Taxation of Securities in Russia: What Investors Need to Know
Introduction
For individual investors in Russia, understanding the intricacies of securities taxation is a crucial component of effective portfolio management and maximising net returns. Tax legislation encompasses various rates and relief mechanisms, integrated into a comprehensive framework. Dividends, coupons, capital gains from the sale of securities, as well as the benefits of Individual Investment Accounts (IIA) and long-term ownership relief (LOR) — all these factors enable investors to legally reduce their tax burden and plan their financial flows effectively.
This guide details the existing types of investment income, applicable personal income tax (PIT) rates, the process for filing declarations, mechanisms for obtaining deductions and exemptions, along with practical examples of calculations and recommendations for tax planning.
Types of Investment Income and PIT Rates
Dividends from Russian Issuers
Dividends from Russian companies are subject to a PIT rate of 13% for residents of the Russian Federation. For total annual income exceeding ₽2.4 million, the rate on the excess amount increases to 15%. The tax is automatically withheld by the broker as the tax agent. The investor needs to check the broker's reports and prepare documents for the IIA if a deduction is necessary.
Example: An investor received dividends from Gazprom amounting to ₽3,000,000: ₽2,400,000 × 13% = ₽312,000, ₽600,000 × 15% = ₽90,000. Total PIT = ₽402,000, which the investor sees in the broker's report.
Preferred Shares and Dividends
Dividends on preferred shares are taxed at the same rates as ordinary shares; however, investors know the amount of payments in advance, which simplifies tax planning and the assessment of effective returns.
Dividends from Foreign Companies
Dividends from foreign issuers are taxed at 13% for residents and 15% for non-residents (or at the rate provided in the double taxation avoidance agreement if it is lower). Investors can claim a credit for foreign tax paid by reporting this in their declaration and attaching a document from the foreign depository or broker (for instance, W-8BEN for the USA).
Example: Dividends of USD 1,000, with 15% withheld at source in the USA = USD 150. In Russia, the taxable base is USD 1,000, and PIT = USD 130. The investor will claim USD 150, and the excess USD 20 will be refunded or credited.
Coupon Income from Bonds
Coupons from bonds issued by Russian entities are subject to PIT at a rate of 13% for residents and 15% for non-residents. This applies to federal loan bonds (OFZ), municipal, and corporate bonds. The broker automatically withholds tax upon each coupon payment.
Example: A coupon from OFZ bonds amounted to ₽85,000. Tax at 13% = ₽11,050, thus the investor’s net coupon is ₽73,950.
Gains from the Sale of Securities
The difference between the selling price and the purchase price of securities is subject to PIT at a rate of 13%. When calculating the tax base, the investor uses the FIFO method (the first asset purchased is considered the first sold), but may choose another method if provided for in the brokerage agreement.
Expenses incurred for brokerage services can be deducted to reduce the tax base. The tax is not withheld by the broker; the investor declares the income independently when submitting the 3-PIT declaration.
Example: An investor purchased shares for ₽1,000,000, sold them for ₽1,300,000, and paid commissions of ₽5,000. The tax base = ₽1,300,000 − ₽1,000,000 − ₽5,000 = ₽295,000; PIT = ₽38,350.
PIT Rates by Type of Income
- 13% — dividends up to ₽2.4 million, coupons from bonds, income from the sale of securities.
- 15% — dividends exceeding the threshold of ₽2.4 million.
- 0% — benefits from IIA type A and IIA-3, LOR.
Individual Investment Accounts (IIA) and Tax Deductions
Type A IIA
Advantage: a 13% deduction on contributions up to ₽400,000 per year (maximum of ₽52,000). The account must remain open for a minimum of three years. In order to receive the deduction, the investor must submit a 3-PIT declaration by 30 April of the following year, along with a 2-PIT certificate from the broker and the IIA agreement.
Type B IIA
Advantage: exemption from PIT on income (dividends, coupons, capital gains) from the IIA, provided the account is held for three years. Contributions to type B do not qualify for deductions.
IIA-3 (Long-Term Investment Account)
Starting in 2025, IIA-3 will be available, combining a deduction on contributions (up to ₽1,000,000 per year; deduction up to ₽130,000) and exemption from income taxation with a five-year account retention. This initiative aims to stimulate long-term investments.
To benefit from all the advantages of IIA-3, the investor only needs to open an account, deposit funds, and maintain it for at least five years.
Filing a Declaration and Claiming Deductions
The investor fills out the 3-PIT declaration in their personal taxpayer account, attaching the 2-PIT certificate and the IIA agreement. After verification, the tax authority will refund the deduction as a credit towards tax payments or transfer the funds to the bank account.
Long-Term Ownership Relief (LOR)
Conditions for Application
The LOR exempts income from capital gains on the sale of securities if the investor has held them for at least three years (for those acquired before 1 January 2023) or five years (for those acquired after this date). The maximum exempted amount of capital gains is ₽3,000,000.
Example of LOR Application
An investor purchased shares for ₽1,000,000 and sold them five years later for ₽4,500,000. The capital gain was ₽3,500,000: the first ₽3,000,000 is exempt from tax under LOR, while the remaining ₽500,000 is subject to PIT at a rate of 13% (₽65,000).
