Features of calculating personal income tax (personal income tax)

The personal income tax (personal income tax) is a tax that is mandatory for all citizens who receive income in one form or another.

According to the Tax Code of the Russian Federation, for the vast majority of the population, the personal income tax rate is 13%. Since 2021, an increased personal income tax rate of 15% has been in effect in Russia. This percentage will be paid by individuals with incomes over 5 million rubles a year. The personal income tax rate of 35% is also valid. It is applied in case of a person winning.

In this article we will talk in detail about the tax calculation and payment of personal income tax.

Personal income tax: features

As we noted earlier, personal income tax is a tax payment on personal income. The tax must be paid by citizens and residents of the Russian Federation. This applies to those who are in Russia for more than 183 days in a calendar year. Also, NFDL are required to pay individuals who live abroad, but have income in the Russian Federation.

As a rule, these types of income include:

• Wages, including under an employment contract or a civil contract.
• Income from the sale of immovable property that has been owned for less than a certain time by law.
• Income from rental payments.
• Profit from financial sources abroad of the Russian Federation.
• Prizes received during contests.

Personal income tax accrual is not limited only to salary. Employee bonuses, other incentives and additional payments are also the tax base for the accrual of personal income tax. At the same time, not all profits are subject to personal income tax. Article 217 of the Tax Code of the Russian Federation clarifies which type of income will be exempt from tax. For example, this applies to all types of benefits, pension payments and almost all types of grants.

It is important to keep in mind that tax agents are employers who are required to deduct a certain percentage from an employee’s salary.

Personal income tax amount

The Tax Code of the Russian Federation provides for 5 personal income tax rates. These include the following:  

1. 9% – the minimum amount is applied to:

• dividends paid before 2015;
• interest on certain mortgage bonds;
• the income of the founders received during the trust management of mortgage property.

2. 13% – the calculation of this income tax is made from the employee’s salary.

3. 15% – paid by non-residents of Russia from the income received from dividends in Russian companies.

4. 30% – the amount of tax on the wages of non-residents.

5. 35% – the maximum amount of tax is applicable for:

• prizes from contests or lotteries;
• income from bank deposits;
• in the case of using funds of various kinds of cooperatives.

As for non-residents, they pay tax only on income in the Russian Federation that is not exempt from taxation. This does not apply to alimony and benefits, but it does apply to sick leave payments. In some cases, the personal income tax rate for non-residents is less than 30%. Thus, non-residents pay 15% of the dividends received from domestic companies.

The exception applies only to certain categories of non-residents who are abroad for more than 185 days and still pay 13% of income:  

• Foreigners working under a patent or who are highly qualified specialists — scientists, teachers, researchers.
• Refugees and people who have received temporary asylum in the Russian Federation.
• Citizens of the EAEU countries — Armenia, Belarus, Kazakhstan and Kyrgyzstan — who work under an employment or civil law contract.
• Russians who moved back to the Russian Federation under the state program of resettlement of compatriots.
• Crew members of Russian vessels.

Calculation of income tax: procedure

Here it is necessary to use a special calculator, which includes the following scheme:

• accounting of the employee’s income in full;
• exclusion of expenses in accordance with the Tax Code of the Russian Federation;
• the balance is taxed at a rate of 13% or 30%.

The calculation of the amount of personal income tax from wages is carried out by the employer. Accordingly, active actions on the calculation of personal income tax are not required from the employee.

For a more visual understanding, we can give an example of calculating the following income tax. For example, a person is an employee of the logistics department. He receives a salary of 60,000 rubles. Of this amount, the accountant of the organization withholds 13%, which is 7,800 rubles. It turns out that the employee will receive 52,200 rubles in his hands. If a person lived in another country and worked in a remote format, the personal income tax would be withheld in a different amount – 30% (namely 18,000 rubles).

Tax withholding procedure

By virtue of the provisions of Article 226 of the Tax Code of the Russian Federation, the employer is obliged to calculate, withhold and pay NFDL to the appropriate budget.

It is necessary to pay the NFDL from the employee’s salary monthly when calculating his income. The main duty of the employer is to withhold personal income tax from the salary. Only after that, other write-offs occur, for example, the payment of a loan debt or alimony.

The calculation of the amount of income tax on wages has its own peculiarities. For example, if the deductions exceed the tax base, then the tax may be negative. In such a situation, the tax is subject to offset in subsequent periods.

Tax deductions may be transferred within one calendar year to different periods.

Terms of payment of tax and penalties for violation

Income tax calculations are carried out by April 30 of the following year. This is the employer’s responsibility. If the income is received independently, then the declaration must be submitted by an individual through the personal account of the Federal Tax Service or during a personal visit to the inspection.

This applies to:

• Individual entrepreneurs.
• Lawyers and notaries.
• Those who have received a profit from the sale of real estate.
• Citizens of the Russian Federation who have received profits from sources located abroad in Russia.
• Citizens who have won the lottery.
• Citizens who have received a profit as a gift.

An employer may be fined in the amount of 20% of the amount of tax that he should have withheld, but did not fulfill his duties.  

If the violation was absolutely in a significant amount, then the fine will be higher – from 100,000 to 300,000 rubles, or the company may lose the right to engage in a certain type of activity for up to 3 years.  

Almost 90% of personal income tax is directed to the budget of the subject of the Russian Federation. Accordingly, if you are employed in Moscow, the tax payment will be sent to the budget of Moscow. The remainder – about 10% – will go to the local budget.

In other words, the personal income tax does not replenish the treasury of the Russian Federation. The funds will remain in the entity where it was paid, which contributes to improving the welfare of each particular region.

Items of expenditure of the budgets of the subjects can be found freely available on the websites of the administration of the relevant subjects of the Russian Federation.

What income is not subject to personal income tax?

According to Articles 215 and 217 of the Tax Code, there are categories of income from which citizens will not pay income tax. As a rule, these are benefits and social benefits. The full list includes:

• Unemployment benefits.
• Maternity allowance, as well as child care.
• Severance payments in the amount of three average monthly earnings.
• Old-age or disability pension.
• Remuneration for donor assistance.
• Alimony.
• Some types of grants.
• Payments in connection with a natural disaster.
• Income from the sale of a car that has been owned for more than three years.
• Inheritance.
• Gifts from close relatives.
• Cash gifts.

Also, personal income tax is not levied on income from the sale of real estate that has been owned for more than five years. In some cases, you can sell an apartment without tax if it has been owned for more than three years. This applies to situations when an apartment is bought, donated by a relative, inherited or under a lifetime maintenance agreement with a dependent.