INCOME TAX

Taxes are most commonly classified as either direct or indirect, an example of the former type being the income tax (inheritance tax, real estate tax) and of the latter the sales tax (value-added tax, excise tax). Direct taxes are taxes on persons; they are aimed at the individual’s ability to pay as measured by his income or net income in excess of stipulated minimum. They are also adjusted to take into account the circumstances influencing the ability to pay of the individual, such as family status, number and age of children, and financial burdens resulting from illness. Income taxes are often levied at graduated rates; that is, at rates that rise as income rises. Inheritance taxes are taxes on the money or property that you give to someone else after you die. Real estate taxes are taxes imposed upon immovable property consisting of land, any natural resources, and buildings.

In Russia income tax is levied on resident and non-resident individuals, whether or not they are citizens of the Russian Federation. Individuals are considered to be a resident if they stay in Russia for 183 days or more in the calendar year.

Residents are liable to income tax on their world-wide income. Non-residents are taxed on their Russian Federation source of income.

Income is taxable whether it is received in pecuniary form or in kind. Taxable

income includes:

- income from employment;

- casual earnings and earnings from secondary employment;

- copyright and patent royalties;

- income from self-employment.

Taxable income does not include: social insurance and social welfare benefits; alimony; all types of pensions; payments to students; income received for work associated with prospecting activity for the extraction of gold; interest and gains from deposits in Russia banking establishments and from state treasure bonds; compensation for injury and other damage to health; capital gains; gifts; insurance payments; redundancy payment.

Each individuals is established to deduction equal to the minimum wage. An additional deduction is available for the cost of maintaining each child up to age 18, each child aged from 18 to 24 receiving daytime undergraduate education and each dependent not having an independent source of income.

Second World War veterans and invalids, parents and widows of military personnel who died carrying out military and official duties are entitled to a deduction equal.

Taxable income may also be reduced by amounts given for charitable purposes.

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Exercise 2