Residents and non-residents of the Russian Federation

A reminder about residents and non-residents.

When crossing the Russian border, paying taxes – for example, on property in their home country – or when questions arise as to whether they need to fill in any forms or submit reports, many people get confused by the wording and cannot find the answer amidst the intricacies of the law.

We have tried to make sense of this complex dilemma.

Tax resident of the Russian Federation

First and foremost, it is important to distinguish between the concepts of ‘tax resident’ and ‘currency resident’ of a country.

For example, if you work in Cyprus and pay tax there, whilst legally residing on the island on a permanent or temporary residence permit, but visit your relatives or travel there for other personal reasons several times a year, you do not become a tax resident of your home country, as the 183-day rule applies, which states that if a Russian citizen is not present on Russian territory for more than 183 days, they cease to be a tax resident and their income is not subject to taxation in Russia, and they are not required to file a tax return there.

In other words, you are a tax resident of the country where you live for the greater part of the calendar year.

Currency resident of the Russian Federation

Currency residency is a different matter. This is where the law on currency regulation and currency control comes into play.

Under this law, Russian citizens who have not been present on the territory of the Russian Federation for more than one year are not considered currency residents.

However, if a Russian citizen returns to the country for a few days after, say, two or three years’ absence, they lose their status as a foreign exchange non-resident and become a foreign exchange resident.

This means that, from 2016 onwards, individuals, along with legal entities, are required to submit to the Russian tax authorities a mandatory annual report on the movement of funds across all their accounts outside the Russian Federation.

This is the first time this requirement has been in place; the report must be completed in Russian. If there are several accounts, each additional account should be listed on a new page (page 2) of the report.

This year, the report covers the period 2015 (from 1 January to 31 December) and must be submitted in duplicate; the second copy is returned to you for your records. Further details can be found in our previous overview.

Failure to notify the tax authorities on time (after 1 June 2016) or failure to notify them at all is subject to an administrative fine of up to 5,000 roubles, and in the event of a repeat failure to notify, the fine may be up to 10,000 roubles.