(RUS) Set up calculation parameters for employee income tax

Applies To: Microsoft Dynamics AX 2012 R3, Microsoft Dynamics AX 2012 R2

This topic describes how to set up income tax calculation parameters for employees who are residents, non-residents, or highly-paid non-residents. You can set up income tax exemptions for dependents and off-budget funds.

At the end of the fiscal year, the employee, who is the taxpayer, submits tax declarations to claim tax deductions. The legal entity, acting as a tax agent, pays tax to the tax authorities for employees. The legal entity calculates the tax amount for the employee, withholds the calculated amount from the employee salary, and pays the tax amount to the tax authority.

If the legal entity has multiple branches in different regions of the country, the legal entity employs tax agents to pay the tax amounts to regional tax authorities for employees who work in these branches. The regional tax authority is allocated depending on the branch location.

Prerequisites

The following table shows the prerequisites that must be in place before you start.

1. Assign a region and tax authority to an employee

You can assign regions and a tax authority to an employee by selecting a payroll group for regions that have particular NDFL rates.

To assign a region and tax authority to an employee, follow these steps:

1. Click Payroll (Russia) > Settlements with tax authorities > Setup > Groups for countries having particular NDFL rates for RF.

2. In the Country/region field, select the country/region.

3. In the Group field, select the payroll group.

4. Click Payroll (Russia) > Common > Employees. Select an employee record, and then click Edit.

5. On the Profile tab, on the Personnel data FastTab, in the Country/region field, select the region.

6. On the Tax FastTab, in the STI code field, enter the code of the tax authority where the employee is registered as a taxpayer.

2. Set up the tax residential status of an employee for NDFL calculation

Use the Tax calculation settings form to determine the tax residential status of an employee automatically or manually. You can change the residential status of an employee to non-resident status or highly paid non-resident status.

To determine the tax residential status automatically, follow these steps:

1. Click Payroll (Russia) > Common > Employees. Select an employee record, and then click Edit.

2. On the Tax tab, click Periods of stay of employee in RF.

3. In the Start date and End date fields, select the starting date and ending date of the employee’s stay in the Russian Federation. The residential status of the employee is automatically calculated when you run the tax calculation for an employee in the Russian federation.

To determine the residential status manually, follow these steps:

1. In the Periods of stay of employee in RF form, clear all the records with non-empty Start date and End date fields. Close the form.

2. Click Payroll (Russia) > Settlements with tax authorities > Setup > Tax calculation settings.

3. In the Non-residents field group, select the rate codes for the non-resident and highly paid non-resident status.

To modify the tax status of the employee from resident to non-resident, follow these steps:

1. Click Payroll (Russia) > Common > Employees. Select an employee whose tax resident status is Resident, and then click Edit.

2. On the Action Pane, in the Rates group, click Employee to open the Set up rate values form.

3. Select a non-resident rate attribute. Click New, and then select an employee.

4. In the Date and Value fields, enter the date, and then select Yes to define the selected resident employee as a non-resident.

   Note

   You can also perform similar changes to the rate attribute of a highly paid non-resident employee.

5. Close the form. On the Action Pane, in the Payroll group, click Payments and deductions.

6. In the Payments and deductions registration form, click Calculation to recalculate the payroll transaction. You can see that the tax percentage value is increased for non-resident status.

7. Close the form. On the Tax tab, click Income tax. In the Income tax form, you can see that the employee’s tax status is updated to Non-resident and the rate is updated to the tax percentage for non-residents.

3. If required: Update income tax information of an employee from a previous employer

Use the Employees form to update the income tax information of an employee from a previous employer, and to calculate the employee’s income tax rate accordingly.

To update the income tax information of an employee from a previous employer, follow these steps:

1. Click Payroll (Russia) > Common > Employees. Select an employee whose tax resident status is Resident, and then click Edit.

2. On the Payroll tab, click Payments and deductions to verify the salary amount and run the calculation of income tax for the selected resident employee.

3. On the Tax tab, click Income tax to verify the personal income tax percentage at which the income tax is calculated.

4. Click Form 2 - NDFL to print the Form 2 - NDFL report that the company issues to the employee when the employee resigns. This form is provided to the new employer or another authority by the employee. The new employer uses this as an opening balance for tax calculation for that fiscal year.

