Russia Individual Tax Guide

Russian Federation

Moscow GMT +3

Because of the rapidly changing economic and legislative environment in the Russian Federation, readers are advised to obtain updated informa tion before making decisions. The tax law described in this chapter applies only to the Russian Federation. The foreign exchange rate estab lished by the Russian Central Bank on 30 June 2021 is RUB72.3723 = USD1.

A. Income tax

Who is liable. Residents are taxed on worldwide income. Non residents are taxed on Russian-source income only. Russiansource income includes, but is not limited to, income derived from work or services performed in the Russian Federation, capital gains derived from the disposal of property in the Russian Federation, interest from deposits held in the Russian Federation, rent from property located in the Russian Federation, dividends paid on shares of companies in the Russian Federation, and income in the form of material benefit from certain low-interest loans and from the acquisition of securities or derivatives below fair market value (if Russian-source).

For tax purposes, individuals are considered resident if they are present in the country for 183 days or more in a period of 12 consecutive months. However, the Ministry of Finance and the Federal Tax Service take the position that an individual must spend at least 183 days in the Russian Federation in a calendar year to be considered tax resident for Russian tax purposes for the particular calendar year. This requirement is not stated in the Tax Code. For the purpose of determining residency, presence in the Russian Federation is not considered interrupted if an indi vidual departs from the Russian Federation for periods of less than six months for medical treatment, education, or completion of employment or other duties related to work (that is, rendering services) at offshore hydrocarbon fields, which must be duly documented.

Currently, the 12-month rule is applied by Russian tax agents for tax withholding purposes.

The current position of the tax authorities is that the days of both arrival and departure count as Russian for purposes of the tax residency test.

Accordingly, nonresidents are individuals who do not meet the above test.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Employment income consists of compensa tion received in cash or in kind, including, but not limited to, salary, bonuses, expatriate allowances and taxes paid for the

employee by the employer. Tax residents are entitled to certain types of tax deductions from income (see Deductions).

Self-employment and business income. The income of individuals engaged in self-employment activities is subject to income tax.

Controlled foreign companies. Russian tax residents are subject to certain reporting requirements with respect to participation in a foreign company or an establishment of a foreign unincorporated structure as well as controlled foreign company (CFC) notifications. A CFC’s undistributed profit above the threshold may need to be included in the taxable income of the controlling person, subject to the additional analysis required. Certain types of CFCs may be exempt from tax in the Russian Federation.

Interest income. Interest income received at Russian and foreign banks is treated differently. Income received in the form of bank interest at a non-Russian bank is treated as a regular income. New rules for the determination of the nontaxable limit for interest income at Russian banks came into force starting in the 2021 tax year. Under these new rules, the nontaxable threshold on all deposits that a taxpayer has at Russian banks is calculated as RUB1 million multiplied by the Central Bank’s refinancing rate as of the first day of the tax period (that is, 1 January). The excess of the nontaxable limit is subject to tax at a rate of 13% for both Russian tax residents and nonresidents. The rules do not affect income received in the form of bank interest on deposits at a Russian bank with an interest rate of not more than 1% per year and escrow accounts at a Russian bank, because such income is fully nontaxable. The new rules do not affect income received in the form of bank interest at a non-Russian bank; it is still treated as a regular income and has no applicable nontaxable threshold.

Dividend income. Dividends (both Russian and non-Russian source) received by residents are subject to tax at a rate of 13% (15%; see Rates). Russian-source dividends received by nonresidents are subject to tax at a rate of 15%.

Taxation of employer-provided stock options. Taxation of employer stock options and other equity-based compensation is not directly addressed in the Tax Code. Therefore, general tax principles and Organisation for Economic Co-operation and Development (OECD) guidelines are normally applied in such cases for sourcing purposes (although the Russian Federation is not a member of the OECD). Historically, based on general tax principles and most common prevailing positions, an employee was required to recognize income equal to the excess of the fair market value of the stock over the exercise price at the time of exercise of an employer-provided stock option. However, a literal reading of the Tax Code and securities market regulations suggests that, effective from 1 January 2011, an equity award that at the time of grant is structured as an option contract may potentially also trigger taxation of the individuals at the time of receipt of the option. At the moment, uncertainty continues to exist as to the taxability of option grants. Under recent changes to the legislation, employer-provided stock options should not be taxed at the grant date with a condition that an option agreement

(or other supporting documents) is in place and based on the employment relationship.

