Russia – Tax Residence: Wealthy ex-pats targeted

17/10/2019
At present an individual needs to spend 183 days a year in Russia to be considered as Russian tax resident, however, if new proposals made by the Ministry of Finance that could well change in the near future.

In an effort to target wealthy Russians who, while resident abroad, retain close ties with Russia, the Ministry of Finance has proposed a number of changes that would catch currently non-resident nationals with business interests or assets in Russia or who have other close ties to the jurisdiction.

It is proposed that an individual would be considered Russian tax resident after only 90 days, a significant reduction from the present 183 days, and those that have their ‘vital interests’ in Russia, would be treated as Russian tax resident without consideration of time, if any, actually spent there.

As a separate issue, the Ministry of Finance has proposed reducing non-resident rate of income tax to 13%, from the current 30%, which would reduce it to the same level as the income tax charge to residents.

Should the proposals be adopted, the consequences for individuals caught by the change will be significant. As an individual treated as having Russian tax resident status the consequences could include:
  1. Liability to Russian taxation on worldwide income.
  2. Foreign companies and structures that are controlled by the individual, will be subject to Russian tax rules.
  3. In the absence of double tax treaties, there is the potential that the individual could be considered as tax resident in several jurisdictions.
  4. Likelihood of automatic exchange of information with Russia by foreign banks.
 
Individuals who potentially fall within the scope of the changes would be well advised to consider their options and long term planning in the near future. Should the proposals be implemented there could be a significant impact for those who are unprepared.


For more informations, please contact Simon Huxford: s.huxford@rosemont-mc.com