Relocation – features of remuneration for an employee working abroad.

In recent
years, particularly during the coronavirus period, many have adapted and
switched to remote working. In some cases, the specific of the employee’s work
allows for remote working.

Formalising
the contractual relationship with the employee

On the one
hand, labour law allows for the remote working, however, according to the
Ministry of Labour, cooperation with employees located in another country
should still be carried out within the framework of a civil law relationship
(letters dated 07.07.2015 No 17-3/B-410 and dated 16.01.2017 No 14-2/OG-245).

In this
connection, the first thing to do is to sign an civil contract with an employee
moving to another country and to make sure that the place of work is indicated
in the contract, as this will determine who must pay personal income tax on
behalf of the employee.

Peculiarities
of tax residency when working abroad

Please note
that the tax residency/non-resident status depends on the actual presence in
the country. After 183 days after leaving Russia, the employee will lose their
tax residency status and, as a result, the personal income tax rate will
change. A tax rate of 30% instead of 13% (15% of the amount exceeding 5 million
roubles) applies to non-resident income.

If you
continue to pay personal income tax at the 13/15% rate after losing your
residency status without informing the tax authority of the change in tax
status, there is a risk that this will be discovered, which could lead to
penalties.

It is
therefore advisable to specify in the agreement with the employee in advance
that he/she will report his/her tax status every six months.

Who has to
pay tax depends on the place of work stated in the contract. If it is Russia,
then the employer pays the tax for the employee. If the place of work is in
another country, the employee pays personal income tax for himself.

Insurance
premiums

Insurance contributions
for Russian citizens are transferred regardless of their location, as they are
insured in the social, pension and health insurance fund. The situation is
similar with citizens of the EAEU countries. If the performer (employee) is not
a Russian citizen, insurance contributions are not paid for him/her.Difficulties
with the payment of remuneration to an employee

When
transferring money to an employee who is abroad, some complications can arise,
in particular

– Russian
bank cards (Visa, Mastercard) are not accepted abroad;

– MIR bank
cards are accepted only in several banks of the countries where they are serviced;

–
difficulties may arise in transferring funds from a Russian bank account to a
foreign bank account;

–
restrictions in choosing currencies for settlements.

To transfer
funds, you can use money transfer systems, through an agent company. It is also
possible to send money from a Russian bank account to a foreign account via
SWIFT; however, a number of banking institutions do not have this option due to
sanctions imposed.