View Full Version : double taxation question

26-07-2012, 13:19
According to Nalogovyi Kodeks, Russian tax residents are liable for income taxes on their worldwide earnings, regardless of their citizenship - kind of similar to US. However, there is a double taxation avoidance treaty between Russia and USA. I have a question about how exactly does this apply to US sourced income for a Russian tax resident? Can an American citizen who is a Russian tax resident and derives income from US sources (we are now talking ONLY about income from USA) avoid paying taxes in Russia on this income, since this income is already taxed in US?

27-07-2012, 02:21
I think you should present a paper to Russian authorities that proves you have already paid taxes in US.
No idea how it is processed technically.

Many people simply do not say about this (e.g their Russian income to US and vice versa=))))

Tony P
27-07-2012, 02:47
Depending on actual wordings, Double Taxation Treaties or Agreements generally are such that you get credit for tax already paid in the source country when calculating your liability in your country of residence. The same original gross income is still the basis for calculating liability in residence country.
Although you get credit against your residency country tax liability of the amout of tax paid in the source country, you would not get an actual cash refund of any excess tax.

If there is no DTT between the countries concerned, the general rule is to use the tax suffered in the source country to reduce the gross income to a net income figure that then becomes a gross income for tax in the residency country - but no credit for tax suffered.

If my explanation is unclear, I will try to do some basic examples.

27-07-2012, 13:04
Thank you, it is very clear. It follows then that since US sourced income of a Russian tax resident is taxed at rates higher than Russian tax rates, no tax is due to Russia on that income, thanks to the double taxation avoidance treaty (apparently it was signed all the way back in 1992). I guess the only question remaining is how do you prove that the income is "sourced" in US - suppose you are physically in Russia and doing the work using your computer/internet, yet the income you earn is paid to your US account by a US company - is the payment source being in US enough to establish that the income source in also in US?

27-07-2012, 13:16
You can use your receipts/statements/return forms from the IRS to prove that the income has already been taxed. However, you should contact an accountant who is experienced in claiming treaty benefits, as Nalogovaya is picky about documentation.

27-07-2012, 14:53
Have anybody on this forum used such an accountant?
Or if you can recommend a tax adviser specializing in tax issues for US expats please share their info.