The Cabinet of Ministers of Russia withdrew from the State Duma a draft tax amendment, which was presented on April 24, which, among other things, increased the personal income tax for workers from abroad, TASS reported, citing the government press service.
“Yes we do. A number of technical clarifications are required before the bill is sent to the State Duma,” the press service told the agency.
From the text of the bill and the comments of the Ministry of Finance, it becomes clear that freelancers working on GPC for Russian companies will have to pay personal income tax at the rate of 30% after losing their tax resident status. Russian Federation. If the self-employed person remains a tax resident in the Russian Federation, 13% of personal income tax is deducted, or 15% if his income is more than 5 million rubles. in a year. In addition, if the income comes from a source outside the Russian Federation, the personal income tax rate of 13% will continue until the self-employed is not a resident. A tax resident is a person who has stayed on the territory of the Russian Federation for at least 183 days in 12 consecutive months.
The draft law emphasizes that the tax changes will affect freelancers – those who receive fees from Russian companies for services performed using the Russian part of the Internet. In this case, the company that signed the contract with the contractor will automatically withhold the tax as of the amendment text.
The Ministry of Finance announced on April 24 that employees of Russian companies that continue to work under an employment contract will not be affected by the changes. Also, the project does not change taxation for individual entrepreneurs and self-employed.
Persons who have left Russia for more than six months and continue to serve Russian companies are now exempt from personal income tax. If the service provider is a resident, he must declare the income in the form of 3-NDFL and pay the tax himself to the budget.
The changes were originally scheduled to take effect on January 1, 2024. Press Secretary of the President of the Russian Federation Dmitry Peskov described the tax changes as a “working process”.
Change history
The Ministry of Finance presented the first version of the bill in July 2022. From the new version, the clause that increased the personal income tax to 30% for employees of Russian companies located abroad and lost the status of tax resident in Russia disappeared.
The Ministry of Finance has proposed an increase in personal income tax for those who relocate in the summer, but then the head of the ministry, Anton Siluanov, said officials tend to keep the 13% rate so far. In the autumn, department vice president Alexei Sazanov said that officials tend to keep the tax at the same level, 13%. In September, Deputy Finance Minister Alexei Sazanov said that the increase in the tax rate was due to the need to protect tax revenues in the regions: “The main goal for us is to protect the tax, not increase it, not increase it. It is the basis of the issues.” However, he accepted the possibility of lowering the personal income tax of people going abroad.
In December 2022, the Chairman of the State Duma Vyacheslav Volodin considered it right to increase personal income tax for those who left Russia and continue to work with Russian companies. He pointed out that “the vast majority of society does not support his actions”.
Alexey Gatin, Lawyer, Managing Partner of the Law & Taxes law firm speech He called the changes with socialbites.ca as a measure for the return of specialists to the country. According to him, it will be impossible to avoid double taxation in Russia and the host country. He added that it would be unprofitable for Russian companies to hire an artist from abroad.
“According to this version, it turns out that hiring such employees for the company will be quite expensive, since personal income tax will have to be paid not 13%, but conditionally 30%. According to citizens in Russia, they immediately become uncompetitive. <…> “This is a kind of coercion to bring back people who work in Russia,” he said.
Gatin added that a possible increase in personal income tax for Russians abroad would make such workers less competitive for Russian companies.
Citing Donat Podniek, partner of the Kept audit firm, the newspaper Kommersant noted that if the changes are adopted, “customers will have to determine the tax status of an individual contractor and accordingly apply the appropriate personal income tax.” ratio. Otherwise, they may be subject to fines, penalties and, under certain circumstances, the amount of personal income tax that is not withheld.