Capital gains. Capital gains are included in regular income. A separate capital gains tax does not exist in the Russian Federation. For additional details, see Property-related tax deductions.

Deductions. Deductions, which are available only to tax residents (the only exception is a property-related tax deduction on income from the sale of property which is also available for tax nonresidents), are categorized as standard tax deductions, social tax deductions, property-related tax deductions, professional tax deductions and investment tax deductions.

Standard tax deductions. Each resident taxpayer is allowed a standard deduction for dependent children of RUB1,400 per month per child for the first and second child and RUB3,000 per month for the third and each additional child. This deduction phases out in the month in which the taxpayer’s year-to-date income taxable at a rate of 13% exceeds RUB350,000. In addi tion, a deduction of RUB3,000 per month is granted to certain disabled individuals, veterans and victims of natural disasters.

Social tax deductions Social tax deductions include the following:

• Annual deductions for certain charitable contributions, up to 25% of income

• Education expenses for the taxpayer’s children, up to RUB50,000 per child

• Education expenses for the taxpayer himself or herself

• Medical expenses for the taxpayer (the amount of the allowable deduction depends on the type of medical expense)

• Expenses related to the taxpayer’s contributions to licensed Russian non-state pension funds

• Expenses related to the taxpayer’s supplemental state pension insurance contributions

The aggregate deduction for medical, non-state pension fund, state pension insurance and educational expenses (except for the tax payer’s children’s educational expenses and certain medical expenses related to expensive medical treatments, as designated by the government) may not exceed RUB120,000 per tax year.

Property-related tax deductions. Income derived from the sale of property owned by the taxpayer for five years (three years in certain cases) or more is exempt from tax, starting 1 January 2018 for both tax residents and tax nonresidents.

Property purchase expenses on the construction or acquisition of living premises in the Russian Federation (up to RUB2 million), increased by amounts of mortgage interest or certain other bank interest paid on a loan to fund such an acquisition or construc tion, are deductible. A property deduction in the amount of RUB2 million can be applied to several property items until the whole amount of deduction is used. The amount of deductible mortgage interest is limited to RUB3 million. If a residential property is owned by several individuals (so-called shared own ership), each individual can claim the property tax deduction in the amount of RUB2 million, but not exceeding the actual expenses of each individual. In case of spouses’ mutual property,

both spouses may claim the tax deduction in an amount not exceeding RUB2 million per individual.

The first RUB1 million of income from the disposal of immov able property that has been owned by the taxpayer for less than five years (three years) is fully deductible against the sale pro ceeds (alternatively, the taxpayer can choose to pay tax on the actual taxable gain, which equals gross proceeds less document ed expenses).

The first RUB250,000 of income from the disposal of movable property (except securities) that has been owned by the taxpayer for less than three years is fully deductible against the sale pro ceeds (alternatively, the taxpayer can choose to pay tax on the actual taxable gain, which equals gross proceeds less document ed expenses).

Deduction for property-purchase expenses, expenses related to pension insurance contributions to Russian non-state pension funds and professional tax deductions can be obtained through the payroll (that is, tax withholding ceases for a period until a deduction is fully taken).

Income derived from the sale of securities is subject to special rules.

Professional tax deductions. Individual entrepreneurs and other individuals performing work or services on a contractual basis may deduct associated business expenses. Property tax paid by these taxpayers is deductible if the property is directly used in carrying out entrepreneurial activities. Taxpayers who cannot document expenses incurred in connection with their entrepreneurial activi ties are allowed a standard professional tax deduction at a rate of 20% of total income received from entrepreneurial activities.

