The new Russian Frenchman

Text by Pavel Sedakov

With the participation of Irina Skrynnik

“It is easy to offend an artist”, - Vladimir Putin said in December of 2012 in defense of Gerard Depardieu, the most eccentric actor, restaurateur and wine-maker of France, whose assets, according to the evaluation done by The Wall Street Journal, amount to 120 million USD. But Depardieu does not like it, when someone peers down his pocket. When the French government headed by Francois Hollande decided late in 2012 to raise the tax on superincome (over 1 million euros per year) to 75%, the actor decided to escape. The Depardieu project became a matter of State-level significance in Russia. According to best traditions of the Soviet “cultural hospitality”, Depardieu is showered in gifts and titles, cheering halls receive him, films starring him are shown everywhere in the country. Like his predecessors Louis Aragon and Romain Rolland, who were received very warmly, Depardieu reciprocates: he praises Putin and Kadyrov, he dances the lezginka, takes ice hole baths, attempts to establish fraternity ties between Saransk and Nice. The banker Alexander Lebedev was ironic in his Twitter: “Depardieu’s fate is as follows: a flasher, a membership in the UNF, Gazprom’s pipeline contracts”. What is the price Russia has paid for such a guest and how the change of the registration will affect Depardieu’s finances?

<…>

Depardieu’s Russian passport is not what matters to the tax service. His tax status is. At the end of 2013, the inspectors will calculate how much time Depardieu has spent in Russia. If his stay in Russia is less than 183 days, he will be considered non-resident. Non-residents have to pay the individuals’ income tax only from the income they receive in Russia.

Ilya Mokryshev, Managing Partner of TaxHelp, says: “The French government is not entitled to the fees from Russian cinema companies or income from entrepreneurial activity that Depardieu receives as those are only taxable in Russia”. He alleges the double taxation convention executed by Russia and France in 1996.

However, the non-resident status has a drawback – non-residents are taxed at a higher rate, 30%. Mokryshev explains: “The only easy way to avoid the 30% exaction before obtaining the tax resident status is to register as an individual entrepreneur and to adopt the simplified taxation system (STS)”. That is what the actor did. Now Depardieu is a non-resident and an individual entrepreneur, and, by using the STS, has to pay from the revenue that his business activities in Russia produce either the tax of 6% of the proceeds or 15% of the profits, says Maxim Rovinskiy, Head of the Tax and Customs Law Practice of the Law Firm "YUST". Depardieu will have to pay the individuals’ income tax for his roles in Russian films at the rate of 13% as a foreign high-paid specialist. He won’t have to pay any tax in Russia from the income received abroad.

In order to obtain maximum benefits from the Russian tax system, Depardieu needs to become a tax resident of Russia, and that requires spending more than 183 days in the country. M.Rovinskiy explains that a resident must declare all his “world income” in Russia – the money earned in all other countries of the world. In this case, Depardieu will pay the business activity tax with the use of the STS (6% of the proceeds or 15% of the profits), and 13% from other income.

However, according to Ilya Mokryshev, Depardieu will have a hard time ceasing to be a French taxpayer. To temporarily leave the country is not enough – the tax service will remain after him while he still has a house, the family, a job or a “center of economic interests” in France. Depardieu tries to avoid as much contact with his Motherland as possible: last year he put his Paris realty – a 4-storey XIX century mansion with a swimming pool and a garden – on sale for 50 million euros. Depardieu will pay the 2013 taxes in that country, where he becomes tax resident.

However, the taxes for the past year, that of 2012 – the fees for his roles in “Asterix and Obelix in Britain”, “L’homme qui rit”, “Turf” – are payable by Depardieu in France. He is lucky that the Constitutional Court of France contested the 75% rate of tax on superincome suggested by the government.

The complete version is available in the Forbes No. 8 (113), 2013.