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rubyrussia
05-05-2012, 16:49
Hello,

I am going to start the process for obtaining the Individual Entrepreneur's License (ИП).

If I have a company that signs a contract with me for either consultancy or English lessons, what percent in tax should they pay the government? How do they pay the government?

My understanding is after that amount, I should pay 6% in tax. How do I do that? I'm planning on opening that special bank account at Sberbank for all these transactions.

Thanks for any help!

Daniel

DavidB
05-05-2012, 17:51
The company which you invoice won't pay any tax to the government. You issue the invoice to them, and they pay you. It's the same as when a company orders a product or service from another company (eg. from a store).

You will have to pay 6% "unified tax". There were also some changes to the social security laws during the past year, so I'm not sure if you will have to pay some social fund contributions as well. Maybe someone else knows. If you hired some employees under your IP entity, you would definitely have to pay social fund contributions on their behalf. I'm not sure if you as the IP proprietor are considered an employee yourself, or if your income is considered a dividend or some other form of drawings, in which case it would be exempt from employment-related taxes and contributions.

DavidB
06-05-2012, 15:16
Also remember that if you work through a company/IP entity, the company which you provide services is not bound by the employment laws. They don't have to provide you with holidays or any allowances for sick leave, strike action, transport problems, etc. If you can't provide the services as per the contract, they don't have to pay. It would be a good idea to put allowances in the contract for those situations.

I guess if you can find an accountant or legal firm which is relatively well organised, they will have standard contracts for service-type businesses which cover all of the usual issues around notice periods for cancellations, payment terms, etc.

DavidB
06-05-2012, 15:22
And I found some more details about the social insurance contributions on Wikipedia:

http://ru.wikipedia.org/wiki/Индивидуальный_предприниматель

Отчисления на социальное страхование идут только исходя из МРОТ, взятого на начало соответствующего года (в виде фиксированного платежа), даже если деятельности не было

Налоги и сборы ИП
ИП обязан платить фиксированный платёж в социальные фонды вне зависимости от дохода. В 2009 году — 7274.40 руб.[4], в 2010 — 12002.76 руб.[5], в 2011 — 16159.56 руб. Сумму налога при упрощенной системе налогообложения с объектом налогообложения «доходы» (в том числе по патенту) или ЕНВД можно уменьшить на размер этого платежа, но не более 50% от суммы налога.
Систем налогообложения четыре, две как и у юрлиц: УСНО (упрощёнка), ЕНВД и две характерные только ИП: УСНО на основе патента и ОСНО (основная), характерная учётом дохода по оплате, а НДС по методу начисления.
Сельскохозяйственные производители (главы крестьянского (фермерского) хозяйства, являющиеся ИП), имеют право применять единый сельскохозяйственный налог.

Steve1
07-05-2012, 12:07
I am doing the same and I know for sure that you have to pay 6% НДС (tax) but I am really considering to open OOO. In the beginning you have to pay more (something like 5.000 Госю Пош.) but in the end you have more ways of dealing with the ФНС (you can easily deduct a lot things from your annual tax payment).

For the beginning I am now in the process of getting my ИП but I am planning after two month to open my OOO (first I need to earn some good white money to finance this). Pretty much it depends on how you are planning to deal with it in future. You are going to give just some classes and that's it - then ИП is what you want. You are going to make in a bigger style with corporate clients and maybe a few teachers working for you or you want to earn money in a big scale then you need OOO.

DavidB
07-05-2012, 12:33
The entity which you choose doesn't make much difference. Both can use the simplified system with the tax set at 6% on revenue or 15% on income, or the normal system with VAT registration, 20% profit tax and the more complicated accounting requirements. For a small business, I don't think you would want to use the normal accounting system because the bookkeeping requirements would be a burden in terms of cost and time.

There's a summary of the differences here:

http://www.acg.ru/english/russia_s_simplified_taxation_part_i_-_the_basics_of_the_system

rubyrussia
07-05-2012, 13:45
I'm working my way through the article that DavidB posted. Thanks. I see the six percent mentioned over and over. However, at the bottom of the page, there is a table that I don't quite follow.

Does this mean that if you add up all of the taxes (Pension Fund Contribution 26%, Mandatory Social Insurance Contributions 2.9%, Mandatory Medical Insurance Contributions 5.1%, Single Tax 6%) it's 40 percent?

Or Does it mean that they take all of those things out of the 6% that you pay?

Ugh...

DavidB
07-05-2012, 15:42
The way it works is that you pay 6% tax on your total invoices (the amount your clients pay you).

You also have to pay a fixed amount each year, which is somehow linked to the minimum wage. The rate in 2011 was 16159.56 rub. and you can pay it quarterly together with your tax filings. The details are in Russian in my post #4.

I think what the table refers to is the social/medical/pension taxes for employees of the company.

