The Cabinet of Ministers of Russia withdrew from the State Duma a draft tax amendment filed on April 24. The move, reported by TASS citing the government press service, follows a period of technical clarification before the bill is sent again to the State Duma.
According to the press service, additional technical refinements are being prepared prior to forwarding the draft to parliament.
From the bill text and the Ministry of Finance commentary, it is clear that freelancers working on government procurement contracts for Russian companies will face a personal income tax rate of 30 percent once they no longer hold tax resident status in Russia. If a self-employed person remains a tax resident, the tax rate is 13 percent, or 15 percent if annual income exceeds five million rubles. Should income originate from a source outside Russia, the 13 percent rate will apply until the individual ceases to be a resident. A tax resident is defined as someone who has stayed on Russian soil for at least 183 days within a 12‑month period.
The draft highlights that the changes will impact freelancers who provide services to Russian companies via the Russian segment of the internet. In this scenario the contracting company will automatically withhold taxes in line with the amendments.
On April 24 the Ministry of Finance clarified that employees of Russian firms who stay on under an employment contract are not affected. The project does not alter taxation for individual entrepreneurs or the self-employed scheme.
Individuals who left Russia for more than six months but continue to serve Russian companies are currently exempt from personal income tax. If the service provider is a resident, they must declare the income using the 3-NDFL form and settle the tax themselves.
The changes were originally slated to take effect on January 1, 2024. Dmitry Peskov, the President’s press secretary, described the tax changes as a continuous working process.
Change history
The Ministry of Finance released the first bill version in July 2022. In the updated draft, the clause increasing personal income tax to 30 percent for Russian company employees abroad who lost tax residency had been removed.
During 2022 there were discussions about raising the rate for those who relocate, yet the ministerial leadership indicated a preference to keep the 13 percent rate for now. In the autumn, deputies signaled that the rate would stay at 13 percent. In September, Deputy Finance Minister Alexei Sazanov stated that the motive for any rate increase was to protect regional tax revenues, not to raise the burden on taxpayers. He left room for a potential reduction of taxes for those going abroad.
In December 2022, Vyacheslav Volodin, then chairman of the State Duma, supported a higher tax on Russians who leave and continue working with domestic firms. He cautioned that public opinion was not aligned with such moves.
Alexey Gatin, a lawyer and managing partner at a law firm, noted that these changes could drive double taxation between Russia and foreign jurisdictions. He warned that Russian companies hiring foreign talent might face higher costs and compliance challenges. Gatin argued that firms could face increased expenses as personal income tax would be higher than the usual 13 percent, potentially reducing competitiveness for Russian employers looking to hire abroad. He described the measure as a way to encourage specialists to return to Russia.
Donat Podniek, partner at a consulting firm cited by Kommersant, said that if changes pass, clients would need to determine each contractor’s tax status and apply the appropriate rate while avoiding penalties or back taxes. This would require careful tax planning and clear documentation to prevent penalties for underpayment.