The Russian government has prepared the final version of the draft amendments to the tax legislation, which determine, among other things, taxation for employees of Russian companies working from abroad. This was announced by Deputy Finance Minister Alexei Sazanov.

According to him, the Ministry of Finance will retain the previous personal income tax rates for employees working remotely from abroad. And he does not intend to increase them to 30%, as discussed earlier.

“The issue of taxation of remote employees who work with organizations both under labor contracts and under GPC agreements was resolved. Regardless of their status – Russian tax resident, non-resident – their income will be taxed at the personal income tax rate of 13/15% provided for Russian tax residents,” Sazanov explained.

The government began drafting a bill to regulate taxation of remote workers who left the country last summer. In its original form, it established that payments from a Russian company for performing work duties remotely outside the country would be treated as income from sources in Russia.

In practice, this meant that an employee who works from abroad for a Russian company pays the standard 13% income tax (or 15% if the annual income exceeds 5 million rubles). This continues as long as he remains a Russian tax resident. Resident status is lost if the employee has spent more than 183 days abroad in a year. After that, he must already pay personal income tax on his own and in the amount of 30% – like all non-residents.

The bill was supposed to come into force on January 1, 2023. But it was sent back for revision. The second option was submitted to the State Duma on April 24 this year. The document contained some concessions, which lawyers interpreted as follows: a remote employee of a Russian company can pay 13-15% personal income tax even if he permanently lives outside the country (that is, he is not actually a tax resident), but only if he works under an employment contract.

That is, not full-time employees, but GPC personnel and freelancers potentially fell under increased taxation. Vedomosti, citing a source, reported that the authorities’ target in this case is bloggers who have left the country and earn income from content posted on Western platforms, primarily YouTube and Instagram (the owner of Meta is recognized as extremist in Russia and banned).

However, the next day, April 25, the Cabinet withdrew the bill from Parliament, stating the need for “technical clarifications”. The current and latest version of the document, according to RBC, combines two norms at once, which allow exempting a non-resident (an employee permanently living abroad) from paying income tax of 30%:

– “attribution of income in the form of remuneration and other payments when a remote worker performs a labor function under an agreement with a Russian organization – employer to income from sources in the Russian Federation”;

– “the establishment of a tax rate in respect of such income for taxpayers who are not tax residents of the Russian Federation, in the amounts established for taxpayers who are tax residents of the Russian Federation.”

As for the quick withdrawal of the draft law from the State Duma on April 25, Deputy Minister Sazanov explained that this was done to supplement the document with norms for fine-tuning the institution of the Single Tax Account (UNS). We are talking about creating a simple mechanism for paying off tax debts for individuals so that a criminal case is not initiated against them. As well as a number of amendments to facilitate the transition of regions to the UNS.

“Clarification of the types of income of remote employees and the application of a single tax rate will significantly simplify the tax administration mechanism for tax agents,” Sazanov summed up.

Discussions of an increased income tax for remote workers went on throughout 2022-2023 in the government and parliament against the backdrop of a mass exodus of specialists from Russia after the start of a special operation in Ukraine last February and partial mobilization in September.

“Those who have made a choice not in favor of Russia must understand that it will no longer be possible to feed themselves at the expense of our country. Such people will have to pay for their betrayal with at least a large part of their income, and, of course, they should not be granted preferential treatment with a low tax rate, ”said Alexei Zhuravlev, First Deputy Chairman of the Duma Defense Committee.