Permanent establishment risk under secondment arrangements
It is common practice amongst expatriate personnel working for international groups in Russia to be employed by an entity outside Russia and then assigned to the entity with operations here. Sometimes the expatriate is seconded directly to the Russian operation, sometimes indirectly, via the parent company of a Russian subsidiary. The costs of employing secondees are then typically recharged to the entity in Russia to which they are assigned. Where appropriately structured and documented, such arrangements have not been considered to give rise to a taxable presence ("permanent establishment") of the secondee company, under usual double tax treaty provisions and, more significantly, a specific provision of Instruction No. 34 on the taxation of foreign legal entities.
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