Thursday, July 24, 2014


Russia

Russian Expats Wrestle With Dual-Citizenship Dilemma

Some Russian expatriates worry the law will used to compile a list of "traitors," following comments by the law's author, State Duma Deputy Andrei Lugovoi.
Some Russian expatriates worry the law will used to compile a list of "traitors," following comments by the law's author, State Duma Deputy Andrei Lugovoi.
By Carl Schreck
A new Russian law criminalizing the failure to declare foreign passports has raised fears of a fresh Kremlin crackdown on opponents at home, but Russian expatriates technically excluded from the statute are now scrambling to determine whether they must comply as well.

As it turns out, they may not be off the hook quite yet.

The law, which Russian President Vladimir Putin signed on June 4, requires Russian citizens living within Russia's borders to declare any foreign passports or residence permits they possess but excludes Russians "permanently residing" outside the county from the provision.

Hundreds of thousands of Russians living abroad, however, may be forced to choose between either disclosing these foreign ties or formally canceling their Russian residency -- a step some say they are hesitant to take because of potential bureaucratic hassles should they return home.

"If I have to make a choice, there's no way I'm going to cancel my [Russian] residence registration," says Ksenia, a Chicago-area entrepreneur originally from the Moscow region who declines to give her last name because of the political controversy surrounding the legislation.

The law, which introduces criminal fines or community service for failure to comply, has prompted Russian expatriates to seek clarity at their consulates abroad and on social-media sites and Internet forums.

Russia's Federal Migration Service, which is tasked with collecting the disclosures, has yet to issue any formal guidance on the law, which takes effect on August 5. Russians affected by the law have 60 days after that date to report foreign passports and residence permits.

"There are concerns about this issue throughout the entire world, but there is no panic," says Yelena Staroselskaya, president of Russian Washington, an organization catering to the Russian-speaking community in Washington, D.C., and the surrounding area.

Staroselskaya says she has received numerous inquiries from Russian citizens about the law. Based on her conversations with the Russian Embassy in Washington and other sources, it appears that only Russian expats who maintain a Russian residence registration are required to declare, she says.

The Russian Embassy said it could not comment on the details of the implementation of the law because it was awaiting a "detailed clarification" from Moscow, adding that the embassy would make this information public as soon as it was received.

'Fifth Column'

The dual-citizenship law comes amid Moscow's standoff with the West over Russia's annexation of Ukraine's Crimea territory and what Kremlin critics see as the Russian government's escalating siege mentality.

Kremlin loyalists have repeatedly warned that a "fifth column" inside Russia is intent on undermining the government in the interests of Western powers. The bill's author, State Duma Deputy Andrei Lugovoi, directly linked the law to these concerns last month.

"It's obvious that having dual citizenship reduces the importance of Russian citizenship and the attitude toward one's homeland," said Lugovoi, who is wanted in Britain in connection with the 2006 poisoning death of former Russian security-services officer Aleksandr Litvinenko.

"This is particularly important in light of recent geopolitical events, when Russia continues to encounter aggressive pressure from the West," he added.

Ksenia, a dual Russian-U.S. citizen, says she doesn't mind disclosing her U.S. passport, because she believes the law is meant to target opposition activists or businesspeople with dual citizenship living in Russia. "For me it'll probably just add some annoying paperwork for my future child, but I can survive getting one more paper among others," she says.

Others express greater concern about the implications of the law. "I do think that this is something to panic about, because if this list is compiled, then there must be a purpose," says Anya Levitov, a U.S. green-card holder based in New York City.

Levitov, managing partner at the Moscow-based real estate firm Evans Property Services, notes that Russians are already required to indicate whether they have any foreign citizenships when applying for a Russian travel passport.

Furthermore, she says, Russian border-control officers can ascertain if someone has a foreign residency permit because of the absence of a visa for the country he or she is traveling to. "So it's not a question of disclosure. It's a question of compiling this list of, I don't know, potential traitors or whatever they feel we are," Levitov says.

A Taxing Dilemma

Russian lawmakers estimated in 2010 that around 1.6 million Russian citizens permanently live abroad, more than half of them in the European Union, Israel, and the United States.

In the United States, more than 83,000 Russians obtained U.S. citizenship between 2003 and 2012, while more than 193,000 Russians were granted U.S. green cards between 2000 and 2012, according to the most recent data from the U.S. Department of Homeland Security.

Many of these expats, however, never bothered to de-register from their places of residence in Russia. On paper -- namely their internal Russian passports, essential for almost every conceivable bureaucratic action in Russia -- these emigres do not appear to differ from their compatriots back home when it comes to their country of residence.

This can have considerable tax implications: Anyone who resides outside Russia for more than 183 days in a given 12-month period is subject to 30 percent tax on any income in the country, compared to a 13 percent tax for residents.

Because of this, the new law on dual citizenship could have substantial financial drawbacks for Russian expats planning to conduct transactions with real estate properties in Russia, Levitov says.

If they choose to de-register from their Russian residence and formalize their status as permanent resident abroad, they could face a 30 percent tax on the total proceeds of the sale. "So if you bought an apartment for $1 million and you're selling it for $900,000, you still pay $300,000 in tax," she explains.

On the other hand, by keeping one's registration in Russia and instead declaring a foreign passport or residence permit, an individual's name will end up in a database that tax authorities could cross-check to examine whether a higher tax rate should be assessed, she adds.

Levitov says her company is already seeing a "surge in sales" of Moscow properties due to the law, as well as numerous cases of foreigners in Russia transferring ownership of Moscow properties to people with Russian passports. "People fear that the required declaration will, long term, result in some sort of disadvantage in foreign property ownership," she says.

The Waiting Game

Several other outstanding questions about the law remain to be clarified, including whether the declaration of a foreign passport or residence permit can be made at a Russian consulate abroad or whether expats will have to return to Russia in order to disclose their status.

In the absence of official instructions from the government, some Russian expats are merely waiting to see how the law will be implemented and enforced.

"My tactic will be probably to do nothing at this point, and when the law will take effect, and maybe some consequences begin to appear, I'll just see what other people do and what are the circumstances," says Kirill Pankratov, an engineering manager at a Boston-area high-tech firm.

Pankratov, a well-known Russian blogger who has had a U.S. green card for more than a decade, says Russian expats he knows have discussed the new law but without a great deal of urgency. "Mostly it was just mentioned briefly, like: 'Should we be worried? Should we do anything?'" he says. "And at this point I haven't heard of anybody -- at least among my friends and acquaintances -- who's done anything about it yet."

Ksenia, the Chicago-area entrepreneur, says many of her friends are talking about the law as well but that most believe any political consequences will be confined within Russia's borders.

She adds that she will be far from enthused if Russian expats who want to keep their registration back home are required to return to Russia to declare their passports. "Then I would be angry," she says.

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