If have employees, one way to reduce your taxes further would be to adopt a business model where your teachers register as individual entrepreneurs and charge you for their teaching services. In that case, it may be better to use 15% of profit as the tax, because you could also include rent, electricity, admin staff wages, etc. as expenses.

rubyrussia
07-05-2012, 16:05
DavidB, certainly glad you are on this forum. It seems you've done a lot more business over here than anyone else.

Thanks again.

DavidB
07-05-2012, 16:40
I don't know about doing more business than others, but it probably helps that I'm in the business of avoiding taxes. That was half the reason I moved to Russia. :D

rubyrussia
07-05-2012, 17:32
Lol. And the other half???

DavidB
07-05-2012, 19:09
There are many of them. Let's just say that Russia is the world's sexiest tax haven. ;)

But more seriously... I prefer seasonal climates and all of the other tax havens except Switzerland and Slovakia are tropical. I tried living in Slovakia for a couple of years, but found life there to be slow and dull. It's a nice country, but just too small and slow-paced for me. After that, I came to Russia and have enjoyed it ever since.

LondonYvonne
07-05-2012, 21:12
Hi David,

Do you havbe any tips on avoiding taxes?

Also, any tips on getting money out of Russia without a Russian bank account?


I don't know about doing more business than others, but it probably helps that I'm in the business of avoiding taxes. That was half the reason I moved to Russia. :D

DavidB
07-05-2012, 23:00
Hi David,

Do you havbe any tips on avoiding taxes?

Also, any tips on getting money out of Russia without a Russian bank account?

Your post is a bit light on details, but I think I know what the situation is: you have cash in Moscow and you wish to deposit it somehow in your bank account in London. However, you don't like the idea of paying "bank fees", so you're looking for a way to get the money there without using a bank.

The most obvious way would be to take the cash with you across the border. You're allowed to take 10000 euros without a declaration.

Another option would be to find a friend who has the same problem in reverse. I.e. they would like to transfer money into Russia and would also like to avoid the problems associated with "bank fees." Let's assume that your friend has 10000 pounds in her bank account in London, and you have 485500 rubles cash in Moscow. You would give her the cash, and at the same time she would make an electronic transfer for 10000 pounds to your account. Both parties got the money to where they wanted it to be, and at the same time avoided all of the problems associated with "bank fees."

And that's how you run a laundromat. :smokin:

LondonYvonne
07-05-2012, 23:32
Hi David,

Thanks for the info, do you have a link to the 10,000 EUR rule? Other sources say $3000 USD. 10,000 EUR = 8,064.97 GBP, which seems more reasonable






Your post is a bit light on details, but I think I know what the situation is: you have cash in Moscow and you wish to deposit it somehow in your bank account in London. However, you don't like the idea of paying "bank fees", so you're looking for a way to get the money there without using a bank.

The most obvious way would be to take the cash with you across the border. You're allowed to take 10000 euros without a declaration.

Another option would be to find a friend who has the same problem in reverse. I.e. they would like to transfer money into Russia and would also like to avoid the problems associated with "bank fees." Let's assume that your friend has 10000 pounds in her bank account in London, and you have 485500 rubles cash in Moscow. You would give her the cash, and at the same time she would make an electronic transfer for 10000 pounds to your account. Both parties got the money to where they wanted it to be, and at the same time avoided all of the problems associated with "bank fees."

And that's how you run a laundromat. :smokin:

DavidB
07-05-2012, 23:45
Hi David,

Thanks for the info, do you have a link to the 10,000 EUR rule? Other sources say $3000 USD. 10,000 EUR = 8,064.97 GBP, which seems more reasonable

My mistake.. it's 10000 USD, not EUR.

http://www.rossiya-airlines.com/en/passenger/luggage/Customscheck/

LondonYvonne
08-05-2012, 00:31
Thanks for the link.....it contradicts itself, $10,000 in one section, $3000 in another section.....do you have any other sources of information?



Exportation of foreign currency by individuals (residents and non-residents)

Exportation of foreign currency in cash by individuals from the Russian Federation to an amount up to the equivalent of 10,000 US dollars inclusive calculated using the exchange rate of the Bank of Russia as of the current date shall comply with the customs rules, however, without producing permission documents to the customs bodies.

Customs declaration

According to article 168 of the Customs Code of the Russian Federation, all goods and transport facilities carried across the customs border of the Russian Federation shall be declared to a customs body of the Russian Federation.

The following must be declared in writing:

1. Imported foreign currency in cash to an amount exceeding 10,000 US dollars (or the equivalent).
2. Exported foreign currency in cash to an amount exceeding 3,000 US dollars (or the equivalent).