Investment tax deductions. The following are the three types of investment tax deductions:

• The amount of the capital gain from the sale or redemption of securities circulating on a Russian stock exchange that were owned more than three years and acquired after 1 January 2014 (certain limits on the amount of deduction apply)

• The amount of funds deposited into an individual investment account (special type of account opened by a Russian broker or fiduciary), capped at RUB400,000 per year, subject to certain terms and conditions

• The amount of income from transactions involving the use of an individual investment account

A taxpayer must choose between the second and third investment tax deductions above; they cannot be applied simultaneously.

Rates. Four flat tax rates of 13%, 15%, 30% and 35% apply to different baskets of income.

The following tax rates are applicable in the Russian Federation for tax residents:

• 13% for the income not exceeding RUB5 million per year

• 15% for the part of the income exceeding RUB5 million per year

A flat rate of 13% (15%) applies to all income for which another rate is not specified, including salary, dividends and other income

earned by tax-resident individuals and earnings received by for eign individuals who qualify as Highly Qualified Specialists (HQSs) for immigration purposes (see Section J) for perfor mance of work and services in this capacity. However, see the next paragraph.

In accordance with the current position of the Ministry of Finance, employment income of tax-nonresident HQSs is limited to base salary, vacation allowance, payments for the duration of business trips and bonuses (that is, remuneration received under Russian employment or civil-legal agreements from the employer sponsoring the HQS work permit). Because tax authorities currently tend to apply a 13% (15%) tax only to income directly related to remuneration in an HQS capacity, some benefits and allowances are treated by the tax authorities as taxable at 30%. Therefore, taxation of other types of income received by taxnonresident HQSs or income received by tax-nonresident HQSs outside the Russian Federation; for example, work or services performed by an HQS in the Russian Federation at a 13% (15%) rate may be challenged by the authorities.

A flat rate of 15% applies to Russian-source dividend income received by individuals who are not tax residents.

A flat rate of 30% applies to all taxable income (other than dividend income) received by individuals who are not tax residents, except earnings of tax-nonresident HQSs (however, see above).

A flat rate of 35% applies to certain prizes and deemed income from certain low- or zero-interest loans.

Starting 1 January 2018, receipt of low- or zero-interest loans is considered to be income in the form of a material benefit that is taxable in the Russian Federation if a taxpayer receives such a loan from a company or an individual entrepreneur that is consid ered an affiliated person for the taxpayer or if the taxpayer has a labor relationship with this company or individual entrepreneur.

Relief for losses. Business losses of a self-employed person may not be carried forward to future years.

B. Other taxes

Net worth tax and estate and gift tax are not levied in the Russian Federation.

C. Social security

In 2021, the following rates of social contributions are estab lished for all categories of payers (except those who are entitled to the beneficial social security regime).

to

966,000

1,465,000

1,465,000

rate

ion

Payments made with respect to expatriate employees who hold the immigration status of HQS (see Section J), are not subject to social contributions (except for workplace accident insurance). Payments with respect to expatriate employees holding standard work permits and temporarily staying in the Russian Federation are not subject to contributions to the Medical Insurance Fund and are subject to social contributions to the Social Insurance Fund at a 1.8% rate. After the first six months of accrual of these contributions, these expatriate employees are eligible for payment for the period of a sick leave.

Payments made with respect to other categories of expatriate employees who hold temporary or permanent resident permits without HQS status are subject to social contributions similar to Russian nationals. Existing totalization agreements with a few countries allow foreign employees working in the Russian Federation to be exempt from certain types of social contribu tions subject to the availability of a certificate of coverage.

Under the social security system, additional pension contribu tions must be paid by organizations that have employees eligible for early retirement (that is, employees working in unsafe and hazardous conditions). Based on the results of a procedure for the special evaluation of working conditions, certain job positions may be classified as work performed in unsafe and/or hazardous conditions. In this case, the employer must accrue and pay additional pension contributions due on employment income of these special categories of employees. Depending on the class of pro fessional risk assigned to employees, the employers are required to pay additional pension contributions at a rate ranging from 0% to 8%.

