President Approves Amendments to Russian Currency Legislation

Tax Russia Legal Alert December 2015 President Approves Amendments to Russian Currency Legislation On November 28, 2015 Russian President signed the Federal law No. 350-FZ "On the Introduction of Amendments into Articles 3.5 and 15.25 of the Russia Code of Administrative Offences and Articles 12 and 23 of the Federal law "On Currency Regulation and Currency Control"" (the "Law") which will introduce important changes into Russian currency regulation (the "Currency Law" 1 ). The Law (1) expands the list of transactions that Russian residents - individuals may perform using their foreign bank accounts and (2) introduces administrative liability for failure of Russian resident individuals to report on the movement of funds on their foreign bank accounts. Extension of authorized transactions The Law further expands the list of cases when Russian resident individuals may transfer funds to their accounts in foreign banks to now include the following:  income from the sale of foreign securities listed on the Russian stock exchange or one of the foreign stock exchanges on the list provided for by the Russian Federal law "On the Securities Market" (this will cover transactions (sales) that occur after January 1, 2018);  income received from the transfer of money and (or) securities into the fiduciary management of a non-resident (effective from official publication of the Law). The Law also removes from the list of authorized operations the receipt of grants from non-residents. Penalties for non-reporting on foreign bank accounts for Russian residents Starting from January 1, 2015, currency rules require from Russian residents to report to the Russian tax authorities on movement of funds on their foreign bank accounts. Until now the Russian law did not contain any penalties for individuals' failure to submit such reports. The Law will eliminate this gap and establish administrative fines for failure of individuals to provide the required reports which will vary from RUB 300 (for a delay in reporting 1 Federal law No. 173-FZ "On Currency regulation and Currency Control" dated December 10, 2003. www.bakermckenzie.com For further information please contact Alexander Chmelev +7 495 787 27 00 [email protected] Sergei Zhestkov +7 495 787 27 00 [email protected] Igor Kuznets +7 495 787 27 00 [email protected] Maxim Kalinin +7 812 303 90 00 [email protected] Baker & McKenzie — CIS, Limited White Gardens, 10th Floor 9 Lesnaya Street Moscow 125047, Russia Tel.: +7 495 787 27 00 Fax: +7 495 787 27 01 BolloevCenter, 2nd Floor 4A Grivtsova Lane St. Petersburg 190000, Russia Tel.: +7 812 303 90 00 Fax: +7 812 325 60 13 Tax 2 Legal Alert December 2015 within 10 days) to RUB 3,000 (for delay in reporting for more than 30 days). In case of repeated violation the fine may increase up to RUB 20,000. This provision will become effective from January 1, 2016, and will apply to reporting concerning 2015 and thereafter. The Currency Law has also been updated so that Russian individual residents would not be required to support reports on movement of funds on their foreign bank accounts with bank documentation (including bank statements) and/or relevant contractual documentation. Russian individual residents may be required to provide bank documentation at the specific request of the Russian tax authorities or currency control agents, e.g. in case of an audit. Russian legal entities and individual entrepreneurs will however be required to support reports on movement of funds on their foreign bank accounts with the appropriate bank documentation. Actions to consider  Individuals (Russian residents for currency control purposes) must prepare for annual reporting on movement of funds on their foreign bank accounts, which is expected to start from 2016 and will cover transactions made in 2015;  There is no need to support annual reporting with bank and/or contractual documentation, unless the Russian tax authorities or currency control agents specifically ask for such documents;  Individuals' failure to report movement of funds on their foreign bank accounts or late reporting may result in administrative fines;  The extended list of authorized transactions which may be remitted to foreign bank accounts may be used in the course of restructuring to simplify the return to Russia of income from the sale of foreign securities or income received from fiduciary managers. We would be happy to answer, on an individual basis, any questions you may have with respect to Russian currency regulation. This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.