The Russian government has prepared, among other things, the final draft of the amendment to the tax legislation determining taxation for employees of Russian companies operating from abroad. In this respect reported Deputy Minister of Finance Alexey Sazanov.
According to him, the Ministry of Finance will maintain previous personal income tax rates for employees working remotely from abroad. And, as discussed earlier, he does not intend to increase them to 30%.
“The issue of taxation of remote workers working with organizations under both employment contracts and GPC agreements has been resolved. Regardless of their status – tax resident or non-resident of Russia – their income will be taxed at the personal income tax rate of 13/15% provided for Russian tax residents.”
A bill regulating taxation for remote workers leaving the country, the government began developing last summer. In its original form, it determined that payments made from a Russian company to perform remote work duties outside the country would be treated as income from sources in Russia.
In practice, this meant that an employee working from abroad for a Russian company paid the standard 13% income tax (or 15% if annual income exceeded 5 million rubles). This continues as long as a Russian tax resident remains. Residence status is lost if the employee has spent more than 183 days abroad in a year. After that, he has to pay personal income tax on his own and in the amount of 30%, like all non-residents.
The bill was supposed to go into effect on January 1, 2023. But it was sent back for revision. The second option was presented to the State Duma on April 24 this year. The document contained some concessions, which lawyers interpreted as follows: a remote employee of a Russian company can pay a personal income tax of 13-15%, even if he permanently lives outside the country (that is, even if he is not actually a tax resident), but only if he works under an employment contract.
That is, GPC staff and freelancers, not full-time employees, fall under potentially increased taxation. Citing a source, Vedomosti reported that the authorities’ target in this case were bloggers who left the country and earn money from content posted on Western platforms, primarily YouTube and Instagram (the owner of Meta is considered extremist and is banned in Russia).
The next day, however, on April 25, the Cabinet withdrew the bill from Parliament, citing the need for “technical clarifications”. According to RBC, the current and most recent version of the document combines two norms at once, allowing a non-resident (an employee living permanently abroad) to be exempt from income tax of 30%:
– “attribution of income in the form of wages and other payments when a remote worker performs a work assignment to income from sources in the Russian Federation under an agreement with a Russian employer”;
– “For taxpayers who are not tax residents of the Russian Federation, the determination of a tax rate for such income in the amounts established for taxpayers who are tax residents of the Russian Federation.”
Regarding the swift withdrawal of the bill from the State Duma on April 25, Deputy Minister Sazanov explained that this was done to supplement the document with norms for fine-tuning the Single Tax Account (UNS) institution. We are talking about creating a simple mechanism for individuals to pay their tax debts so that a criminal case is not brought against them. As well as a number of changes to facilitate the transition of regions to UNS.
“Clarifying the income types of remote workers and applying a single tax rate will significantly simplify the tax administration mechanism for tax agents,” Sazanov summarized.
The debate on the increased income tax for remote workers continued in government and parliament throughout 2022-2023, against the backdrop of the start of a special operation in Ukraine last February and the mass departure of specialists from Russia after partial mobilization in September.
“Those who make a choice that is not in favor of Russia should understand that it will no longer be possible to feed at the expense of our country. Such people will have to pay for their betrayal with at least a large part of their income, and, of course, they should not be given preferential treatment at a low tax rate, ”said Alexei Zhuravlev, First Deputy Chairman of the Duma Defense Committee. .