Taxation of foreign natural persons

From January, 1, 2001 taxation of foreign natural persons in the Russian Federation is carried out on the basis of the chapter 23 of tax code of the Russian Federation. Regulations of operating intergovernmental agreements about avoidance of double taxation, made between the Russian Federation or former USSR and foreign countries are taken into account. In accordance with the item 11 of tax code of the RF the payers of profit tax of natural persons are natural persons, who are the tax residents of the Russian Federation, and also natural persons not being the tax residents of the Russian Federation and who get profits from sources in the Russian Federation. According to the item 61 of tax code of the RF the course of term of the actual being on the territory of the Russian Federation begins on the next day after a calendar date that is the day-time arrival on the territory of the RF.
The calendar date of day of departure outside the Russian Federation is included in the amount of days of the actual being on territory of the Russian Federation.
The dates of departure and arrival of natural persons on territory of the Russian Federation are set on the marks of admission control in a document proving the identity of citizen. For lack of the proper marks, as proof of being on territory of the Russian Federation any documents proving the actual amount of days of stay in the Russian Federation can be taken. Determination of tax status of physical person must be done in every tax period.
For tax exemption of the profits, got from sources in the Russian Federation the taxpayer not acknowledged as the tax resident of a Russian Federation must present in tax organs official confirmation of competent organ of the foreign state that he is the resident of the state, with which the Russian Federation concluded a treaty being in force during the proper tax period about avoidance of double taxation, and also document about the received profit and about payment of tax outside the Russian Federation, attested by the tax organ of the proper foreign state.

Foreign citizens and persons without citizenship who got in the organs of internal affairs permission for the inhabitancy or stay permit the RF, or foreign citizens, temporally arriving on territory of the RF, registered in accordance with established procedure at the place of residence on territory of the RF and being on January, 1 of calendar year in the labour relationships with organizations, including branches and representative offices of foreign organizations carrying out the activity on territory of the RF, foreseeing duration of work in the RF in a current calendar year over 183 days, are considered to be the tax residents of the RF at the beginning of current period. The payers of profits tax got from sources in the RF are those foreign natural persons (foreign citizens and persons without citizenship) who get profits of implementation of labours or other duties, accomplishing of other actions on territory of the Russian Federation. Thus, if a foreign natural person gets a profit of work in the Moscow representative office of foreign firm, such natural person is the payer of profits tax for natural persons in the Russian Federation, if it does not contrary to the terms of agreement in force about avoidance of double taxation.

The profits from sources outside the RF are such profits, which are got by natural persons for implementation of works, providing of services being abroad. Taxation of such profits got by foreign natural persons is regulated first of all by regulations of international agreements about avoidance of double taxation. Under the item 232 of tax code of the RF the taxes actually paid by a taxpayer being the tax resident of the RF, outside the RF in accordance with the legislation of other states from the profits got outside the RF, are counted when paying tax in the RF, if it is foreseen by the corresponding agreement about avoidance of double taxation.

For conducting of tax a taxpayer must present in a domiciliary tax inspection the official record of the received profits and about payment of the tax outside the RF by him, confirmed by the tax organ of the corresponding foreign state. Confirmation can be represented both before payment of tax and during one year after the end of that tax period on results of which a taxpayer has pretensions of taking account. In accordance with paragraph 5 part 3 of the item 208 of tax code of the RF the profits got from the sources located outside the RF are in particular profits got from sale of shares or other securities outside the Russian Federation. The profit got by a natural person from the security-related operations is subject to taxation in the order foreseen in the item 2141. In case if natural person at the sale of actions through the third person (broker) gets a profit as a difference between the sums on the personal account got from realization of securities, and charges on their acquisition, realization and (including the reimbursable expenses of the professional participant of equity market), this profit must be completely included in a tax base. If part of shares is realized, and the profit got from their realization only defrays expenses for their acquisition, realization and depositing, the tax base for this type of profit is absent. According to the item 228 of tax code of the RF taxpayers being the residents of the Russian Federation and having got such type of profit from sources outside the Russian Federation are under an obligation to give the tax return to a tax organ at the place of the account in time to April, 30 of the year after the past tax period.