The legislation also stipulates certain categories of organizations entitled to apply lower rates of social contributions. These are organizations conducting specific types of economic activities including, but not limited to, the following:

• Certain types of information technology companies

• Certain types of mass media companies

• Participants in the Skolkovo project

• Companies rendering engineering services

In addition to the above social contributions, workplace accident contributions are due on all payments to all employees (Russian nationals and foreigners), including HQSs. The contributions are without a cap. The rate is generally 0.2% for most employers that predominantly or only employ office workers.

Organizations must submit the following reporting on social contributions:

• “Electronic labor book” SZV-TD capturing major human resources events (such as hiring, termination and change of job position)

• Monthly pension fund report (SZV-M)

• Quarterly report on workplace accident contributions (Form 4-FSS)

• Quarterly report on social contributions

• Annual report on employees’ length of service (SZV-STAZH)

• Annual confirmation of the main type of economic activity with the Social Insurance Fund

According to the current requirements, the respective types of reporting should be submitted to the authorities electronically if the number of individuals with respect to whom social contribu tions were paid (that is, insured persons) exceeds 25.

D. Tax filing and payment procedures

The tax year in the Russian Federation is the calendar year.

Entrepreneurs, attorneys, notaries and private detectives must file both preliminary and final tax returns. These categories of tax payers must submit a preliminary tax return within one month and five days after they first receive income from their activities, and no later than 30 April in each subsequent year in which they plan to conduct professional activities in the Russian Federation. Preliminary tax equals 100% of the tax payable on the estimated income. Payment for January through June is due by 15 July; for July through September, by 15 October; and for October through December, by 15 January of the following year.

For most taxpayers, tax is payable through withholding at source. Tax agents for the purpose of Russian personal income tax are Russian legal entities and permanent establishments of foreign legal entities, from which, or as a result of relations with which, individuals receive income. Tax agents are required to withhold income tax at source on payments in accordance with the indi vidual’s residency status (or some special status) and remit the tax withheld to the Russian tax authorities on a monthly basis.

Tax agents submit reporting on the accrued and withheld per sonal income tax.

Individuals who receive income subject to tax in the Russian Federation but not subject to full tax withholding must file a tax return. If underwithholding of employment income from the Russian company is the only source that triggers Russian tax pay ment obligations, a tax return is not needed (if the employer noti fies the tax authorities of this debt), and the taxpayer should be able to pay the outstanding tax due by 1 December of the year following the reporting year based on the notification provided by the tax authorities.

An individual may also file a tax return on a voluntary basis even if a filing is not required. A tax filing may be required to claim certain tax deductions that cannot be granted through the payroll, to claim a refund of overwithheld tax as a result of a change of a tax-resident status or to obtain a Russian tax clearance certifi cate.

The annual tax return is due on 30 April of the year following the reporting calendar year, and no extensions are available; the cor responding tax self-assessed in the declaration must be paid by 15 July of such year.

There are special provisions for filing departure tax returns by foreign citizens. A departure tax return must be filed at least one month prior to the actual departure of a foreign individual from the Russian Federation, and tax due must be paid within 15 days of the filing of the departure tax return. Previously, departure tax returns were often filed as soon as the final compensation information became available, and the late submission of a departure

tax return did not result in late filing fines provided the tax was paid prior to the filing of the departure tax return. However, the tax authorities have started increasing their control over demobi lizing expatriates. Therefore, submission of a departure tax return and payment of tax due within the set time frames or at least closer to the respective timing is advisable.

All tax payments must be made in rubles from the individual taxpayer’s personal bank account or in cash via Sberbank. Starting from the 2017 calendar year, the tax may be paid by third parties. If the tax due is to be settled from a foreign bank account, it is necessary to confirm with each particular bank in advance that the bank is able to process the payments in rubles and that it has a correspondent relationship with the Russian bank system; otherwise, registration of the payment to the tax office may be delayed.

