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Employment Taxation for Expats in Russia

Submitted: January 2014

Residence

Once you have stayed Russia for more than 183 days in any 12 month period for the purpose of earning income you will be considered resident. As a resident you will be taxable on your worldwide income and gains, even if you only became resident part of the way through the year. If you remain non-resident you will only be taxed Russian-sourced income, and certain capital gains. The income tax rates for residents and non-residents differ (see below).

Tax rates and allowances

The tax year runs from 1 January to 31 December. Your employer will withhold tax from your wages or salary. Non-residents working for an employer do not necessarily need to register with the tax office; tax will be deducted automatically by your employer.

The income tax rate for residents for most types of income is 13%.

The income tax rate for non-residents for most types of income is 30%

Your employer will base your tax rate on your ‘intermediary’ residence status. While you have been in Russia for less than 183 days, they will withhold tax at the non-resident’s rate of 30%. Once you have passed the 183 day limit, you will be taxed at the resident’s rate of 13%. However your final tax status for the calendar year will be decided by whether you have stayed in Russia for 183 days in that year. For example, if you arrive and start work on 1 December, and work until the end of December of the following year, you will pay 30% tax on your income in the December of the first year, and continue to have tax withheld at 30% in the second year until the 183 days are completed (on 1 June or 31 May in a leap year), after which tax with be withheld at 13%. However as far as the second calendar year is concerned, on 2 July you reach 183 days in that calendar year, and as a result are treated as a resident for the entire year. This means that you actually only owe tax at a rate of 13% from 1 January. As a result you are due a refund on the difference between what your employer withheld and what you actually owe.

A Highly-Qualified Specialist (HQS) regime exists which allows for fast-tracking of visas and work permits. It also allows for qualifying persons to pay income tax at a rate of 13% irrespective of how long they have spent in Russia. Generally the minimum qualification for HQS is a salary of RUB2m (approx £36,000), though there are some exceptions where the limit is RUB1m, for instance in the fields of education and research.

Obligatory social contributions in Russia are paid by the employer not the employee.  

Unless you have had tax fully and correctly withheld by your employer, and no other forms of income, you will usually be required to submit an annual tax return. This must be sent to the relevant tax service office by 30 April of the following financial year. Payment of any outstanding tax must be made by 15 July following the filing of the return. You may also have to file a departure return if you leave the country in the middle of the year, this should be filed no later than one month before your departure date, and payment is due within 15 days of the filing date.

 

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