Taxation of profits of foreign natural persons is done either at the source of payment of profit or on the basis of the tax return given in a tax organ. Foreign natural persons carrying out entrepreneurial activity are to be registed with confermention of the ITN (Individual Taxpayer Identification Number) at the place of commorancy and at the place of realization of business in territorial tax inspections. Declaration on a tax on the profits of the stated natural persons is presented to a tax organ at the place of account of natural person not later than on April, 30 of year following the past tax period. In the case if the foreign natural person stops his activity and departs territory of the Russian Federation during a calendar year tax return about the profits actually got during the period of his staying in a current tax period on territory of the Russian Federation must be presented not later than one month prior to his departure outside this territory.
In a term to April, 30 of year following after current declarations are under an obligation to present: physical persons, who got recompense from natural persons who are not tax agents, on the basis of agreements of civil legal character (profits by agreements of hiring or contracts of tenancy of any property, from the sale of any property);. Participation of physical person in the tax relations through the representative consists only in presentation of interests of physical person in the relationships with tax organs and does not release this person from independent execution of incumbent duties of taxpayer on him by the legislation about taxes-and-duties.

If the tax return is sent by mail the day of its presentation is the date of sending of the certified mail with the inventory of enclosure. A tax organ has no right to refuse to accept the declaration and has to put a mark about its acceptance and date of presentation on the copy of tax return on request of taxpayer. Persons who don’t have to represent the tax return have a right to present it in a domiciliary tax organ. According to the item 218-221 of tax code of the RF the tax return can be given in the following cases: if during a tax period a taxpayer did not get standard tax deductions or they were given in a less size than the item 218 of tax code of the RF foresees; for the receipt of social tax deductions; for the receipt of property tax deductions; for the receipt of professional tax deductions. A taxpayer gets standard, social, property and professional tax deductions at the presenting the tax return at the end of tax period on the basis of his written statement, and also documents confirming the right of taxpayer to these deductions. On results of paper verification of the tax return given with the purpose of receipt of tax deductions, the excessive paid tax is given back by a tax organ to the taxpayer during one month from the day of presenting of corresponding written statement by him.

In the tax return a natural person is under an obligation to specify the profits got from all sources of payment. For its turn tax organs has no right to require the including into the tax return information not connected with the calculation and payment of taxes from the taxpayer (5 of the item 80 of tax code of the RF). With consummation of the chapter 23 of tax code of the RF the order of forming of tax base of foreign natural persons has been changed. Since January, 1, 2001 the profits of foreign natural person in accordance with paragraph 1 of the item 210 of tax code of the RF do not diminish for the sums of deductions to the funds of obligatory social insurance and provision of pensions. The sums of compensative payments for indemnity of charges for renting of apartment and use of car in official aims, if such are foreseen by a labour contract (paragraph 3 of the item 217 of tax code of the RF) are taxed as the profits of natural persons in corpore. The profits of foreign citizens and persons without citizenship who are to be taxed in the Russian Federation, are taxed according to the rates set by the item 224 of tax code of the RF, if other ones are not foreseen by the international agreements of the RF or former USSR.
Profits of foreign citizens who are tax residents of the RF and who are in the tax period in the labour relationships with organizations are taxed as the profits of natural persons since January, 2001 on the basis and on the rates set for the tax residents of Russia. According to the item 224 of tax code of the RF the profits of the named category of persons are to be taxed as profits at interest of 13% with the grant of the tax deductions foreseen by Code. In the case of pre-term cancellation of labour contract by a foreign citizen and his departure outside the RF before expiration of 183-day term of being in a tax period organization must produce the re-calculation of tax on the rate 30%. The celebration of urgent labour contract on a term less than 183 days is not confirmation of status of tax resident of the RF of foreign natural person on territory of Russia. In this case tax from the profits of such foreign natural person must be deducted by a tax agent on the rate 30%. Under the change of tax status a taxpayer has the right to appeal to the tax organ for the re-calculation of tax.

