Does a foreign citizen with a residence permit become a resident?

Taxes and fees are the main sources of the state budget. Issues related to establishing the procedure for taxing economic entities are a priority in the business life of every taxpayer.

Changes in legislation, increased duties for individuals and legal entities, different interest rates in certain countries contributed to the emergence of the concept of tax residency. For example, the income tax rate in Bulgaria is 10%, in Montenegro - 9%, and in France it varies from 0 to 49%; the obvious difference provides a wide field for choosing and planning your investments.

Concept and features

Tax residence of individuals is a term denoting the status of a subject of economic relations, that is, a person’s membership in the tax system of a particular state.

The origin of the term comes from the Latin language - "residens", which means "sits" or "remains in place."

In immigration law, the concept of residence is used to identify the presence of a permit (permit) to reside in the country of persons with permanent residence and registration, as well as foreigners and people of undetermined citizenship, subject to the laws of the state.

There are often cases when it is beneficial for federations and republics to establish criteria so that as many persons as possible are recognized as residents, and therefore pay interest on all their income.

Some liberal criteria result in no full obligations in any of the countries in which individuals reside and are active. Therefore, it is important to know what tax residency is.

In tax law, a resident is a person or company that is registered with the government agency of the selected country and makes the necessary contributions in accordance with the accepted norms of the law.

That is, you can have a residence permit in one state, but be a resident of another, while paying taxes to the treasury of the chosen place, where it is most profitable.

And vice versa - being a tax subject, you may not have a residence permit, that is, not be a citizen in the migration sense.

The objects from which funds are withdrawn are:

• scholarships;
• salaries;
• pensions;
• profit from the company.

Completing reports for non-residents in 2019

In Certificates 2-NDFL (approved by Order of the Federal Tax Service dated October 2, 2018 No. ММВ-7-11/ [email protected] ) submitted for non-resident employees, it is necessary to correctly indicate the status of this employee. For example, in a Certificate issued for a non-resident foreign worker working under a patent, status 6 must be indicated.

• Can a Russian Citizen Be a Resident of Ukraine
• Resident status for a citizen of Ukraine in Russia
• Citizen of Ukraine in Russia Resident Or Not

Citizen of Ukraine Working in Russia Resident Or non-Resident

How to determine status (resident or non-resident) for personal income tax purposes

• contracts with medical (educational) institutions for treatment (training);
• certificates issued by medical (educational) institutions indicating the completion of treatment (training) indicating its time;
• copies of passport pages with special visas and border control stamps on border crossings.

Situation: how to take into account days spent on business trips and vacations abroad when determining tax status (resident or non-resident) for the purposes of calculating personal income tax?
The status of an income recipient is determined by the number of calendar days that a person was actually in Russia over the next 12 consecutive months.

Citizen of Ukraine Resident or Non-Resident in Russia

The tax rate is set at 30 percent in respect of all income received by individuals who are not tax residents of the Russian Federation

Article 73 of the Treaty on the EAEU states that the income of citizens of the countries party to the EAEU Treaty from the first day of employment is taxed at the same rates as the income of individuals who are tax residents of the state in whose territory foreign citizens carry out labor activities.

Example Masha is a citizen of Ukraine.
She first came to Russia in May 2021, immediately applied for a temporary residence permit for marriage, and already received it in July. Is Masha a resident? No, because Masha spent less than 183 days in Russia over the past 12 months. Who is a resident and non-resident

A tax non-resident of the Russian Federation is a person who has been in Russia for less than 183 calendar days over the next 12 consecutive months (clause 2 of Article 207 of the Tax Code of the Russian Federation). In addition to directly determining who is a resident and non-resident of the Russian Federation, the Tax Code of the Russian Federation contains a number of differences in the taxation of their income.

For residents and non-residents, the Tax Code of the Russian Federation establishes a different list of income subject to personal income tax. Unlike those who are residents, non-residents withhold tax only from income received from sources in Russia (Article 209 of the Tax Code of the Russian Federation).

Does a foreign citizen with a residence permit become a resident?

Important! Taxation policy is closely related to this area. Depending on the status of the person, it is determined which part of the income will be subject to taxes. If a person located on Russian soil is a non-resident, then taxes will be levied only on that part of his income that he receives in the territory of the country of residence.

