We wrote about this law after the corresponding draft law was introduced for consideration.
Before it came into force, employers were required to independently determine the tax rate for remote employees living abroad, depending on the tax residence of such employees. The Russian Ministry of Finance has clarified that the income of non-residents working for Russian companies is generally not subject to personal income tax taxation as income received fr om sources outside of Russia.
At the same time, the personal income tax rate is now 13% (for income over 5 million rubles per year 15%) for employees of Russian companies if they work remotely, regardless of whether they are residents and wh ere they live.
Russian organizations in the terminology of the Tax Code of Russia are legal entities formed in accordance with Russian legislation.
The key criterion for determining the rate is the performance of a labor function remotely under an employment contract with a Russian organization or with a separate division of a foreign organization registered in Russia.
That is, in order for a 13% rate to be applied to a non-resident employee, it is necessary that:
- the employer was a Russian organization or a division of a foreign company registered in Russia;
- an employment contract (not service contract) was concluded with the employer;
- the employment contract implies remote work.
Citizenship, residency, place of residence are not important in this case.
However, we draw your attention to the fact that if such an employee, being a non-resident, enters into an agreement on non-remote work (or an additional agreement to the existing agreement, changing the nature of the work to non-remote), the provisions introduced by the new law will no longer apply to him, and he will pay 30% until (unless) he lives in Russia for more than 183 days during the year and becomes a resident.
A similar situation for a service contract will come into force a year later, on January 1, 2025.
In accordance with the law, from January 1, 2025, personal income tax in Russia in the amount of 13% (15% for income over 5 million rubles per year) will also be taxed on income received under contracts for the provision of services, remuneration for the right to use the results of intellectual activity or by means of individualization, if these works, services or rights are provided using domain names and network addresses located in the Russian national domain zone, or information systems and software and hardware systems located on the territory of Russia.
To do this, at least one of three conditions must be met:
- the performer is a tax resident of Russia (this was the case before);
- he receives remuneration into an account in a Russian bank; or
- the source of payment of income is a Russian organization, an individual entrepreneur registered in Russia, a notary engaged in private practice, a lawyer who has established a law office, or a separate division of a foreign organization in Russia.
Explanations of the law that came into force can also be found on the official website of the Federal Tax Service of Russia.
For more information, please contact the consultants of the Confidence Group company.
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