The Ministry of Finance of the Russian Federation proposes to make the same income tax rates for residents and non-residents of the Russian Federation.

Currently, the tax rate is 30% for non-residents.

The Ministry’s draft proposes to establish a single income tax rate for residents and non-residents.

They propose to make tax rates for foreigners engaged in labor activity and who are non-residents, in an amount like that for permanent residents of the Russian Federation. 

This is not the first time this proposal has been put forward by the relevant ministry, however, due to the coronavirus pandemic, the bills were not considered.

Existing norms

Now, when staying for a period of more than six months for one year, a person is recognized as a resident and pays tax at a rate of 13% with an income of up to 5 million rubles per year. Receipts in the amount of more than 5 million rubles should be taxed at a rate of 15%. Also, at this rate, the earnings of foreigners working based on a patent are subject to taxation, and 13% is withheld from the earnings of highly qualified workers and citizens of the EAEU member states. In other situations, the rate for non-residents is 30%.

Due to the coronavirus pandemic and restrictions on border crossing, the obligation of permanent residence in the Russian Federation to acquire tax resident status was simplified earlier, since many were unable to come to Russia for good reasons. This category of citizens could retain their tax resident status if they were in the Russian Federation for more than 90 days for the whole of 2020. This provision will leave unchanged the size of the rate on personal income and will allow citizens to use deductions when calculating taxes.

Lowering rates is one of the measures to create comfortable conditions for foreign citizens in the Russian Federation. In addition, it is proposed to grant a permanent residence permit to highly qualified foreigners in the case of investments in the Russian economy in the amount of 30 million rubles. Relevant draft laws have already been prepared by relevant ministries.

These proposals may be effective in improving the investment attractiveness of the Russian Federation for businessmen using various tax and business administration schemes. The innovation will be convenient for foreign citizens who regularly come and do business in Russia, but do not permanently live here.