Russia and China have a double taxation avoidance agreement: taxes paid in China are credited in Russia. In practice, this works as follows: 6% in China (1% VAT + 5% profit tax), 13% personal income tax (NDFL) in Russia, with a 7% difference to be paid.
How the tax credit works
- A Chinese company pays its taxes: 1% VAT + 5% profit tax
- Income is withdrawn by the owner — withdrawal methods
- A 3-NDFL declaration is filed in the Russian Federation: income from abroad is taxed at 13%
- Under the agreement, taxes paid in China are credited: 13% − 6% = 7% additional payment
Example: income of 1 million ₽. ~60,000 ₽ (6%) paid in China, 130,000 ₽ NDFL accrued in Russia, 70,000 ₽ to be paid. The total tax burden remains 13%, simply split between the two countries.
Required documents for the tax credit
- A certificate from the Chinese tax authority regarding paid taxes, stamped
- A notarized translation into Russian
- 3-NDFL declaration — by April 30 of the following year
- NDFL payment — by July 15
Regarding tax residency
The scheme above applies to tax residents of the Russian Federation (183+ days per year in Russia). Those who live in China for most of the year fall under a different regime — this requires a separate consultation, not an article.
Frequently asked questions
Do I need to pay NDFL if the money stays in China?
NDFL arises for a Russian tax resident on received income. As long as the profit remains in the company and is reinvested (purchasing, logistics), there is no personal income and therefore no tax base. The obligation arises upon withdrawal to yourself: dividends or transfers to a personal account.
What exchange rate should be used for the 3-NDFL declaration?
Income in foreign currency is converted into rubles at the Central Bank rate on the date of receipt. Payment system and bank statements provide exact dates — it is accounting routine, but it is better to handle it in January rather than on April 29.
What happens if I don't file a declaration?
Fines for non-filing and non-payment, plus interest. Russian banks see incoming transfers from abroad, and automatic information exchange is active — hoping they "won't notice" is no longer a viable strategy. A transparent scheme with a 6% credit is cheaper than any risks.
How much additional tax do I need to pay in Russia if I have already paid taxes in China?
Under the double taxation avoidance agreement, you pay the 13% personal income tax in Russia minus the 6% already paid in China, resulting in a 7% additional payment.
What documents are required to receive a tax credit for taxes paid in China?
You must provide a stamped certificate from the Chinese tax authority regarding paid taxes along with a notarized translation into Russian.
When do I become liable for NDFL on my Chinese company's income?
The tax obligation arises only when you withdraw income to yourself, such as through dividends or transfers to a personal account, rather than when the profit remains in the company for reinvestment.
What are the deadlines for filing the 3-NDFL declaration and paying the tax?
The 3-NDFL declaration must be filed by April 30 of the following year, and the NDFL payment is due by July 15.