Working from abroad: how the Russian legal environment reacted to the wave of relocated workers

Some companies decided to implement a so-called "combined mode" of work, meaning an employee can work both remotely and at the company's workplace. The choice depends on an agreement between the worker and the employer, but typically the employee is free to choose which location they prefer unless there is some necessity to work at a stationary workplace.

In response to this practice, regulatory rules were modernised. The Russian legislature implemented a new chapter in the Russian Labour Code devoted to distant, permanent, and combined working. 

2022 was a year of working abroad. Many employees decided to reside in other countries while still working for Russian companies. Typically, employers were unwilling to lose valuable personnel and continued labour relationships with relocated staff. At first glance, existing labour laws should cover this situation. However, both employers and employees have faced some challenges. 

If “combined” labour contract provides so, the employer has at any time the right to call the employee back to the stationary, on-site workplace, even if the employee moved abroad. If the employee fails to do so, the employer may dismiss the worker, as absenteeism is a severe violation under Russian labour law. Surprisingly, even if the employer’s "right to call" may be unmotivated under a labour contract, the firing of the worker may be challenging. There are court judgements that established that employers must demonstrate the necessity of a call back to the stationary workplace, despite the opposite provisions of the labour contract. That may create a factual change to the regime both parties actually intended when entering into the original labour contract.

Under general rules, personal income tax for Russian employees who reside in Russia is 13% or 15%. If an employee spends less than 183 days per year in Russia, they lose Russian residency and are subject to 30% income tax (citizenship does not matter). As a result, relocated Russian workers face the possibility of a harsh increase to their tax burden. 

In April 2023, the government submitted a bill to the State Duma to increase the personal income tax rate from 13% (or 15%) to 30% for non-residents who continue to work for Russian companies. The next day the bill was revoked. A month later, the government submitted a new version of the law. 

Currently the personal income tax rate will be kept at 13% or 15% for all workers from abroad, regardless of residence. The bill was passed, and these new rules will enter into force on 01 January 2024. This change can be explained by an unwillingness to allow a dramatic and damaging staff outflow from Russian companies to happen.

Sergey Bakhmisov is an attorney-at-law with NSP. Sergey accompanies disputes in courts and arbitrations, including ones with the participation of foreign entities. He consults clients in labour law issues, and represents them in labour disputes in Russian courts. He is recommended by Best Lawyers® 2022 (Litigation).