In the past year and a half, many companies have transferred their employees to remote work. Some of them, taking the opportunity, went to work in countries with a more pleasant climate / interesting architecture. This article is for everyone who has lived or plans to live outside the Russian Federation for more than 183 days during a calendar year.
When a person has the citizenship of one country, but lives in another, he is a citizen of the first and tax resident of the second. The concept of a tax resident was introduced to distinguish between citizenship and place of residence. In most countries, residency occurs upon residence more than 183 days in a calendar year on the territory of the country. Living in Russia, you are a tax resident of Russia, and pay 13% of personal income tax from your salary and other income…
If, while remaining a citizen of Russia and continuing to work in a Russian company, you move abroad, resident status is lost and now you must pay 30% personal income tax… Sadness, Sadness. Now, 17% more taxes will be deducted from your salary. By law, you yourself must notify your employer to pay more taxes for you, and transfer less money to your card. If there are other sources of income (bank / brokerage account, real estate lease, profit), personal income tax on them will also become 30% instead of 13%.
The question immediately arises – what to do if you have not already notified the tax office for the last year? – in the past 2020, you can be a resident and pay only 13% of personal income tax if you have lived in Russia for more than 90 days. This is a special year, because of the covid, many are stuck abroad, so they introduced such an exception, for the first time in the history of tax. In 2021, planes are flying, the +/- borders are open and there will be no exceptions.
If you do not notify the tax office yourself, but it finds out about your non-residence, you will have to pay additional tax + penalties and fines. Unpleasant story, but not critical. the obligation to file a declaration and independently pay tax not withheld by the tax agent follows from paragraphs. 4 p. 1 and p. 3 of article 228 of the tax code.
How can the tax authorities find out about my departure? The immediate answer is that at the moment there is no system for the automatic exchange of information between the customs service and the tax service. They can find out, by asking you to provide proof of tax residency in Russia… For example, by providing a scan of all pages of a foreign passport. The second way to find out is if you will open a bank account abroad with a Russian passport indicating the tax residence of that country. There is a CRS information exchange system between countries. It does not include all countries, but the majority, about 100. Russia is included. When you check in financial institutions in one country on your passport “resident”, financial and tax institutions of other countries will automatically see that you are already a resident there, therefore, you cannot be with them.
The next questions are – if you live in another country, but do not open a bank account there, then they will not find out and I will be able to continue to pay 13% of personal income tax in Russia? Most likely you can, but within the framework of this article there is no purpose of such appeals 🙂 A separate story with neighboring states and territorial entities that you can enter with an internal passport. It is very unlikely that the tax office will find out about your residence in Abkhazia, or in Belarus, unless of course you yourself there declare your new residence there.
The recommended strategy when relocating with telecommuting in a Russian company is to notify your employer. You will almost certainly be offered a transition from an employment contract to a GPC. This makes it easier for a company to report on non-resident employees. And you also don’t need to pay social contributions (32% of your salary). So when switching to GPC, you can logically demand an increase in salary (the employer saves 32% of your salary on social contributions). Then the increase in personal income tax for your net income will go unnoticed. AND you will be able to live in peace in a new country without fear of being exposed in front of financial institutions.