03.06.08

The Ministry of Finance received a query regarding the taxation of profits received by a Lithuanian citizen from the sale of property in Russia. Russia has a tax treaty with Lithuania dating from June 29, 1999.

According to MinFin, the tax treaty provides both sides (Lithuania and the Russian Federation) the right to charge profit tax on property sales according to the country’s legislation.

According to paragraph 1 of article 208 of the Russian Tax Code (TC), profits from sources in the RF include profits received from sales of property located inside Russia. Therefore, all individuals who received such profits are subject to taxation: 13% for the tax residents; 30% for non-residents.

For non-residents the situation is even worse: according to the regulations of the TC, taxes based on alternative rates (including the rate for non-residents), may not apply deductions, as listed in articles 218-221 of the TC.

Having learned of the above instructions, any Lithuanian citizen would probably want to stay in the RF for at least 183 days during the 12 months prior to any major sale of property in Russia.

(Ministry of Finance Letter # 03-08-05 from May 19, 2008)

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Source: Российский налоговый портал