August 20, 2014

Russian nationals must report dual citizenship

Moscow Russian nationals holding dual citizenships or permanent residence permits in another country must report it to the Russian Migration authorities 60 days from the 4th of August 2014, otherwise they risk paying heavy fines.

The law does not make dual citizenship illegal; it is merely a reporting requirement.

Federal Law No. 142-FZ on Amendment of Articles 6 and 30 of the Federal Law on Russian Federation Citizenship and Individual Regulations of the Russian Federation, which took effect on 4 August 2014, makes it a criminal offence for Russian nationals to conceal dual citizenship or long-term residence abroad.

Russian nationals, regardless of whether they currently live in Russia or elsewhere, are required to notify the Russian Federal Migration Service (FMS) of any citizenship or permanent residence permit they hold in another country.

Exempted from the requirement are persons who can demonstrate that they officially and permanently reside outside Russia by means of a deregistration stamp in their Russian passport or an official document that confirms their permanent address abroad.

Even though the law is ambiguous on the exemptions issue, it is assumed, based on FMS officials’ clarifications, that Russian nationals with double citizenship or a permanent residence permit who actually live outside of Russia and retain their Russian registration, should only report it on entry to Russia.

Deregistered citizens are fully exempted from the requirement.

The FMS may issue further clarifications on the issue soon.

Failure to submit a notification within 60 days of obtaining a permanent residence or citizenship abroad or within 60 days of the law coming into force in the case of existing arrangements, is punishable by a fine of up to RUB200,000, or up to one year’s salary or other income, or by compulsory community service of up to 400 hours. Additional fines of between RUB500 and RUB1,000 may be imposed for minor administrative violations.

The law will not take effect for residents of Crimea until 1 January 2016.

Within Russia, notification forms and copies of the supporting documents, such as a Russian passport, a foreign passport or a permanent residence permit, can be filed at an office of the FMS or sent via a Russian Post Office. Notifications cannot be posted directly to the FMS from outside Russia. It has been reported that local Russian embassies or consulates cannot accept notifications.

Notification for people under the age of 18 years must be made by a parent or legal representative.

Even though it has been suggested that the law may have been enacted to tackle tax avoidance, there is no direct link between the law, reporting requirements provided by the law and taxation of such individuals. Moreover, it is not clear whether Russian migration authorities are planning of providing the received information to the Russian tax authorities.

Generally, Russian tax residency is defined based on physical presence of a person in Russia (for at least 183 days during calendar year) and not on citizenship. Thus, Russian tax authorities are not really interested in knowing the citizenship but rather they are interested in knowing physical presence of a person in or outside of Russia. Generally, it is possible to spend less than 183 days during calendar year in Russia even without dual citizenship or permanent residence permit in other countries.

Every draft law introduced to the State Duma is supported by an Explanatory Note which provides for the background, brief content of the draft and purpose of the draft law to be adopted. The Explanatory Note on the new law on dual citizenship reporting does not mention taxation. It rather states – although indirectly – that a person with dual citizenship could act contrary to the interests of the Russian Federation and thus it is assumed that the Russian Federation should simply be aware of such citizens.

Therefore, at this stage, based on the current legislation in force, the reporting requirement prescribed by the law is not expected to affect the tax status of the affected individuals in Russia.