Comparison of LOR and IIA
– LOR only exempts capital gains, while IIA-3 exempts all income (dividends, coupons, and gains);
– LOR does not require opening a special account, but necessitates holding the asset within a regular portfolio;
– IIA-3 allows for the combination of deduction on contributions and income exemption, but is only available through a broker.
International Taxation
Double Taxation Avoidance Agreements (DTAA)
Russia has signed DTAAs with over 80 countries. If foreign tax is withheld at a higher rate than the Russian rate, the investor can claim the difference by submitting a 3-PIT declaration along with a certificate from the foreign tax authority or broker.
Automatic Exchange of Information (CRS)
The Common Reporting Standard (CRS) obligates financial institutions to transfer data about resident financial accounts to the tax authority. Investors are required to declare foreign income; failure to do so may result in penalties and interest.
Taxation of Depository Receipts (ADR/GDR)
ADR and GDR are treated as foreign dividend income, subject to PIT at a rate of 13%, with the possibility of crediting foreign withholding tax provided the declaration and supporting documents are submitted.
Tax Agents and Declaration
The Role of the Broker
The broker acts as a tax agent for dividends and coupons: automatically withholding PIT and transferring data to the tax authority. When selling securities, the broker does not withhold tax, and the investor independently declares the income.
Deadlines for Filing Declarations
The 3-PIT declaration must be submitted by 30 April of the year following the reporting year, attaching 2-PIT certificates, transactional statements, and proof of foreign tax payment.
Penalties and Fines
Late tax payments incur a penalty of 1/300 of the key rate of the Central Bank for each day of delay. A penalty for failure to submit a declaration ranges from ₽5,000 to ₽30,000. Incorrect information in the declaration may lead to a fine of up to 20% of the underpayment amount.
Tax Planning and Optimisation
Legal Methods of Optimisation
- Utilisation of IIA Types A, B, and IIA-3;
- Application of Long-Term Ownership Relief (LOR);
- Credit for foreign tax under DTAAs;
- Planning the timing of transactions to meet the conditions for benefits.
Risks and Limitations
Violating the conditions of IIA or LOR forfeits the investor’s rights to deductions and exemptions. Regulatory and tax authorities may challenge aggressive optimisation based on the principle of economic justification. It is advisable to document all transactions and consult professionals.
Practical Examples of Calculations
Example 1: Tax on Dividends
Dividends of ₽3,000,000: the first ₽2,400,000 × 13% = ₽312,000; the remaining ₽600,000 × 15% = ₽90,000; total tax — ₽402,000.
Example 2: Deduction for Type A IIA
Contribution of ₽400,000 × 13% = ₽52,000 refund. To claim the deduction, submit the 3-PIT declaration and a 2-PIT certificate.
Example 3: Application of LOR
A gain of ₽3,000,000 is exempt after five years of holding, tax on the remaining ₽500,000 = ₽65,000.
Example 4: Credit for Foreign Tax
Dividends of USD 1,000, with 15% withheld in the USA (USD 150), PIT in Russia at 13% = USD 130, credited USD 130; excess USD 20 — refund or credit.
Example 5: Accounting for Losses
An investor reported a loss of ₽200,000 in 2024 and realised a gain of ₽300,000 in 2025. Under the law, the previous year's loss can be deducted, reducing the tax base by ₽200,000: the taxable base on the sale = ₽300,000 − ₽200,000 = ₽100,000, tax = ₽13,000.
Frequently Asked Questions
Can LOR and IIA be combined?
Yes. LOR applies to securities in a standard portfolio, while IIA applies to securities held within the account. Use LOR for assets outside the IIA, and IIA-3 for the account.
When is it best to sell securities?
For LOR benefits — after three or five years, and for IIA-3 — after five. When planning, consider your objectives and timelines.
How do I choose between Type A and Type B IIA?
Type A IIA is advantageous for regular contributions and low dividend yields; Type B is suitable for expected high income from coupons and capital gains.
How to file a declaration if the broker does not withhold tax on the sale?
Download transaction data from the broker's personal account, fill out the 3-PIT form through the FNS personal account, and attach 2-PIT certificates.
Investor Recommendations
Monitor Legislative Changes
Tax rates and conditions for benefits may change. Official information is published by the Tax Service and the Ministry of Finance. Subscribe to official channels and consult accountants.
Document Transactions
Keep all contracts, reports, and certificates. In the event of a tax audit, proper documentation is crucial for resolving issues quickly.
Plan for the Long Term
Utilise the tools of IIA-3 and LOR for long-term investments. Short-term speculation does not offer significant opportunities for tax reduction.
Consult Professionals
Complex situations involving foreign securities, derivatives, and cryptocurrencies require assistance from tax consultants and lawyers.
Conclusion
Taxation of securities in Russia includes rates from 13% to 15%, mechanisms such as IIAs and LOR, credits for foreign tax, and automatic data exchange through CRS. Competent tax planning and adherence to deadlines will help investors optimise net returns and avoid penalties. Regularly monitoring legislative changes, maintaining discipline, and consulting professionals will ensure effective management of the investment portfolio.
