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Social Payments for Foreign Employees Working in Russia Decided on Status of Residence


On 11 April 2011, the Supreme Arbitration Court passed ruling related to social pay. Taxand Russia looks at the importance this has on companies operating in Russia, with foreign employees. The panel of judges stated that social payments should not be paid for foreign employees without plans of their permanent living in Russia. In addition, the panel of judges stated the necessity for a professional translator in tax authority and foreign taxpayer relations.

The Courts also concluded that foreign employers working in RF should have obligatory pension insurance only if they have an official permanent or temporary residence permit in RF. If a foreign employee has no status of residence he shouldn't be insured.

A director general and director economic were foreign citizens, but there was no professional translator to take part in their company's tax audit. The translator's function was given to the deputy director. The Court concluded that it was impossible for the foreign employees to give powerful explications and objections.

Taxand's Take

The ruling is of relevance to companies with foreign employees working in Russia. Regarding the actual social payment rate in Russia, which is 34%, the possibility of making a deduction for such expenses for CIT can be very important. So it is useful to identify cases that are obligatory payments and those that are non obligatory.

It is helpful to know the procedure rights, because in the absence of a professional translator, the tax authority's decision should be recognised as illegal.

Your Taxand contacts for further queries are:
Andrey Tereschenko
T. +7 495 967 00 07

Ivan Zelenin
T. +7 495 967 00 07

Taxand's Take Author