In this case specification of tax status is made on the totality of days of staying in the RF of foreign natural person. The period of commorancy on territory of Russia of foreign citizen is determined taking into account the marks of admission control in his foreign passport. If the proper marks are absent, as proof of staying on territory of Russia any documents certifying the actual amount of days of staying in the RF can be adopted, in particular certificate about registration at the place of staying in the RF or certificates about the profits got in a tax period.

Thus, foreign citizens are the tax residents of a Russian Federation, being in a tax period in the labour relationships with organizations (or tax agents) which deducted from them a tax on profits on a rate 30%, have the right to appeal to the tax organ for the re-calculation of tax. According with the item 232 of tax code of the RF only for registration of accounting of the tax paid abroad, a natural person must present confirmation of tax organ of the corresponding foreign state. When presenting by a foreign natural person (taxpayer) in the tax organs of the Russian Federation of any documents given out abroad it’s necessary only to translate such documents into Russian. Natural persons doesn’t have to present certificate of profits N 2- TRNP (tax return of natural person) or other document confirmating the sum of the got profit together with the tax return. The general sum of tax, calculated from the tax return is to be paid by a taxpayer to July, 15 of year, following the current, on the basis of the tax notification sent to him by a tax organ not later than 30 days prior to the term of payment. Tax notification can be given to the natural person (to his legal or empowered representative) personally on receipt or in another way, confirmating the date of the receipt. In the case if physical persons evade the receipt of tax notification, this notification is sent by mail by the certified mail.

Tax notification is considered to be received on the expiry of six days from the date of sending of the certified mail. The article 45 of tax code of the RF gives the right to fulfil the duties of paying taxes in foreign currency to natural persons, both Russian and foreign. For these aims the Central administrative board of federal treasury of Treasury Department of Russia established the account in Outtradebank, on which one should transfer foreign currency which are to enter the federal budget. The code does not limit a right of citizens in the choice of method of fulfiling of such payments or the choice of credit establishment. The order of enrolment of taxes-and-duties in foreign currency to the accounts of the income calculation of federal budget was ratified by the joint order of Treasury Department of Russia and Tax Department of Russia on 19.05.2000 N 52 -n and N BG-3-09/211, in accordance with which payments in foreign currency are reflected on the accounts of taxpayers according to the date of entering in the accounts of the Central administrative board of federal treasury of Treasury Department of Russia - date of process of currency.

In other words, the date of discharge of tax (in the case of payment in foreign currency) will be considered the date of entering in the account of the Central administrative board of federal treasury of Treasury Department of Russia (established in Foreign commerce bank) of cash assets. The liability to tax is considered to be done from the moment of producing the charge for tax payment to the bank. According to the paragraph 2 article 11 of tax code of the RF under the concept “bank” are ment banks and other credit organizations that have the license of the Central bank of the RF. The moment of discharge of tax duty from account in a foreign bank will be considered to be the date of entering of cash assets in foreign currency in the accounts of budget in the Russian Federation.

In the case of non-payment or delayed payment of tax on profits of natural persons the amount of arrears is feed for every day of delinquency since the day following the day of payment of tax established by taxes-and-duties law. In the case of the fact of non-payment of tax on the profits of natural persons in terms fixed by the legislation taxpayers are called to account foreseen by the item 122 of tax code of the RF. According to the item 57 of tax code of the RF change of the fixed term of the tax payment is allowed on the basis of the Code. According to the item 63 of tax code of the RF the body which is responsible for the decision-making about the change of term of payment of tax on the profits of natural persons is Treasury Department of Russia.