A penalty of 5% of the tax due for each full or partial month of delay is imposed for the late submission of a tax declaration after the deadline. The penalty is capped at 30% of the tax due and cannot be less than RUB1,000. The late payment of tax is subject to interest at a rate of 1/300 of the annual refinancing rate of the Central Bank of the Russian Federation for each day of late pay ment.

Underpayment or incomplete payment of tax results in the impo sition of a 20% fine (40% for a deliberate violation) on the respective amount of tax due. Criminal sanctions can also be applied in rare cases.

Under immigration rules, a foreign citizen is not allowed to enter the Russian Federation if he or she evaded a tax payment or has an administrative fine during a previous stay in the Russian Federation. The entry ban lasts until the foreign citizen fully pays the respective tax or administrative fine.

E. Double tax relief and tax treaties

Taxpayers may be either exempt from the payment of Russian tax or foreign tax paid may be credited against Russian tax payable, but the foreign tax credit cannot exceed the Russian tax payable on the same income. Under new rules in force from 2016, to apply for an exemption, a taxpayer must present a certificate of residency from a country with which the Russian Federation has a double tax treaty (the Russian tax authorities may request additional supporting documents). The foreign tax credit may be claimed in a tax return within three years of the receipt of income. The taxpayer must enclose documents supporting the amount of income received and tax paid with the tax return.

Depending on the particular situation, a taxpayer must submit one of the following:

• A certificate issued by the tax authorities of the treaty state indicating the type and amount of income, calendar year of receipt, amount of tax paid and date of payment

• A copy of the tax return submitted in the foreign state and a copy of the tax payment confirmation

• A document issued by a tax withholding agent containing infor mation on income per month and tax withheld

All supporting documents must be submitted to the Russian tax authorities together with a notarized Russian translation.

The Russian Federation has entered into tax treaties with the fol lowing jurisdictions.

Albania Indonesia Philippines Algeria Iran Poland

Argentina Ireland Portugal Armenia Israel Qatar

Australia Italy Romania

Austria Japan (b) Saudi Arabia

Azerbaijan Kazakhstan Serbia

Belarus Korea (North) Singapore Belgium Korea (South) Slovak Republic

Botswana Kuwait Slovenia

Brazil (a) Kyrgyzstan South Africa

Bulgaria Latvia Spain

Canada Lebanon Sri Lanka

Chile Lithuania Sweden

China Mainland Luxembourg Switzerland Croatia Malaysia Syria Cuba Mali Tajikistan Cyprus Malta Thailand Czech Republic Mexico Turkey Denmark Moldova Turkmenistan Egypt Mongolia Ukraine Finland Montenegro United Arab France Morocco Emirates Germany Namibia United Kingdom Greece Netherlands (c) United States Hong Kong SAR New Zealand Uzbekistan Hungary North Macedonia Venezuela Iceland Norway Vietnam India

(a) The double tax treaty between the Russian Federation and Brazil entered into force on 19 June 2017 and is applicable from 1 January 2018.

(b) On 7 September 2017, the Russian Federation and Japan signed a double tax treaty, which replaces the previous treaty and applies to tax periods beginning in 2019.

(c) The double tax treaty is denounced and no longer valid starting from 1 January 2022.

F. Visas

Visas are issued by diplomatic missions or consulates of the Russian Federation, the Ministry of Foreign Affairs or the Ministry of Internal Affairs (directly or by proxy) on the basis of any of the following:

• An invitation from an organization registered with bodies of the Ministry of Internal Affairs

• A decision adopted by the Ministry of Foreign Affairs or a consulate or diplomatic mission

• A decision of a territorial body of the Ministry of Internal Affairs to issue a temporary residence permit

Visas can be single-entry, double-entry or multiple-entry.

Foreign citizens from most Commonwealth of Independent States (CIS) countries and those who are permanent or temporary residents of the Russian Federation do not need entry visas; they must present identification documents and/or their permanent or temporary residence permit on entry.

The following categories of visas are available in the Russian Federation:

Diplomatic

Service

Ordinary

Transit

Temporary residence

Ordinary visas are divided into private, business, tourist, study, work, humanitarian, and entry visas for persons seeking asylum.

