Russian companies will be required to levy a 30% personal income tax (PIT) on any compensation paid to employees or even freelancers who have lost their tax residency in Russia. A bill introducing this requirement has been submitted to the State Duma.
A non-resident taxpayer is someone who has stayed outside the Russian Federation for more than 183 days, tax expert Nikolai Yepikhin, director of the Uproshchyonka (‘simplified taxation system’) website, told Invest Foresight. If an employee has relocated but continues to work for a Russian company, with Russia stated as their place of work, it means they receive income in Russia, in which case, it is their employer’s/customer’s responsibility to withhold PIT from their salary, wages or remuneration under an independent contractor agreement, and transfer it to the tax authorities.
The PIT rate depends on the employee’s tax status. As soon as they become a non-resident taxpayer, their PIT for the current year is to be recalculated at 30%. At present, if their contract mentions a different country as their place of work, the employer has no obligation to withhold PIT from the employee’s income regardless of their tax status because their compensation is considered “income from sources outside the Russian Federation,” the expert explained.
“Now lawmakers are planning to change that. They have drafted a bill categorizing any remuneration to remote workers located outside Russia as income from a Russian source. This means that a remote worker will not avoid paying PIT to Russia if they are paid by a Russian company,” he concluded.