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. Last Updated: 07/27/2016

Ask a Stupid Question

Are foreigners living and working in Russia obliged to pay tax on income paid to them from an offshore tax haven and received by them in a bank account in an offshore tax haven? If so, where should such income be declared?

Tim Carty, tax partner at Ernst & Young, writes:
Sadly, this is usually the case. Tax residents of Russia (those present here for more than 182 days in a calendar year) are taxable on all income received regardless of the location in which this happens. However, tax non-residents are taxable on Russian-source income only. Russian-source employment income is income from duties performed in Russia, and hence if you are paid offshore for the work you do in Russia you would need to report this for tax, even if you are not a tax resident. However, offshore investment income received by a non-resident would not be taxable in Russia; nor would income for work done in another jurisdiction.

Taxable income needs to be reported on an individual tax return, which needs to be filed with the relevant tax authority.

Expats often ask, "How will the tax authorities know about the offshore income?" and in many cases this is a good, if somewhat morally awkward, question. However, the cost of employment income is often recharged to the Russian business in which the expatriate works, which means this can be traced quite easily.

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