28 July 2023
Sweeping Changes in the Russian Tax Code

On 21 July 2023, the State Duma of the Russian Federation (the State Duma) passed in its third reading bill No. 369931-8, implementing the key areas of the fiscal policy for 2023 and the target period. The proposed amendments are systemic and stipulate changes to 30 chapters of the Tax Code of the Russian Federation (the Russian Tax Code). The key amendments are summarised below.

I. Individual income tax for those, who have relocated

Currently, the income of remote employees, who have left the country and lost their Russian tax residency is not subject to the individual income tax as their source of income is determined based on the place of their actual work and is located abroad (subject to certain specifics).

What will change following the adoption of such amendments?

The amendments change the principle of taxation of income earned by remotely working non-residents: from now on, the individual income tax will be withheld from their income at the resident rate of 13% (15%).

In particular, the new bill proposes to consider the following income as income from sources in Russia:

a) income of remote employees earned from Russian entities / stand-alone divisions of foreign entities registered in Russia (with some exceptions);

b) fees earned by non-residents under independent contractor’s agreements for any work / services / grant of intellectual property rights, if they take place in the Russian segment of the Internet, i.e. by using at least one option from the list:

  • domain names and network addresses with Russian national domain extensions;
  • information systems with technical facilities located in Russia;
  • technology stacks located in Russia.

In the latter case (b), an additional criteria to classify income as income from sources in Russia would be receiving such income (1) from Russian entities (sole traders, private notaries and attorneys-at-law, who has set up their law offices) or (2) to Russian accounts. 

For more details, please see the attached file on the left.

Authors: Senior Associate Olga Morozova,Paralegal Zlata Zvyaginsteva.


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Key contacts

Sergey Kalinin

Sergey Kalinin

Moscow, UAE

Olga Morozova

Olga Morozova