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How to Become Russian Tax Resident in 2020
July 16, 2020 19:05


The government has supported amendments that allow those who have spent from 90 days to six months in the country to voluntarily become tax residents of Russia. This, among other things, was achieved by tax consultants, whose clients, due to the pandemic, risked changing their tax residency against their will.

The government has backed amendments to the Tax Code allowing people who spent from 90 to 182 days in Russia in 2020 to voluntarily obtain Russian tax resident status this year, Finance Minister Anton Siluanov said. Now, to become a tax resident in Russia, you need to spend 183 days in the country.
According to Siluanov, after the changes are made, to obtain the status a person will only need to live in Russia for at least three months and submit an application to the tax service in any form along with the personal income tax return.

The coronavirus pandemic has made these changes especially urgent, Siluanov said. "Some citizens were unable to return to Russia for objective reasons - from a business trip, vacation, from school or after treatment," he explained (quoted by Interfax).

The proposal to give people the opportunity to voluntarily recognize themselves as tax residents, even if they did not spend 183 days in Russia, was expressed by tax consultants, whose clients risked changing their tax residence against their will due to the pandemic and flight restrictions. “This idea has been in the air for a long time. It is needed even outside the crisis for people for whom the center of vital interests is in Russia, but they have to spend a lot of time abroad. For example, athletes, artists and musicians,” the PwC partner Karina Khudenko told Forbes. The idea to introduce a declarative procedure for tax residency for 2020 was proposed by the consultants to the Federal Tax Service,  Anna Savon, the
director of the private client tax services group at EY said. But the Ministry of Finance at that time did not plan to change the rules.

At the same time, the Ministry of Finance last year put forward the idea of ​​reducing the time required to obtain residency. Then it explained the initiative by the desire to return to Russia taxes that companies and their owners pay abroad. “To make it easier to work and so that our businessmen who fled to the West would come back to us,” Siluanov explained in June last year.

The idea did not find support from business. In particular, the head of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, expressed fears that it could lead not to an influx, but to an outflow of residents. “What to do with those who work both here and there? Even for medium-sized companies 90 days is... generally speaking, if people pay taxes in another jurisdiction, they practically automatically transfer to the Russian jurisdiction, because they are used to spending half a year in Russia, half a year somewhere else. Including, bearing in mind that they have an extensive business, and sometimes,  their families live there, children study their, and they live 50/50. We are afraid that an outflow may arise because of this.” he noted. After that, Siluanov promised to postpone the idea "until better times" if it does not find support from the business.

Author: Anna Dorozhkina

Tags: Russian laws     

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