My mistake.. it's 10000 USD, not EUR.

http://www.rossiya-airlines.com/en/passenger/luggage/Customscheck/

DavidB
08-05-2012, 01:34
http://www.ifcg.ru/en/information/customs-rules-in-russia-for-individuals.html

Importation (exportation) of currency by individuals from (to) the outside the Customs Union

Currently it is allowed to import and export currency in cash (either in Russian Rubles or in foreign currency) without any limitations. Meanwhile, in case of importation or exportation of the cash currency or traveler’s checks exceeding the equivalent of $10,000 (according to the rates established by Central Bank of Russia), this currency must be declared to customs.

The currency which is imported or exported by individuals in other documentary forms (e.g. bonds, security etc.) should be declared to customs irrespective of the nominal value.

Previously, cash amounts between the equivalent of $3,000 and $10,000 should have been declared on exportation. Moreover, it was not allowed to export currency exceeding the equivalent of $10,000 (unless an individual provides a document confirming that the cash was imported or transferred into Russia before).

LondonYvonne
08-05-2012, 08:36
:-)

As RubyRussia said, we're lucky to have you on the forum

Any other tips on getting cash to the UK? In an unregulated way




http://www.ifcg.ru/en/information/customs-rules-in-russia-for-individuals.html

Importation (exportation) of currency by individuals from (to) the outside the Customs Union

Currently it is allowed to import and export currency in cash (either in Russian Rubles or in foreign currency) without any limitations. Meanwhile, in case of importation or exportation of the cash currency or traveler’s checks exceeding the equivalent of $10,000 (according to the rates established by Central Bank of Russia), this currency must be declared to customs.

The currency which is imported or exported by individuals in other documentary forms (e.g. bonds, security etc.) should be declared to customs irrespective of the nominal value.

Previously, cash amounts between the equivalent of $3,000 and $10,000 should have been declared on exportation. Moreover, it was not allowed to export currency exceeding the equivalent of $10,000 (unless an individual provides a document confirming that the cash was imported or transferred into Russia before).

DavidB
08-05-2012, 14:29
You can also use anonymous prepaid debit cards, although it's a slow process and the card commission is relatively high.

Most of my solutions involve companies in other jurisdictions in combination with some of the more liberal aspects of tax code. That allows you to minimise taxes and provide a good level of privacy without having to avoid banks. But it only works if you're in a position to change the structure of your business.

Employment in most countries leaves you with very few options, unfortunately. It's always better to work as a contractor so that you have more control over your tax matters.

LondonYvonne
08-05-2012, 22:05
Would you say it's quite straightforward to get business visas here as a contractor? Repeatedly?



You can also use anonymous prepaid debit cards, although it's a slow process and the card commission is relatively high.

Most of my solutions involve companies in other jurisdictions in combination with some of the more liberal aspects of tax code. That allows you to minimise taxes and provide a good level of privacy without having to avoid banks. But it only works if you're in a position to change the structure of your business.

Employment in most countries leaves you with very few options, unfortunately. It's always better to work as a contractor so that you have more control over your tax matters.

DavidB
08-05-2012, 22:49
Would you say it's quite straightforward to get business visas here as a contractor? Repeatedly?

I have around 6 consecutive 90-day business visas in my passport, and I'll have another 1 or 2 before my residence permit is ready. Someone else I know had at least 11 or 12 before he got his residence permit.

But working on a business visa would require you to do everything in cash and illegally. It isn't possible to register as an entrepreneur or company director with that kind of visa.

LondonYvonne
08-05-2012, 23:04
But working on a business visa would require you to do everything in cash and illegally.


I'd never do that :-)

LondonYvonne
16-05-2012, 11:35
Hello again David,

Where can I get a prepaid debit card in Moscow and do I need a Russian bank account to get one?



You can also use anonymous prepaid debit cards, although it's a slow process and the card commission is relatively high.

Most of my solutions involve companies in other jurisdictions in combination with some of the more liberal aspects of tax code. That allows you to minimise taxes and provide a good level of privacy without having to avoid banks. But it only works if you're in a position to change the structure of your business.

Employment in most countries leaves you with very few options, unfortunately. It's always better to work as a contractor so that you have more control over your tax matters.

DavidB
16-05-2012, 12:18
Where can I get a prepaid debit card in Moscow and do I need a Russian bank account to get one?

I've seen them advertised in payment machines like Cyberplat, Novoplat, etc. But it's a slow option because they are limited to a few hundred dollars at a time.

The best option is to find a friend who needs to transfer money into Russia. It's the cheapest way. I previously did something similar in Kiev because the spreads offered by banks and MC/Visa there are even worse than in Russia. It was worth the hassle for saving 4-5%.

LondonYvonne
16-05-2012, 12:26
It's a good idea but I don't have a friend like that and I wouldn't be comfortable doing it with a sranger

It looks like my options are very limited without a bank account