All of the above benefits that a foreigner receives by applying for a residence permit indicate that the person intends to live permanently in the territory of the Russian Federation. Still, having a document does not guarantee that an immigrant has resident status.

The key factor determining resident status, other than the residence permit, is the time spent within the country's borders. Provided that a person does not live outside the Russian state for more than 183 days in one year, he will be a resident.

Who is a resident and non-resident of the Russian Federation

On January 1, 2018, amendments to the law came into force, according to which all Russian citizens, regardless of the length of stay abroad, are currency residents. But at the same time, individuals who permanently reside abroad for more than 183 days within 12 months are exempt from restrictions of currency legislation and are not required to inform the tax authorities about their accounts in foreign banks. Determining this status is important. For example, for residents of the Russian Federation, personal income tax (NDFL) is levied at a rate of 13%, for non-residents - 30%.

When distinguishing between the concepts of “resident of the Russian Federation” and “non-resident of the Russian Federation,” you can often hear that any Russian citizen is considered a Russian resident. In fact, such a status is assigned based on the length of time a person stays on Russian territory.

A person with a temporary residence permit is a resident or non-resident

• Citizen of the Russian Federation, with the exception of permanently residing in a foreign state for more than a year (residence permit) or temporarily staying on a paradise or study visa for a period of at least a year;
• Foreign citizens permanently residing on the basis of a residence permit.

If a foreign citizen has a temporary residence permit in Russia, for example, for three years (there is no residence permit), is he a resident or non-resident?

• Currency resident - as in Russian law - a citizen of the Russian Federation, except for those permanently residing for more than a year in a foreign state; foreign citizen with a residence permit.

Read about Russian-Ukrainian relations:

• Can a Citizen of Ukraine Fly Abroad from Russia?
• Privatbank Ukraine How to Withdraw Money in Russia
• How to Register a Land Plot for a Citizen of Ukraine in Russia
• Permanent residence in Ukraine and registration in Russia
• Customs clearance of goods from Russia to Ukraine Cost

Attention!

Due to recent changes in legislation, the legal information in this article may be out of date! Our lawyer can advise you free of charge - write your question in the form below.

Tax residency of legal entities

In the Russian Federation, legal entities may be subject to taxation:

• corporations, companies, enterprises and the like that were created and registered on the territory of the Russian Federation, in accordance with the requirements of national legislation;
• branches of Russian enterprises located abroad, but registered in the Russian Federation and fulfilling the necessary tax obligations (payment of interest to the treasury of the Russian Federation and submission of a declaration to record this fact to the Federal Tax Service).

In the practice of other countries, there are cases when the status of legal entities is determined according to the following criteria:

1. The place where the main office of the company is located.
2. The country where boards of directors are held, that is, the actual management of the company is carried out.
3. The place where the financial departments of the company are located;
4. The state where the company's global activities take place (receiving a larger share of profits).

This is interesting

To avoid double taxation, when an organization is registered in one country but operates in several, an international agreement is drawn up. It defines the criteria for income taxation and regulates conflicts of interest in a contractual manner.

The Russian Federation has an international agreement with most other countries that exempts legal entities from tax abroad if they file a declaration on the territory of the Russian Federation. Additionally, it is worth noting that the collection occurs not only from the profit received in Russia, but also in foreign countries.

What is the difference between resident and non-resident

Since both concepts relate more to tax and financial legislation, the difference is expressed precisely in money.

1. A tax non-resident is required to contribute 30% of income to the state treasury. The resident pays the usual 13% (clauses 1, 3 of Article 224 of the Tax Code of the Russian Federation).
2. Financial residents have every right to open deposits in foreign currency on the territory of the Russian Federation and carry out other banking operations. Non-residents are subject to significant restrictions.

As you can see, the question of whether a person with a residence permit is a resident is quite confusing. Let's figure out who and when is granted the status in question.

In what cases does a person receive resident status?

There are not so few grounds operating in 2021. In addition to the residence permit, other factors also influence the presence of resident status.

1. All citizens of the Russian Federation are considered such, except for Russians living abroad for more than a year with a residence permit, on the basis of employment or for training purposes.
2. Foreigners who stay in the Russian Federation for more than 183 days during the year also become residents and pay 13% personal income tax.
3. Financial residents - foreigners are only persons with a valid residence permit.
4. If we go beyond individuals, then all legal entities (companies) registered within the framework of Russian legislative requirements on the territory of the Russian Federation, as well as their foreign branches and other divisions, will be recognized as residents.
5. Diplomatic bodies of the Russian Federation around the world have a similar status.