Ordinary business visas support business trips to the Russian Federation. In general, they may be single-entry or double-entry for up to three months, or multiple-entry for up to one year. A foreign citizen with a multiple-entry business visa may not be present in the Russian Federation for more than 90 days within each 180-day period. Ordinary work visas are issued to those who perform labor activities in the Russian Federation. Initially, ordinary work visas are issued for up to three months and are valid for a single entry (except for HQSs). However, on the indi vidual entering the Russian Federation, the visa may be extended by bodies of the Ministry of Internal Affairs or the foreign citi zen’s place of stay through the issuance of a multiple-entry visa for the term of the labor agreement, limited to one year for the initial visa and for each subsequent multi-entry visa.

For information on the special work permit and work visa regime for HQSs, see Section J.

G. Work permits

Work permits, patents and residence permits are discussed in Sections G, H and I, respectively.

Effective from 1 January 2015, foreign nationals who apply for a work permit, patent, temporary residence permit or permanent residence permit are required to present a certificate confirming their knowledge of Russian language, history and basics of Russian law. This requirement does not apply to the processing of work permits and permanent residence permits for HQSs.

In general, any foreign citizen who works in the Russian Federation must hold a work permit or patent, and the employer or purchaser of work (services) of such foreign citizen must hold a valid employer permit to engage such an individual (when applicable).

The Russian Federation has entered into treaties simplifying the Russian work permit application process with France and Korea (South).

It is never necessary to obtain a work permit or patent, and permit for the engagement and use of foreign workers with respect to certain workers, including the following:

• Citizens of Armenia, Belarus, Kazakhstan and Kyrgyzstan

• Temporary residents of the Russian Federation

• Permanent residents of the Russian Federation

• Refugees and individuals with temporary shelter in the Russian Federation

• Employees of diplomatic missions, consulates and international organizations (with respect to their work for such organizations)

• Employees of foreign legal entities engaged in the installation, installation supervision, servicing, warranty servicing and afterguarantee repairs of installed equipment manufactured or sup plied by those foreign legal entities

• Journalists accredited in the Russian Federation

• Students studying at vocational or higher educational institu tions in the Russian Federation according to the state-accredited basic professional education program (starting from 4 August 2020)

The procedure applicable for individuals who are not HQSs and who require a visa to enter the Russian Federation is discussed below.

If no exemption applies, the company must submit a forecast to the local Interdepartmental Committee setting out the company’s expectations for the number and profile of foreign employees needed in the following year. If the company fails to complete this submission or properly include in it a foreign employee for whom it will apply for a work permit, a refusal to issue a work permit may result. The deadline for submitting a forecast applica tion varies by region.

A list of positions that do not require a forecast (quota) approved upfront also exists.

The following are the steps for obtaining employer and employee permits with respect to citizens of countries requiring visas to enter the Russian Federation:

• Applying for a conclusion on the expediency of the engagement of foreign labor from the Federal Employment Service

• Applying for a permit for the engagement of foreign labor from the Ministry of Internal Affairs

• Applying for a work permit for a foreign employee from the Ministry of Internal Affairs

The following essential documents are required for an applica tion for a non-HQS work permit:

• Voluntary medical insurance policy

• Medical certificates on the absence of drug abuse and infec tious diseases, including COVID-19

• Certificate of Russian language proficiency and knowledge of the history and basics of Russian law

• Apostilled or legalized diploma with translation into Russian and further notarization

Completion of the above steps can take four or more months. As a result, it is critical to begin the application process as early as possible.

H. Patents

Effective from 1 January 2015, foreign nationals who do not require a visa to enter the Russian Federation (CIS countries) for work purposes must apply for a patent instead of a work permit to perform a labor activity for organizations or individuals. The

quota system is abolished for these foreign nationals who come from non-visa countries.

Under the patent system, a foreign national must make fixed advance tax payments to maintain the validity of the patent. The monthly amount of such tax payments varies by region.

