Tax resident: definition, meaning, nature and criteria

In the code of laws of the Russian Federation, tax residents are individuals who must pay taxes in the state of their main location. A currency resident also means an individual who has some obligations to use accounts in financial institutions located abroad.

Determination of tax resident status

Taxpayers are of two types:

• residents (regularly residing in the country);
• non-residents (irregularly located within the country).

These types determine their tax obligations, differences at the time of taxation.

Tax resident - tax law terminology contained in most countries of the world. These are citizens who are in Russia for at least 183 days (calendar) for 12 consecutive months. That is, a person who has lived in the country for less than 183 days during the year does not fall into this category. For example, tourists, people who come to study or work are not tax residents of the Russian Federation.

In this case, it does not matter if they have Russian citizenship. That is, both foreigners and persons who do not have it in principle are recognized as tax residents. On the other hand, a Russian may not be a resident of the country.

The term of 183 days is calculated by summing up all the days during which the taxpayer has been within the state for 12 consecutive months. This includes the days of departure from Russia and entry into it.

By the way, this calendar period is not interrupted if the taxpayer left the state for a short-term period (less than 6 months). For example, to study or undergo treatment.

The person will receive the final status after the end of the calendar year, because this is the deadline for calculating the income tax on individuals.

Important information

An important point is that a taxpayer who does not act as a tax resident of the country will pay taxes on income that was derived from sources that are present within the borders of our state.

What is the law talking about?

The tax law clarifies that a resident is a person who regularly resides within the state.

Tax residents are:

• individuals who must be in the country for more than six months of the year, or the majority of business and vital interests should be in this state;
• legal entities: the status in question is established based on the place of registration, the main office, etc.

Features:

• if a person is recognized as a tax resident, the rule of unlimited tax liability applies to him: in other words, from all his profits, including those earned abroad, it is necessary to pay taxes to the treasury of the state of which the citizen is a resident;
• a nonresident is subject to limited liability: he must be accountable for income received within the borders of this country.

Tax Objects

The tax resident pays tax from his sources, which are the object of taxation. Profits can be made both on the territory of the Russian Federation and beyond its borders.

The tax base can be reduced by the amount of personal income tax deductions. Revenues are taxed at the following tax rates:

• 13%;
• 35%;
• 6%.

All costs incurred by individuals (tax residents) - for example, the purchase of real estate, the purchase of securities, cars and other vehicles, precious metals - are subject to control by the tax authorities.

The nuances of currency legislation

Regulatory documents for currency control and the regulation indicate that the tax resident is:

• a natural person whose place of permanent residence is the Russian Federation, even if he temporarily resides abroad;
• legal entity organized within the territory of the Russian Federation and located there;
• organizations open in the framework of the laws of the Russian Federation and its territory, present here, but not a commercial structure;
• official representations of our country, including diplomatic ones, which are located outside its borders;
• representative offices and branches of its residents located abroad of Russia.

Features of foreign exchange transactions

A tax resident who conducts currency transactions within the borders of the Russian Federation has the right to:

• to study the results of inspections conducted by representatives of foreign exchange control;
• file complaints about their actions.

Residents conducting any currency transactions in Russia must:

• in case of requesting documents from representatives of the currency control authorities, provide them immediately;
• give them explanations based on the results of inspections;
• in case of disagreement with the results of inspections carried out by representatives of the currency control, in writing, provide arguments for their refusal to sign the act;
• keep records of operations, keeping records for at least five years;
• in case of detection of violations by the currency control authorities, promptly eliminate them.

Next steps

After 183 days, the status of a tax resident of the country is acquired, as a result, a foreign citizen begins to pay taxes at a rate of 13%. He has all the rights to the standard deductions specified in the Tax Code. Moreover, of the previously paid tax amount of 30%, 17% must be returned to him.

Therefore, the day when a foreign citizen turns into a resident of the Russian Federation becomes very significant. The countdown should not begin from the day when the labor contract was signed, but when the border of the Russian Federation was crossed. The date of crossing is easy to track by the mark in the foreign passport and by the migration card. The countdown period starts from the next day.

Why is tax resident status necessary?

Confirmation of whether a citizen or a commercial company is a resident of Russia may become necessary in many cases, including:

1. If a commercial organization that is registered in Russia cooperates with a foreign partner (sells products or provides services). Here, in order to avoid double taxation, a foreign partner has the right to ask for such a paper.
2. If an individual provides services or sells goods to a partner located abroad. In order to reduce the amount of tax paid, the foreign counterparty asks for a document that confirms that the supplier from the Russian Federation is a resident of his country.
3. When a resident of the Russian state (company or private person) made a profit in dividends from a foreign organization. To reduce the amount of accrued taxes on income received abroad, the tax inspectorate must provide a document stating which tax resident of which country the person is.
4. If a foreign citizen working in Russia makes a profit, then he may not pay taxes in his home country if he provides a document that confirms that he was a resident of his work in the Russian Federation. True, this applies only to income taxation.
5. The situation when a person who constantly lives and works in Russia buys real estate that is located outside the Russian Federation.The tax authorities of the country in which the property is located may require proof of resident status to avoid double taxation associated with purchase costs.

Given all of the above, one should not disregard such an important issue as determining the status of a tax resident of a country.