Russian companies may be required to levy 30% personal income tax on the wages of their employees who leave the country and lose their tax residency in Russia. Reported with reference to the Duma base “Interfax”.
The corresponding draft law was submitted to the State Duma by the government of the Russian Federation.
The explanatory note to the changes says, “The innovation should affect anyone leaving the Russian part of the Internet for business or using technical, software and hardware facilities located in Russia.”
If the bill is passed, the 30% increased personal income tax will begin to be collected from January 1, 2024 for employees leaving.
In the statement made by the Ministry of Finance, it was said, “These changes do not affect the workers working with employment contracts, the current tax conditions for them do not change in any way.”
That’s why the agency explains that the innovations can only affect freelancers who go abroad and receive orders and payments from Russian customers.
At the same time, a person who falls below 30% personal income tax must either be a tax resident in Russia, or have an account in a Russian bank, or receive fees from Russian organizations, individual entrepreneurs, separate departments of foreign structures in Russia.
That is, according to the material, companies in the Russian Federation will determine for themselves which rate of personal income tax will be applied in each case. In addition, the draft law does not address possible changes in tax rates for self-employed or self-employed individuals. Possible changes may only affect individuals.
According to the current legislation of the Russian Federation, a citizen must pay personal income tax if the employment contract or supplementary contract contains a clause on remote work from abroad.
Tax lawyer Alexei Gatin, in a meeting with socialbites.ca, explained what will happen if this bill is passed.
“It doesn’t matter whether you have a residence or not. As before, if you are not in Russia, you have lost your tax resident status and all your income, for example, if you rent or sell an apartment in Moscow, you have to pay a personal income tax of 30%. It didn’t matter if you went or not. It has always been like this,” he said.
According to him, this bill is precisely connected with the Russian government’s efforts to “eliminate the possibility of avoiding double taxation.”
“Different countries have their own agreements, they previously excluded the possibility of taxation. If you pay taxes in Russia, you do not pay from activities there. Those were the deals. This is a two-sided story that is now directly terminated. It is clear that not all of them have been terminated with certain countries. In this context, people living and residing in certain tax countries face particular problems with additional costs.”
He added that the Russian authorities are willing to adopt these changes so that people are “not interested in going to another tax jurisdiction, namely living and working there.”
“It will be quite expensive for the company to hire such employees because personal income tax would have to be paid conditionally at 30%, not 13%. And, according to citizens in Russia, they immediately become uncompetitive. Thus, when the employer realizes that his employee does not reside in Russia, he immediately deducts 30% of his salary for himself. This is a kind of coercive measure for people working in Russia to come back here, ”the lawyer emphasized.