Pepeliaev Group advises that Federal Law No. 218-FZ dated 21 July 2014 has expanded the list of cases when funds may be credited to foreign accounts of Russian residents and has provided for an obligation on the part of individuals who are Russian residents to provide reports to the tax authority concerning operations on foreign accounts.

Crediting funds to foreign accounts

The law increases the number of cases when funds may be credited to the foreign accounts of Russian residents. The relevant amendments have been made to article 12(1)(2) of Federal Law No. 173-FZ "On

currency regulation and currency control" dated 10 December 2003.

Alongside the instances that were previously permitted, the following cases have been added in which the following amounts of funds may be credited:

For all Russian residents:

  • interest on balances on accounts (deposits);
  • the minimum balance required by the bank's rules when an account is opened (a deposit is made);
  • deposits in cash into the account (deposit);
  • funds received as a result of foreign exchange transactions conducted through foreign accounts.

For individuals who are Russian residents:

  • salary and other payments relating to them performing employment duties outside Russia under employment agreements (contracts) entered into with non-residents, as well as payment and/or reimbursement of expenses connected with employment-related business trips in the context of performing duties under such employment agreements (contracts);
  • funds paid in accordance with decisions of courts of foreign states, save for decisions of an international commercial arbitration tribunal;
  • pensions, scholarships, alimony and other payments of a social nature;
  • insurance payouts made by non-resident insurers;
  • a repayment of funds previously paid by individuals who are Russian residents, including a repayment of funds transferred in error, a repayment of funds for goods previously bought from the non-resident and now being returned to him/her or for a service he/she was paid for.

For individuals who are Russian residents and whose accounts have been opened in banks located in the OECD and FATF member states:

  • amounts of income from leasing out (subleasing) to non-residents real estate (other property) located outside Russia and owned by an individual who is a Russian resident;
  • grants;
  • accrued interest (coupon) income, payment of which is provided for by the terms on which foreign securities were issued belonging to the individual who is a Russian resident, other income on foreign securities (dividends, payments on bonds, bills, payments when the share capital of the issuer of foreign securities is reduced).

Thus, if the above amounts are credited to foreign accounts (deposits), there will be no risk of the resident facing administrative liability under article 15.25(1) of the Russian Code of Administrative Offences (a fine of between three quarters of and the full amount of the transaction value) for carrying out unlawful currency operations. Moreover, there will be no grounds for liability to be imposed for instances where these amounts have previously been credited, since under article 17(2) of the Code of Administrative Offences, a law has retroactive effect if it reduces or abolishes administrative liability or otherwise improves the position of a person who has committed an administrative offence.

Obligation to provide reports concerning operations on foreign accounts

In addition to this, individuals who are Russian residents face an obligation to provide to the tax authorities at the place where they are registered reports on the movement of funds on their foreign accounts (deposits), along with supporting bank documents. Previously, such an obligation had been established only for companies and individual entrepreneurs, who were on the same footing as companies.

This obligation will not apply only in relation to accounts (deposits) of Russian residents, both companies and individuals, if those accounts (deposits) have been opened in the foreign branches of Russian authorised banks. The special requirements of the regime for foreign accounts (deposits) of Russian residents will be lifted in relation to accounts (deposits) of this nature, including the requirements as to the procedure for opening accounts (deposits) and the rules for operations concerning them.

The amendments obliging individuals who are Russian residents to file reports concerning the movement of funds on foreign accounts will come into force from 1 January 2015. All remaining amendments will take effect ten days after the date on which the Law is officially published, i.e. on 2 August 2014.