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. Last Updated: 07/27/2016

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When do I acquire Russian tax residency? Can I lose it?

Olga Boltenko, tax lawyer with LeBoeuf, Lamb, Greene & MacRae, writes:

If an expat is present in Russia for 183 days or more in a calendar year, he is considered resident for tax purposes and has to pay 13 percent tax on worldwide income. If he stays in Russia for a shorter period, he does not acquire tax residency and pays 30 percent tax on Russian-source income.

Russia has a network of dual taxation treaties, which provide that if an individual spends less than 183 days in any 12-month period in Russia, is tax-resident in a treaty country and is paid by a nonresident employer, then his Russian tax liability is zero.

If an expat protected by a treaty spends more than 183 days in any 12-month period in Russia, all his income from work performed in Russia will be subject to 30 percent Russian tax. He has to submit the tax return himself.

However, once a nonresident taxpayer has spent 184 days in Russia in one calendar year, he becomes tax-resident and 13 percent tax is applied to all of his annual income. The 30 percent tax he has already paid will offset his further tax liability or be repaid.

If a tax-resident expat leaves the country before he has spent 183 days in Russia in one calendar year, the employer must withhold a further 17 percent tax. If the employer is unable to withhold tax due, he must inform the tax office. This may result in unpleasant consequences for the expat should he ever return to Russia. Rule changes are expected shortly.

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