Moving to Russia after living abroad involves navigating both legal and practical considerations, especially when it comes to managing your foreign assets. Whether you are relocating permanently or temporarily, understanding the legal framework surrounding the retention of foreign assets is crucial. This guide will explore whether you can keep your foreign assets after moving to Russia, the implications of doing so, and the steps to ensure compliance with Russian laws.
1. Legal Framework for Foreign Assets in Russia
Russia allows its citizens and residents to keep foreign assets, but there are specific legal requirements and obligations that must be fulfilled to remain compliant with Russian law. These laws pertain to income earned abroad, property ownership, and the taxation of foreign assets.
1. Retaining Foreign Assets
- Foreign Bank Accounts: Russian citizens, including those who have recently returned from abroad, are permitted to keep foreign bank accounts. However, the Russian tax authority (Federal Tax Service) requires citizens to report any foreign assets, especially if the total value exceeds a certain threshold.
- Foreign Property: There is no law in Russia that prohibits Russian citizens from owning property abroad. Many Russian nationals hold real estate in other countries, and this ownership does not require any changes upon returning to Russia. However, taxes on foreign properties must still be managed according to both the country of residence and Russian laws.
2. Taxation of Foreign Assets
Russian tax law mandates the declaration of foreign income and assets, especially for tax residents of Russia. Russian tax residents are individuals who spend more than 183 days within Russia over a 12-month period.
- Tax on Worldwide Income: Russian tax residents are required to report and pay taxes on their worldwide income, including income from foreign assets. This means that any income earned from investments, savings, rental properties, or other assets abroad must be declared to the Russian tax authorities.
- Foreign Income Reporting: If you have foreign assets generating income, such as dividends, interest, or rental income, you are obligated to report this income on your Russian tax return. Russia has agreements with certain countries to avoid double taxation, but you must check if your country of origin has such an agreement with Russia to prevent paying taxes twice.
3. Reporting Foreign Assets
Russia’s Federal Tax Service requires individuals to report foreign assets exceeding a certain threshold, typically around 100 million rubles (approximately 1.3 million USD). This includes foreign bank accounts, securities, real estate, and other assets. The law is designed to ensure that individuals are paying appropriate taxes on their foreign income.
4. Foreign Bank Accounts and Currency Regulations
While you can maintain foreign bank accounts after moving to Russia, you must comply with Russia’s currency control laws. Russia has certain rules governing foreign exchange transactions, which require individuals to report any foreign bank accounts with balances exceeding a specific amount (currently around 3 million rubles, or 39,000 USD).
- Currency Transfers: If you plan to transfer large sums of money between foreign accounts and Russian accounts, you may be required to report these transfers to the Russian authorities. These regulations are part of Russia’s broader effort to monitor foreign currency transactions and ensure compliance with tax obligations.
- Disclosure of Foreign Assets: In certain circumstances, such as when selling foreign property or making significant foreign investments, you may need to disclose the source of the funds or assets to the Russian government, ensuring that they are not linked to illicit activities.
2. Estate Planning and Inheritance of Foreign Assets
When you move to Russia, it’s important to consider how your foreign assets will be treated in the event of your death, as inheritance laws in Russia may differ from those of your home country.
1. Inheritance Tax
Russia has an inheritance tax system that applies to assets inherited within the country, but it does not impose inheritance taxes on assets inherited from abroad. However, any foreign property or assets may be subject to taxation in the jurisdiction where they are located, depending on the laws of that country.
- International Inheritance: If you have assets abroad, your heirs may need to navigate the legal processes of both the foreign country and Russia. This could involve fulfilling legal requirements in both jurisdictions, such as paying taxes or filing inheritance declarations.
2. Cross-Border Inheritance Considerations
In some cases, cross-border inheritance may require a separate will for each country where assets are located. A Russian will can govern the distribution of your assets within Russia, while a will in the foreign jurisdiction can determine the fate of assets outside the country.
- Legal Assistance: Consulting a lawyer who is familiar with both Russian and foreign inheritance laws is advisable to ensure that your foreign assets are handled correctly according to both legal systems.
3. Taxation of Foreign Assets Upon Return to Russia
Returning to Russia after living abroad can trigger certain tax obligations, especially if you hold foreign assets or have income generated from abroad. Russian tax law applies to returning residents who meet the criteria for tax residency (i.e., spending more than 183 days in Russia within a calendar year).
1. Worldwide Income Tax
Once you are considered a tax resident of Russia, your foreign income will be subject to Russian taxation. This includes income derived from foreign assets such as:
- Foreign Dividends and Interest: Any income earned from foreign bank accounts, stocks, bonds, or other investments will be taxed in Russia.
- Real Estate Income: Rental income from property located abroad must be reported to the Russian tax authorities.
2. Wealth Tax
While Russia does not impose a specific wealth tax, it does require residents to report foreign assets that exceed certain thresholds. The government also monitors foreign assets to ensure that they are not being used for illegal purposes such as money laundering or tax evasion.
3. Avoiding Double Taxation
Russia has signed double taxation treaties with a number of countries to avoid taxing the same income twice. These treaties generally allow you to reduce your Russian tax liability by the amount of tax already paid abroad. However, you will need to provide evidence of taxes paid in the foreign jurisdiction when filing your Russian tax return.
- Tax Credit System: In cases where a tax treaty exists, you may be eligible for a tax credit in Russia to offset any taxes you have already paid in your country of residence or the country where the asset is located.
4. Practical Steps to Manage Foreign Assets After Moving to Russia
If you are planning to retain foreign assets after moving to Russia, there are several practical steps you should take to ensure compliance with Russian laws and to manage your assets effectively.
1. Consult a Tax Advisor
Before returning to Russia, it is advisable to consult with a tax advisor or financial planner who is familiar with both Russian and international tax laws. This will help you understand your obligations regarding the reporting of foreign assets and the tax implications of maintaining them.
2. Report Foreign Assets
Make sure to report any foreign assets that meet the threshold for declaration, such as foreign bank accounts, real estate, and securities, to the Russian tax authorities. Failure to comply with this requirement could result in penalties or fines.
3. Consider Currency Control Laws
If you plan to transfer money or assets from abroad to Russia, familiarize yourself with Russia’s currency control laws. This includes knowing when you need to report large transactions or foreign bank accounts to the authorities.
4. Keep Records of Foreign Assets
Maintain accurate and detailed records of all your foreign assets and income. This documentation will be crucial when filing your Russian tax return and ensuring that you comply with both Russian tax laws and the laws of the foreign countries where your assets are located.
5. Plan for Inheritance
If you have substantial foreign assets, it’s important to consider your estate planning needs. This includes preparing wills in the jurisdictions where you own assets, understanding inheritance taxes, and seeking advice on how to manage cross-border inheritance.
Conclusion
As a returning citizen of Russia, you are allowed to keep your foreign assets, but you must comply with Russian tax laws, including the reporting of foreign income and assets. While Russia does not impose direct restrictions on foreign property ownership or bank accounts, it does require dual citizens and tax residents to report these assets to ensure proper taxation.
By consulting legal and tax professionals, understanding your reporting obligations, and adhering to currency control laws, you can manage your foreign assets effectively and avoid potential legal issues. It’s also essential to plan for inheritance and ensure that your estate is managed according to both Russian and international laws. By taking the necessary steps to comply with Russian regulations, you can enjoy the benefits of returning to Russia while maintaining control over your international assets.