.
The cash method can be used by companies that have revenue below 1 million rubles quarterly. For the year, revenue cannot exceed 4 million rubles.
The accrual method assumes that:
- Income is taken into account at the time of its documentary occurrence.
- Expenses are taken into account at the time of occurrence, and not at the actual write-off.
- When paying the tax, the amounts are taken into account according to the documented dates, even if the actual payment took place later.
This method can be used by the vast majority of organizations. At the same time, banks, credit cooperatives, companies with large revenues, participants in trust management agreements or partnerships, controlled foreign companies, oil and gas corporations cannot use the cash method for sure.
Accrual of income tax: calculation
The calculation of income tax or the calculation of profit on tax accounting is the amount of income deducted from the organization’s expense item (calculation of tax on actual profit). When calculating income tax, it is necessary to keep in mind certain factors: what can be attributed to the income and expenses of the organization.
The calculation of income tax is determined depending on the taxation of the resident.
For Russian companies, the tax profit is the amount of income minus expenses – this is the calculation of income tax.
There are some peculiarities for non-residents, they pay tax only for a certain type of income.
When is it necessary to report?
According to Article 247 of the Tax Code of the Russian Federation, the tax period is the period during which the tax base is determined and the amount of payments is taken into account. Income tax is calculated by companies once a year.
If the organization’s income exceeds 15 million rubles for each quarter, then the income tax is calculated monthly.
How to file an income tax return
The declaration with the specified amount of income tax calculation is submitted before the 28th of the month, which follows the end date of the tax period.
If the company reports for the first quarter, then it is necessary to pay and submit a report by April 28. For the tax period, you need to report by March 28 and pay the tax for the year. If an organization pays income tax every month, then it is necessary to report by the 28th of each month from January to November.
Few people know that in the absence of income and expenses (as well as the movement of funds on accounts in general), it is necessary to submit a “zero” declaration. If a zero income tax rate is applied, it is important to attach supporting documents.
When using another right to reduce income tax, this right must be confirmed. For example, in the case of conducting scientific research and including expenses for it with an increasing coefficient, it is necessary to have an R&D report. When reporting for the tax paid at a rate of 20%, you do not need to attach additional documents.
If you have any questions, you need to seek professional help. VALEN specialists will help you understand the intricacies of calculating and paying income tax. Our experienced lawyers and accountants will help you calculate the tax base and take into account the maximum possible expenses. To find out more, contact us at the phone number listed on the website.