Self-Employed in Russia

Russia’s self-employment tax regime — Nalog na Professional’ny Dokhod (NPD), also called the “self-employed” regime — is built around simplicity: register in the “My Tax” (Moy Nalog) app, issue receipts, pay 4% on income from individuals or 6% from businesses. Many people assume this rate applies to all rental income. It does not. The law draws a clear line between what qualifies and what does not.

What You Can Rent Under NPD

Residential Properties

Self-employed persons may rent out residential premises — apartments, rooms, private houses, parts of a house — under the NPD regime. The key condition is that the property must be classified as residential in the Unified State Register of Real Estate (USRRE / EGRN).

An explanatory letter from the Moscow Tax Authority (No. 20-21/131926, dated 02.09.2021) also confirms that self-employed individuals can rent out property they do not themselves own — for example, under a sub-lease — provided the head lease does not prohibit it.

Income from residential property: NPD at 4% (individuals) / 6% (companies and sole traders).

Vehicles

Self-employed persons may rent out motor vehicles: cars, motorcycles, buses, and other transport (Ministry of Finance Letter No. 03-11-11/10799, dated 17.02.2020).

The tenant may be an individual, a sole trader, or a company.

Movable Property

Renting out movable property — tools, equipment, machinery, instruments — is also permitted under Federal Law No. 422-FZ of 27.11.2018.

Example: a self-employed person rents a drill to an individual → NPD 4%. Rents construction equipment to a company → NPD 6%.

What You Cannot Rent Under NPD

The core restriction: NPD does not apply to income from renting out non-residential real estate (Article 6, Federal Law No. 422-FZ). This means:

“Apartamenty” (serviced apartments) deserve special attention: even when people live in them full-time, they remain legally classified as non-residential premises in Russian law. The NPD rate cannot be applied to income from renting them out (Min. Finance Letter No. 03-11-11/106478, dated 07.12.2020).

Land plots and garden bath houses are also non-residential — they do not qualify.

Important: The NPD Restriction Changes the Tax, Not the Right to Rent

The restriction does not prevent self-employed persons from earning rental income on a warehouse or garage. It simply means that such income cannot be taxed at the NPD rate. The self-employed person must instead choose one of two paths:

• As a private individual — pay personal income tax (NDFL) at 13% (15% on income above 2.4 million ₽ in 2025)
• Register as a sole trader (IP) — and apply the simplified tax system (USN) or a patent

A common mistake is to keep recording non-residential rental income in the “My Tax” app. This is a risk: if the Federal Tax Service audits, it will reclassify the income and assess backdated NDFL plus penalties of 20%.

When the Tax Authority Sees Hidden Employment

A separate concern arises when companies engage self-employed persons to avoid paying social contributions (30%+). The tax authority looks at a combination of indicators:

Red flags for hidden employment:

• A single client is the sole source of income
• Fixed monthly payments regardless of volume of work
• The self-employed person works on the company’s schedule and at its premises
• The self-employed person uses the company’s equipment
• The contract specifies a job title rather than a specific deliverable

If these signs are present, the tax authority reclassifies the arrangement as an employment relationship and assesses the company for backdated social contributions plus fines. The self-employed person faces backdated NDFL.

How to reduce risk:

• Specify concrete deliverables and deadlines in the contract, not “job responsibilities”
• Work with multiple different clients
• Do not set a fixed schedule or fixed place of work

Practical Takeaway

The NPD regime is an effective tool for property owners who rent out housing or vehicles. For non-residential property it is legally unavailable. Attempting to work around this leads to tax assessments.

If you own multiple properties of different types, or have an unusual situation (registered apartments with a residential function, a garage attached to a house, etc.) — clarify the legal status of each property before choosing a tax regime.

Frequently Asked Questions

Can a self-employed person rent out a garage under NPD? No. A garage is a non-residential premises, so income from renting it out does not qualify for the NPD regime (Ministry of Finance Letter No. 03-11-11/94188, dated 22.11.2021). Such income must be declared as personal income tax (NDFL) at 13%, or the person must register as a sole trader.

Can self-employed persons rent out apartamenty under NPD? No. Apartamenty are legally classified as non-residential premises even when people live in them permanently. The NPD rate does not apply to income from renting them out (Ministry of Finance Letter No. 03-11-11/106478, dated 07.12.2020).

What property can a self-employed person rent out under NPD? Residential premises (apartments, rooms, houses), vehicles, and movable property (equipment, tools). Everything non-residential — garages, offices, warehouses, apartamenty, land plots — is excluded from the NPD regime.

What happens if non-residential rental income is accidentally recorded in the My Tax app? In a tax audit, the income will be reclassified and backdated NDFL assessed, plus a 20% penalty on the unpaid amount plus interest.

Can a self-employed person rent out someone else’s apartment and pay NPD? Yes. According to a clarification by the Moscow Tax Authority, a self-employed person may sub-lease residential property under NPD, provided the head lease does not prohibit sub-letting.

Read Also

• Self-Employment in Russia: Registration, Taxes and Restrictions
• Self-Employed and the Property Tax Deduction: How to Claim 650,000 ₽
• Employment Contract vs. Contractor Agreement: What Employers Risk

If you rent property as a self-employed person and are unsure whether the regime is correctly applied — consult a professional before a tax audit, not after.