The amount of such payments is subject to an adjustment for the deflator coefficient set for the corresponding calendar year. Failure to make advance payments leads to an annulment of the patent.

A patent is issued to a foreign national for the duration of one month with the possibility of further renewal for a period of up to 12 months, provided that a signed employment or civil-legal contract exists.

The following essential documents are required for an applica tion for a patent:

• A voluntary medical insurance policy

• Medical certificates on the absence of drug abuse and infec tious diseases, including COVID-19

• Certificate of Russian language proficiency, and knowledge of the history and basics of Russian law

I. Residence permits

Foreign citizens in the Russian Federation may have one of the following three statuses:

• Persons temporarily located in the Russian Federation

• Temporary residents (those who hold temporary residence permits)

• Permanent residents (those who hold permanent residence per mits)

The first status, which is the default status if one does not apply for and obtain a residence permit, is by far the most common status of expatriates working in the Russian Federation.

Temporary residence permits are issued within quotas estab lished by the government on an annual basis and are valid for three years.

A permanent residence permit may be issued to a foreign individ ual on the basis of a valid temporary residence permit no later than six months before the expiration of the temporary residence per mit. A permanent residence permit may be issued to an HQS (see Section J) based on an HQS work permit only (it is not necessary to first apply for a temporary residence permit). A permanent resi dence permit is valid for an indefinite period except for the residence permit for an HQS, which validity is limited to the HQS work permit expiration date.

J. Special regime for Highly Qualified Specialists

A beneficial immigration regime is available for highly qualified foreign nationals working in the Russian Federation who are employed by Russian companies or branches and representative offices of foreign companies in the Russian Federation. These individuals are referred to as Highly Qualified Specialists (HQSs). For this purpose, an HQS is a person who receives

earnings not less than RUB167,000 per month or not less than RUB501,000 per quarter for work performed in the Russian Federation (with a minor exemption applicable for limited categories of employers; that is, a decreased amount of the monthly salary for HQSs employed by companies operating in particular fields). A simplified quota-free, one-step application procedure for work permits and visas is established for HQSs. HQSs may apply for work permits and work visas that are valid for three years with the opportunity to extend their validity for subsequent three-year periods, as compared to one-year work permits and visas received by other foreigners. Employers engaging HQSs are required to notify the immigration authorities on a quarterly basis with respect to the fulfillment of obligations regarding the payment of the required level of earnings (remuneration) to HQSs. The notification must be sent no later than the last working day of the month following the reporting quarter.

The following are some of the advantages of the simplified pro cedure for obtaining a work visa and work permit for an HQS:

• The employer does not need to receive a conclusion on the expediency of engaging foreign labor.

• A corporate permit is not required to employ an HQS.

• A work permit and work visa for an HQS are issued within 14 workdays after the submission of the application documents.

• A work permit for an HQS can be valid for multiple regions of the Russian Federation. Under ordinary procedures, a separate work permit must be obtained in each region in which the individual would work.

• Medical certificates or exams, Russian language proficiency, and knowledge of the history and basics of Russian law are not required for an HQS work permit application.

HQSs and their accompanying family members (if any) must have voluntary medical insurance valid in the Russian Federation for the duration of their HQS status, which can be arranged either by HQSs or their employers.

Earnings of HQSs for their work in such capacity are subject to tax at a rate of 13% (for further details, see Rates in Section A).

K. Family and personal considerations

Family members. Non-working family members of foreign citi zens may receive accompanying family member visas, but appli cations must be filed separately. The providing of apostilled or legalized birth certificates for children and apostilled or legalized marriage certificates is required for visa applications. Family members must have separate work permits if they plan to work in the Russian Federation.

Driver’s permits. In general, foreign nationals can drive legally in the Russian Federation with their home country driver’s licenses (if the home country is a member of the Vienna Convention on Road Traffic) or international driver’s licenses, accompanied by a notarized translation.

The Russian Federation does not have driver’s license reciprocity with any other country.

