Russian employers may face a 30% personal income tax on wages paid to employees who leave Russia and lose their tax residency. This was reported with reference to the Duma base by Interfax.
A draft law proposing the change was submitted to the State Duma by the Russian government. The explanatory note explains that the change should affect anyone exiting the Russian segment of the internet for business or using technical, software, and hardware facilities located in Russia.
If enacted, the 30% higher personal income tax is slated to take effect on January 1, 2024 for employees who depart the country.
In a statement from the Ministry of Finance, it was noted that the changes do not affect workers under standard employment contracts and current tax terms remain unchanged for them.
The ministry clarified that the measures would primarily impact freelancers who work abroad and receive orders and payments from Russian clients.
At the same time, a person who would otherwise face the 30% rate must either be a tax resident of Russia, hold an account in a Russian bank, or receive fees from Russian organizations, individual entrepreneurs, or foreign branch departments operating in Russia.
According to the material, Russian companies will determine which personal income tax rate applies in each case. The draft law does not address potential changes in tax rates for self-employed individuals; any changes could affect individuals only.
Under current Russian law, a citizen must pay personal income tax if remote work from abroad is included in an employment or supplementary agreement.
Tax lawyer Alexei Gatin, speaking with socialbites.ca, explained what might happen if the bill passes. He noted that residence status is a key factor. If a person is not in Russia, they lose tax resident status and all income is subject to the 30% rate, including income from renting or selling property in Moscow. He stressed that this has always been the case, regardless of whether the person was present in Russia or abroad.
Gatin linked the bill to a broader effort by Russian authorities to prevent double taxation. Different countries have their own tax agreements, and those agreements previously excluded taxation in some scenarios. If taxes are paid in Russia, income from activities outside Russia may not be taxed there. The new proposal signals a two-sided shift that could alter how these arrangements work, particularly for individuals living in countries with tax treaties. This change may create additional costs for those dealing with cross-border taxation.
According to the lawyer, the authorities aim to discourage moves to another tax jurisdiction by strengthening the tax bite on those who work for Russian clients while residing abroad. He warned that it could be costly for companies to hire such workers since the income tax could be applied at 30% rather than 13%. This shift could render some Russian workers less competitive abroad, prompting employers to deduct 30% from salaries when an employee is recognized as non-resident in Russia. The lawyer described this as a coercive measure intended to bring workers back into the Russian tax system.