A new instruction of the Central Bank of Russia* (the “Instruction”), which will abolish the requirement of opening a transaction passport when concluding import and export contracts, will come into force on 1 March 2018. The Instruction also simplifies the procedure for recording import and export contracts. The number of documents to be submitted to authorised Russian banks is reduced and banks are responsible to prepare the reporting documentation and keep record of such contracts.
The Instruction was initially planned to take effect on 1 January 2018, but was postponed* for two months until 1 March 2018.
The new Instruction will replace existing instruction of the Central Bank of Russia No. 138-I* dated 4 June 2012 and expand on the provisions of Federal Laws No. 173-FZ* “On Currency Regulation and Currency Control” (the “Currency Control Law”) and No. 17-FZ* “On Banks and Banking Activities”.
Replacement of transaction passports with the registration of foreign trade contracts with authorised Russian banks
According to the Instruction, banks must compile residents’ data on foreign trade transactions in foreign currency and in roubles, as well as those of non-residents in roubles, by keeping record of the contracts used in such transactions.
Agreements will be subject to registration when their value is equal to or exceeds the equivalent of the sums listed below:
- for import contracts or loan agreements – RUB 3m (approx. EUR 42,500);
- for export contracts – RUB 6m (approx. EUR 85,000).
In order to register an export contract, the resident exporter who is a party to the contract must submit to its authorised bank:
- information on the export contract (the type, number, currency of the contract, amount and date of completion of performance of obligations under the contract, as well as the details of the non-resident counterpart); or
- the export contract itself (or an extract from it providing for the information on the export contract as indicated above).
For the purposes of registration, the resident importer or the resident who is the borrower under a loan granted by a foreign lender, must submit the import contract or the loan agreement (or an extract of the relevant contract) to its authorised bank.
The bank must register a foreign trade contract or a loan agreement on the next business day after submission of the specified documents and assign a unique number to the contract (loan agreement). The bank must prepare a bank control sheet when assigning this unique number to the foreign trade contract or the loan agreement.
Documents to be provided by residents for currency transactions
Previously, a certificate of currency transactions had to be provided in order to carry out foreign exchange operations, but this requirement has now been abolished. To transfer foreign currency to a transit foreign currency account or to debit an amount from a settlement account in a foreign currency, a resident must submit the documents on the transaction to the authorised bank (the list of such documents is set forth in part 4 of Article 23 of the Currency Control Law and provides for, among others, the state and tax registration certificates, contracts and other documents (or their drafts), which serve as the basis for conducting the currency transactions, etc.). If the value of the contract that serves as the basis for carrying out the transaction does not exceed RUB 200,000 or its equivalent in a foreign currency (for instance in euro, approx. EUR 2,800), the resident is only required to inform the bank of the code and type of transaction. The Instruction also establishes cases when a resident is not obliged to provide documents for conducting currency transactions or even information on the transaction type code. For example, this is the case for debiting money in roubles or in a foreign currency from the resident’s settlement account via direct debit with the resident’s consent.
Transaction passports opened before the entry into force of the Instruction
Transaction passports that are not closed on 1 March 2018 will be considered closed without being marked as such by authorised Russian banks. Such transaction passports will be stored in a currency control file. The numbers of the transaction passports will be deemed as the unique numbers of the contracts (loan agreements) for accounting purposes, and will be subsequently serviced by the banks in accordance with the Instruction. If by 1 March 2018, a bank is in the process of verifying documents and information for the purpose of opening a transaction passport, the bank must either remove from its records the contract (loan agreement) in relation to which the transaction passport was to be opened or register it in accordance with the Instruction and on the basis of the documents already provided.
The Instruction is yet another example of further liberalisation of the settlement procedure for foreign trade transactions in Russia. However, due to the lack of practice in interpreting and applying the new norms (particularly with regard to the amount of information on a foreign trade contract or a loan agreement to be provided to an authorised Russian bank), when making settlements on import or export contracts and loan agreements, we would advise negotiating with the banks in advance the list of documents needed for registration of the contracts. Failure to comply with the prescribed procedures may lead to administrative liability for the banks’ clients in an amount ranging from 75% to 100% amount of the illegal currency operation.
* In Russian