Russia has significantly eased immigration barriers for highly qualified foreign professionals in a bid to encourage the inflow of trade and investment into the country, which stands in line with the modernization rhetoric of Russia’s leaders. For years, the foreign business community in Russia has been hampered by tight work permit regulations and a lengthy bureaucratic process, which many see as a hangover from the Soviet era. The immigration restrictions have negatively affected the investment climate in Russia and hindered investment from abroad. After so many years, the Russian government has finally recognized that changes are long overdue.
Effective as of July 1, 2010, the new Federal Law No. 86-FZ, which amended the Federal Law on the Legal Status of Foreign Citizens and other legislative acts (the “Migration Law”), introduced, inter alia, a new preferential work permit regime for a certain group of highly qualified foreign professionals. Under the new regime, eligible organizations and foreign businesses in Russia can now streamline the process of obtaining work permits (which authorize foreign nationals to work in Russia) for some of their foreign employees who fall under the new category introduced by the Migration Law of a “highly qualified professional.”
The Migration Law provides an unequivocal definition of a highly qualified professional. The only substantive criterion is the amount of the locally paid salary. To qualify as a highly qualified professional, a foreign employee’s annual gross income in Russia must exceed two million rubles (approximately US$65,000) and be paid in accordance with Russian labor and contractual laws. The qualification level of a foreign employee is determined by the employer itself. The Migration Law does not require the employer to demonstrate to the immigration authorities that the foreign employee meets particular qualifications (such as work experience, skills, education, or achievements) to be considered a highly qualified professional.
The Migration Law has significantly simplified the process for obtaining work permits for highly qualified foreign professionals. The major improvements introduced by the Migration Law include:
- Employers are freed from the Russian work permit quota restrictions, which require them to obtain a work permit before they can issue an invitation letter to a prospective employee. This flexibility will allow employers to hire qualified foreign nationals on an as–needed basis, without having to anticipate their global foreign labor needs far in advance.
- Employers do not need to obtain a permit to employ highly qualified foreign professionals and register their vacancies with the employment authorities, as required under the current rules. An employer wishing to hire a highly qualified foreign professional can file an application directly with the immigration authorities.
- The new work permits must be issued within 14 business days from the date of filing the application, which is significantly shorter than the current three to six month process.
- A work permit for a highly qualified foreign professional may be issued for a period of up to three years, instead of the current one-year period, and can be extended an unlimited number of times.
- A work permit can be issued for multiple regions within Russia where the highly qualified foreign professional is supposed to work pursuant to his or her employment contract, rather than a single region, as is the case under the current rules. This frees employers from transferring the work permit to a new region every time an employee moves.
Another major benefit introduced by the Migration Law is that highly qualified foreign professionals will now be subject to a flat personal income tax rate of 13%, which is the rate that applies to Russian nationals, in respect of income generated in Russia regardless of the number of days they spend in Russia per tax year. This rate is less than half the 30% rate currently being paid by non-residents (i.e., foreign nationals that spend less than 183 days per tax year in Russia).
While a major improvement to the current immigration regime, the Migration Law fails to go as far as the companies doing business in Russia might have hoped. Since the Migration Law applies the new preferential regime only to a small group of highly qualified professionals, foreign nationals that do not fall into this category will continue to be hired to work in any given region after going through a complicated and lengthy quota system and other immigration hurdles.
Furthermore, the Migration Law provides that only Russian legal entities and accredited branch offices of foreign legal entities are able to sponsor foreign nationals for the new highly qualified professional work permits. The Migration Law specifically excludes representative offices of foreign legal entities, and noncommercial and religious organizations, from availing themselves of the benefits of the new preferential regime. The new rule introduced by the Migration Law allowing representative offices of foreign legal entities to employ foreign nationals without a work permit is extremely limited given that this exception is applicable only on the basis of reciprocity in accordance with international treaties to which Russia is a party. Since there are no such treaties in force at this time, it is extremely unlikely that this exception will be widely utilized in practice.
Overall, the adoption of the Migration Law is a major step towards modernizing Russia and improving its investment climate by making the country more welcoming and friendlier to foreign professionals who are looking to contribute to Russian growth. It is likely to be some time before the new procedures established by the Migration Law are crystallized. For now, the foreign business community can only hope that the implementation and enforcement of the Migration Law will be in line with its spirit.