Currency Law Amendments Slacken Control over Currency Transactions by Residents

19.01.2018

Legal update No 627

Goltsblat BLP advises that 29 December 2017 saw official publication of Federal Law No. 427-FZ of 28 December 2017 “On Amending the Federal Law ‘On Currency Regulation and Currency Control’” (the Law).

The Law came into effect on 1 January 2018, with some of its rules effective retroactively.

Its most essential provisions include:

1. Revised criteria for recognising individuals as currency control residents.

Any Russian citizen is a currency resident.

2. Broader opportunities for residents to use their accounts (deposits) in banks outside Russia.

Residents who remain abroad for over 183 days in aggregate during the calendar year are exempt from the requirements imposed on currency transactions on these accounts (deposits) by the Federal Law “On Currency Regulation and Currency Control”. Whether the individual stays outside Russia continuously or intermittently is of no legal relevance here.

This new rule also applies to individuals who remained abroad for more than a total of 183 days in 2017.

The list of transactions allowed for residents on their accounts (deposits) in banks outside Russia was also extended:

  • These accounts (deposits) may be used for crediting funds gained by the resident from a non-resident upon contractual sale of a vehicle thereto if it was held by the resident outside Russia;
  • These accounts (deposits) may also be used for crediting funds gained by the resident from a non-resident for real property sold thereto if it was owned by the resident individual outside Russia. A requisite condition is that such property be registered (located) within an OECD or FATF member state and such foreign state be party to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information of 29 October 2014 or be bound by another international treaty on exchange of financial information with the Russian Federation. The resident’s account (deposit) must be with a bank located in such a state;
  • The ban on residents using funds on such accounts for foreign currency transactions involving transfer of property or provision of services in Russia has been lifted. Specifically, this allows residents to use their foreign bank cards to pay for goods and services in Russia.

Tax refunds from competent authorities of the country in which the resident is staying may also be credited to accounts (deposits) held by the residents in banks outside Russia.

3. Modified procedure for opening and reporting on accounts (deposits) with banks outside Russia.

Residents remaining outside Russia for a total of over 183 days during the calendar year (starting from 2017) are exempt from the requirements imposed by the Federal Law “On Currency Regulation and Currency Control” on opening accounts (deposits) with banks outside Russia and reporting cash flows on such accounts (deposits).

Yet, if the individual spends a total of up to 183 days abroad in the following calendar year, they will be required to notify the tax authorities of any account (deposit) opened (closed) in a bank outside Russia, as well as of any change in the details of such account (deposit) by 1 June of the year following the calendar year in which they remained outside Russia for 183 or fewer days in total.

In this case, the resident will also be required to submit cash flow reports for accounts (deposits) in the banks located abroad to the tax authority at the individual’s registered location.

All residents are exempt from submitting to the authorised banks notices addressed to the tax authority of an account (deposit) opened with a bank outside Russia when the first transfer is effected from the resident’s account (deposit) in an authorised bank to their account (deposit) in the bank abroad.

4. Additions to the list of currency transactions permitted between residents.

Residents remaining abroad for more than 183 days in aggregate during the calendar year may engage in any type of currency transaction, provided these are effected outside Russia.

These individuals are also free to use their accounts (deposits) in banks outside of Russia for foreign currency transactions between themselves without restriction.

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