The Russian Ministry of Finance (MoF) provides in a so-called Guidance Letter that foreign athletes have to pay income tax in Russia, if they receive honoraria for their participation in tournaments organised in Russia by foreign entities.
The MoF has established the Guidance Letter in response to a question from a foreign company that organizes golf tournaments in various countries (including Russia) through domestic subdivisions. The fund from which the prizes and other honoraria are paid, is built up from contributions by sponsors, including foreign legal entities and citizens.
The MoF stated that under Article 207, Section 1 of the Tax Act Russian taxable people and non-Russian people who earn income from Russian sources, are regarded as income taxable in Russia. Article 208, Section 1(6) and (10) of the Tax Act provides that all fees paid in connection with work, performing work or other obligations, providing services or carrying out operations in Russia, and other income related to activities in Russia are considered as income gained in Russia.
From this the MoF stated, that income gained by individuals from their participation in tournaments held in Russia, should be regarded as income acquired in Russia that is taxable in Russia, whether the person is taxable in Russia or not.
If fees are paid directly to tournament participants by a foreign corporation without a domestic subdivision in Russia, the corporation is not regarded as a withholding agent under Article 226, Section 1 of the Tax Act. In such cases, the recipients of the fees have to pay the Russian income tax by themselves.
If fees are paid through a Russian legal entity or an internal subdivision of a foreign company in Russia, the payer is regarded as a withholding agent who must calculate, withhold and remit the Russian income tax on the fees.