Starting January 1, 2019, a new edition of Federal Law No.173-FZ “On currency regulation and currency control” takes effect, with amendments made for purposes of clarifying the concept of currency residency for individuals, simplifying currency operations using residents’ accounts  in banks outside Russia, as well as specifying the obligations for individuals to notify tax authorities of such accounts abroad.

The main changes Russians should note are the following:

• Persons living most of the year abroad do not need to notify tax authorities of their accounts abroad

Even though lawmakers have clarified that all Russians are deemed currency residents, the new law gives some slack to those who live most of the year abroad.

Resident individuals who spend over 183 days in a calendar year abroad are no longer obliged to notify the tax authorities of their accounts/deposits in foreign banks or to provide cash flow statements for the foreign accounts.

In the past, Russians who lived most of the year abroad still had to file relevant reports and notices if they were deemed a currency resident. That said, under the old rules, a person was subject to all the currency restrictions and obligations even if he or she entered Russia for a single day in a calendar year.

Another clarification is the list of documents the currency control authority can request from residents in connection with the changes. Among the documents that can be requested are those confirming the fact of individual residents staying outside Russia, documents confirming the entry into and exit from Russia.

It is noteworthy that the Legal Directorate of the Federation Council Administration stated in its report on the draft law that in practice the currency control agents could interpret this vague provision at will. One should hope that in practice an approximate list of documents which residents are to provide in such cases will be developed.

• Individuals and banks are released from additional administrative procedures

Since tax authorities from countries that signed the Agreement will, starting 2018, automatically exchange information regarding accounts of residents opened in other member countries, individuals and banks will no longer bear the relevant administrative work. Individual residents are no longer obliged to provide the bank a copy of the notification of the tax authority with the domicile tax authority’s stamp on opening a bank account.

On the contrary, non-credit financial institutions must submit cash flow reports for foreign bank accounts both to the tax authority and to the Russian Central Bank.

• List of permitted currency operations is expanded

Lawmakers have expanded the list of cases when money can be transferred to resident individual accounts in banks on the territory of OECD or FATF member states without involving authorized banks.

Such operations include a resident selling cars and real estate to a non-resident outside Russia. It is important that the real estate be on the territory of the foreign country that is an of OECD or FATF member state that exchanges information with Russia, with the bank account likewise being in such state.

Also, residents staying abroad for longer than 183 days are unrestricted in performing currency operations outside Russia.

The changes took effect on January 1, 2018. The relaxed regulations for Russians apply to people who stayed abroad in 2017 for more than 183 days. As regards foreign accounts and deposits, the new provisions apply to those that were closed as of December 31, 2014.

Federal Law No.427-FZ “On introducing amendments to Federal Law ‘On currency regulation and currency control’” dated 28.12.2017

Anastasya Kuzmina   Head of Tax Group   St. Petersburg   Tel.: +7 (812) 346 79 90

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Anastasya Kuzmina St. Petersburg Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues. 

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