For residents and non-residents in Russia, there are different conditions for opening and servicing bank accounts, carrying out currency transactions, receiving/sending money transfers, many other banking operations and more.

Non-resident rights

There are practically no barriers imposed on persons with this status. The only thing is that they will be limited in their ability to carry out currency transactions with Russian banks. Mortgage lending is closed to such persons. However, non-residents with a residence permit can also enjoy all the benefits of the status, including the right to social grants, medical care and education for children.

Tax residence of an individual

A tax resident in the status of an individual is a citizen of the state, a foreigner or a stateless person who fulfills obligations to the regulatory authority of the state, in accordance with the current national legislation.

Different countries set their own criteria for determining and calculating taxes for individuals.

For example, in order to have the status of a tax subject in the Russian Federation, you need to meet the following requirements:

• non-stop continuous residence in the Russian Federation for 183 or more calendar days during the year;
• have permanent registration and fulfill tax obligations provided for by the regulations;
• Both citizens of our country and people who are not citizens of our country, or stateless persons who fulfill tax obligations due to their long stay and activities in the territory of the Russian Federation, can have this status;
• military personnel and civil servants staying abroad on duty or work, regardless of the duration of absence.

According to Article 224 of the Tax Code of the Russian Federation, for resident individuals, the income tax rate is 13%, and for non-resident individuals - 30%. In some cases the percentage may vary. So, for example, it is envisaged to reduce the interest rate on personal income in the form of dividends to 9%.

Below in tabular form is the percentage of taxation for different categories of the population.

Other states may be guided by additional criteria when issuing tax resident status, among which citizenship, own or rented housing, family registration, length of stay in a particular place and economic interests of individuals and legal entities play a significant role.

Also, as in the case of companies, an ordinary person can be considered a tax subject of several countries, this is also regulated through the conclusion of contractual agreements to avoid double taxation.

In addition to this common status, the term "domicile" is often used. This concept, which makes it possible to specify the payer’s connection to the jurisdictional zone, usually characterizes the place of residence or registration.

General procedure for determining the status of a tax resident of the Russian Federation

Based on paragraph 1 of Art. 207 of the Tax Code of the Russian Federation the following must pay personal income tax:

• individuals who are tax residents of the Russian Federation;
• individuals receiving income from sources in the Russian Federation who are not tax residents of the Russian Federation.

As a general rule, tax residents are individuals who are actually in the Russian Federation for at least 183 calendar days over the next 12 consecutive months (clause 2 of Article 207 of the Tax Code of the Russian Federation). Regardless of the actual time spent in Russia, tax residents of the Russian Federation are recognized as Russian military personnel serving abroad, as well as employees of state authorities and local governments sent to work abroad (clause 3 of Article 207 of the Tax Code of the Russian Federation).

In accordance with Art. 209 of the Tax Code of the Russian Federation, the object of personal income tax is income received by tax residents of the Russian Federation both from sources in the Russian Federation and from sources outside its borders, and for individuals who are not tax residents - only from sources in the Russian Federation. At the same time, the tax rate for non-residents is not 13, but 30% (clause 3 of Article 224 of the Tax Code of the Russian Federation).

The period of stay of an individual in the Russian Federation is not interrupted by periods of his departure outside the territory of the Russian Federation for short-term (less than six months) treatment or training, as well as for the performance of labor or other duties related to the performance of work (provision of services) in offshore hydrocarbon fields.

Federal Law of November 29, 2014 No. 379 FZ, text of Art. 207 of the Tax Code of the Russian Federation was supplemented with clause 2.1, according to which in 2015, tax residents were recognized as individuals who were actually in the Russian Federation in the territories of the Republic of Crimea and (or) the federal city of Sevastopol for at least 183 calendar days during the period from March 18 to December 31 2014. The period of stay of an individual in Russia in the listed territories was not interrupted by short-term (less than six months) periods of travel outside the Russian Federation.

183 days of stay in Russia, upon reaching which an individual will be recognized as a tax resident of the Russian Federation, are calculated by summing up all calendar days when the individual was in the Russian Federation for 12 consecutive months (Letter of the Federal Tax Service of the Russian Federation dated June 25, 2020 No. BS-3-11 / [email protected] ).