US Expat Taxes for Americans Living in Russia– What You Need to Know
There are an estimated 30,000 Americans living in Russia.
Living in Russia is an undeniable adventure for a number of reasons – the history, the culture, and the people, to name but a few. As an American expatriate living in Russia though, what exactly do you need to know regarding filing US expat (and Russian) taxes?
All US citizens and green card holders who earn a minimum of $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.
The good news is if you are paying income tax in Russia, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn over US$10,000 (or $400 if you’re self-employed), you have to file IRS form 1040. While taxes are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.
If you have foreign assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 and declare them.
If you had a total of at least US$10,000 in one or more foreign accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“Individuals conducting private activities including individual entrepreneurs, individuals who received income from which Russian income tax was not withheld and other specific categories of individuals are obligated to file a tax return.” – KPMG
If you pay income tax in Russia, there are several exemptions that allow you to pay less or no income tax on the same income to the IRS. The main exemptions are the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can prove that you are a Russian resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Russia. Remember though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 if you’re self-employed) you still have to file a federal return.
The US and Russian governments share taxpayer info, and Russian banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for tax evasion for expats are steep to say the least.
If you’re a US citizen, green card holder, or US/Russian dual citizen, and you have been living in Russia but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up with your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.
Russian taxes – what you need to know
Russia raises the majority of its tax revenue from taxing oil and gas corporations, so personal taxes are relatively low.
There’s a flat-rate personal income tax rate for Russian residents of 13%, while non-residents pay 30% on any Russian-sourced income. Expats are considered a resident for tax purposes if they spend at least 183 days in Russia in a 12 month period that overlaps with the tax year, or if they have a permanent home in Russia.
There are several other personal taxes, including a property tax, and a land tax.
The Russian tax year is the same as the US, which is to say a calendar year. Russian tax returns are due by April 30th.
The Russian tax authority is called the Federal Tax Service of Russia, and there is plenty of information available in English on their website.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Russia that you contact a US expat tax specialist.