5. Click OK to close the form. Click New, and then in the Income group code field, select the income group code.

6. In the Calculation period field, specify the year and month of the current calculation period.

7. In the Corrected period field, specify the year and month of the original transaction period.

8. Select the Source check box to indicate that the income or deductions for the employee are received from previous or other workplaces.

9. On the Income/deduction numbers tab, enter the amount for which income code or tax deduction code is assigned.

4. If required: Apply income tax exemptions for dependents

You can specify an employee’s dependents to benefit dependent related deductions as tax exemptions. Add the employee with information about the dependents in the Payroll groups form. The employee can benefit the tax exemptions for dependents, since the dependent related deductions are applicable only for the income of residents.

1. Click Payroll (Russia) > Common > Employees. Select an employee from the worker list.

   Note

   Make sure that the selected employee is a resident. If you selected a non-resident employee, select No in the Value field in the Set up rate values form.

2. On the Resume tab, click Relatives, and then specify the name, relationship, and date of birth of the dependent.

3. In the Birth time field, enter the time of birth of the child. The birth time field is used to distinguish twins.

4. In the Adoption date field, enter the date of adoption of the child for the deduction calculation. The adoption date should be greater than the birth date.

5. In the Apply deduction field, select the rate code of the dependent for tax deduction. This field is available if you select Son or Daughter in the Relationship field.

6. In the Disability status field, select the rate code to specify that the child has a disability. This status is used to increase the deduction amount for a child with a disability.

7. In the Deduction type code field, select the rate code to specify the deduction type to be applied to the employee, based on the government rules. In the Rates form, configure the rate value type based on the elements for tax calculations.

8. In the Full-time education status field, select the rate code to specify if the child has enrolled for full-time education.

   Note

   If the full-time education status is Yes, the employee is given an income tax deduction for a longer time according to the government rules.

9. In the Deduction termination date field, select the date when the tax deduction stops.

10. On the Employees list page, select a worker record, and then click Employee to open the Set up rate values form.

11. Select the resident rate attribute. In the Date and Element fields, update the values to calculate tax exemptions for a relative. Close the form.

12. Click Payments and deductions. In the Payments and deductions registration form, click Calculation to recalculate the payroll transaction. Make sure that the taxable revenue is sufficient to apply this deduction. You can see that the tax value is reduced.

13. On the Tax tab, click Income tax. In the Income tax form, you can see that the employee’s Tax status is updated to Resident. On the Income/deduction numbers tab, you can view the tax deduction amount.

5. Set up off-budget funds

In addition to personal income taxes, you can calculate off-budget funds for employees. The legal entity transfers amounts as off-budget funds for the employee to cover employee pensions, medical coverage, social coverage, and insurance for any adverse working conditions.

To set up off-budget funds, follow these steps:

1. Click Payroll (Russia) > Common > Employees. Select an employee, and then click Edit.

2. In the Worker form, in the left pane, click Profile.

3. In the Profile area, on the Pension fund FastTab, in the Category of the insured person field, select the category of the insured person.

4. In the Pension assignment date field, select the retirement date of the retired employee.

5. In the Address field, enter the address of the employee.

   Note

   This is the address that is used in the pension fund. The company sends the pension amount to this address after the retirement of the employee.

6. On the Tax tab, click Payments to off-budget funds to calculate the payments to the off-budget funds after the configuration of the contributions to the social funds in the Off-budget funds form. For more information, see "Set up off-budget and labor remuneration funds" in (RUS) Set up parameters for the payroll process and "Calculate taxes and funds" in (RUS) Generate pay statements.

7. Optional: On the Base to compute allowances tab, you can set up information about the prior earnings of the employee to calculate social allowances. Follow these steps:

   1. Click New, and then in the Amount field, enter the amount that the employee earned in the previous year.

   2. In the Vendor account field, select the previous company. For more information, see (RUS) Register sick lists manually and calculate compensation.

Technical information for system administrators

If you don't have access to the pages that are used to complete this task, contact your system administrator and provide the information that is shown in the following table.