Russian Ministry of Finance proposes easing obligations on declaring foreign accounts and deposits of Russian individuals

In September 2016, the Ministry of Finance published a draft law on amending Federal Law No.173-FZ dated December 10, 2003 “On currency regulation and currency control” (hereinafter the “Draft Law”) easing the obligations of Russian individuals related to their status of a currency resident.

The currency regulations in force today oblige Russian citizens to provide the Russian tax authorities full records on foreign bank accounts and deposits if the individual stayed in the Russian Federation for at least 1 day within a calendar year.

Within the framework of the Draft Law, the financial authority proposes to secure the status of currency resident for all Russian citizens, regardless of the period of their stay in Russia within a year. At the same time, it is proposed to release from the obligation to provide records on foreign accounts and deposits the Russian individuals permanently residing or temporarily staying in a foreign state on legal grounds for at least 1 year, on condition that the period of their stay in Russia does not exceed 183 days within a calendar year.

Furthermore, the Draft Law cancels the obligation of Russian individuals to provide records on foreign accounts and deposits which were closed by December 31, 2014.

It is interesting to note that the initial edition of the Draft Law provided for a 3‑month period of stay in Russia, on expiry of which the individuals would be obliged to report on their foreign accounts and deposits, but in the course of further discussion, the period of stay was extended to 183 days in a year.

We should also note that if the Draft Law is adopted, the timeframe that results in a Russian citizen’s obligation to provide records on foreign accounts and deposits, coincides with the timeframe for determining an individual’s tax residency. Representatives of the Ministry of Finance stress that currency residency is not the same as tax residency and this is a purely technical coincidence.

In the event the Draft Law is adopted, the amendments are to take effect on January 1, 2018.

At the same time, as opposed to the initial edition of the Draft Law, under which Russian citizens who are not Russian currency residents as of December 31, 2017 and who have not returned to Russia as of January 1, 2018 were obliged to notify the Russian tax authorities of their accounts and deposits by March 1, 2018, the current edition of the Draft Law does not contain such an obligation. This means that once the new amendments take effect, a citizen who has not visited Russian territory in 2017, will be obliged to report on his foreign accounts and deposits only if he spends at least 183 days in Russia in 2018.

Under Russian currency law, an individual’s report on foreign accounts and deposits includes submitting to the Russian tax authorities notifications on opening, closing and change of details of foreign accounts and deposits, as well as cash flow statements for such accounts and deposits.

We will continue to monitor the examination process of the Draft Law and will inform you of changes in Russian currency laws.