Starting 1 June 2017, a foreign national who expects to work in the Russian Federation as a professional driver must obtain a local Russian driver’s license.

To obtain a local Russian driver’s license, an applicant must take a written exam, a medical exam and a practical driving test.

L. Other matters

Enrollment. The enrollment procedure involves the responsible hosting party notifying the respective territorial office of the Ministry of Internal Affairs within seven business days of a for eign citizen’s arrival at the place of his or her stay in the Russian Federation, or arrival at a new location in the Russian Federation where this individual will stay for seven days or more.

The enrollment procedure for citizens of Armenia, Kazakhstan and Kyrgyzstan should be performed within 30 days after enter ing the Russian Federation. The enrollment procedure for citizens of Ukraine, except for those who work in the Russian Federation, and for citizens of Belarus should be performed within 90 days after entering the Russian Federation.

HQSs and their accompanying family members may enter and stay in the Russian Federation without having to enroll within 90 calendar days after entering the Russian Federation. In addition, HQSs are not required to enroll if they travel to other regions or places of stay of the Russian Federation different from the one in which they are enrolled, provided that the period of stay in this other place does not exceed 30 calendar days. After the 30-day period expires, HQSs must enroll within 7 business days.

The responsible hosting party is generally the following:

• A hotel if the foreign citizen is staying at a hotel

• A landlord of an apartment in which the foreign citizen is stay ing

• An employer if the foreign employee lives at the company’s premises

• A company (employer) in case the accommodation provided to a foreign citizen for living in the Russian Federation is owned or rented by the company

• Foreign citizens who own an accommodation in the Russian Federation

The de-enrollment procedure is completed at the Russian border when a foreign citizen leaves the Russian Federation, when a foreign citizen is enrolled at a new place of stay in the Russian Federation or by the filing of a special application by the hosting party.

Submission of foreign labor needs forecasts (quota applications).

Under the regulations, companies must report annually before a specified date the number of foreign employees (including both actual employees and civil-legal contractors, but excluding HQSs and CIS citizens) they anticipate needing to engage in the following calendar year, including the precise positions and citizenships of these anticipated foreign employees. This effectively consti tutes an application for a quota. A quota must first be obtained

before it is possible to submit a work permit application for any foreigner who is not one of the following:

• An HQS

• A CIS citizen

• An individual who will occupy one of a limited number of specific quota-free job positions

The deadline for filing the quota application varies by region.

Notifications. Companies are required to notify the immigration authorities of the conclusion or termination of an employment or civil-legal agreement with a foreign national within three busi ness days after the date of the event.

Sanctions for noncompliance with the immigration legislation. Russian legislation contains severe sanctions for companies, their executives and foreign citizens for noncompliance with immigra tion legislation. The upper end of financial sanctions applied to a company can reach RUB1 million (per foreign individual per violation). The worst-case scenario can include deportation of the individual from the country for up to 10 years and/or suspension of the employer’s business activities for up to 90 days and/or a company being banned from engaging any foreigners under the HQS regime for up to two years. Financial sanctions and even deportations have been increasingly applied. In addition, a for eign citizen may not be allowed to enter the Russian Federation if he or she was held liable for an administrative offense in the Russian Federation two or more times within three years or has unsettled tax in the Russian Federation. The entry ban lasts for three years from the date when the last decision on the imposition of administrative sanctions entered into force.

Punishment measures for violations incurred in the cities of fed eral significance (Moscow, St. Petersburg, Moscow Region and Leningrad Region) are even tougher.

Fingerprinting, photographs and medical examinations. Starting 1 January 2021, fingerprinting, photographs and medical examinations are mandatory for the following persons:

• Foreign nationals entering the Russian Federation for purposes of employment, including HQSs and citizens of Eurasian Economic Union member countries (with the exception of Belarus, to which these rules do not apply): within 30 calendar days after their arrival

• Foreign nationals entering the Russian Federation for purposes other than employment for a period of over 90 days, including family members accompanying HQSs and other persons employed in the Russian Federation: within 90 calendar days after their arrival