On the Liberalisation of Foreign Exchange Control Regarding Individuals

On January 1, 2020, amendments to the Federal Law “On Currency Regulation and Currency Control” come into force¹.

From the beginning of 2020, the currency² residents of Russia will be required to notify about the flow of funds not only on the accounts of foreign banks, but also other financial organisations. This obligation will not apply if the account is opened in an FATF or OECD member country, with this country exchanging financial information with Russia and the total amount of funds on the account not exceeding 600,000 (six hundred thousand) rubles. In addition, the list of permitted foreign exchange transactions between residents as well as between non-residents and residents will be extended.

 

1. Submission of notifications and reports on the flow of funds on accounts opened with financial market organisations

From January 2020, the currency residents of Russia will be obliged to notify about accounts and submit reports on the flow of funds not only with respect to accounts opened with foreign banks but also other financial market organisations, which, for instance, include insurance and brokerage companies³.

However, it will be possible to transfer funds to the accounts of such other financial market organisations in cases determined by the Central Bank of Russia⁴.

The submission of a report on the flow of funds in a foreign account is not required when the following conditions are complied with simultaneously:

• the account is opened with a bank/other financial market organisation of an FATF or OECD member country;
• the foreign country in whose bank/other financial market organisation is opened participates in the automatic exchange of financial information with Russia⁵;
• the total amount of funds transferred in the account for the reporting year or the balance of money on the account does not exceed 600,000 (six hundred thousand) rubles or the equivalent of this amount in foreign currency⁶.

A fine of up to 3,000 (three thousand) rubles⁷ is applied in case of violation of the procedure and term for submitting a report on the flow of funds in foreign accounts:

A repeated violation shall result in a fine in the amount of 10,000 (ten thousand) rubles.

 

2. Extension of the list of transactions for the unlimited transfer of funds

From 2020, it will be possible to transfer any funds from non-residents to residents’ accounts in banks outside Russia without restrictions if the following conditions are complied with:

1. the account is opened with a bank of an FATF or OECD member country⁸;
2. the foreign country exchanges financial information with Russia.

 

3. Extension of the list of permitted foreign exchange transactions between currency residents

The existing list of permitted foreign exchange transactions between currency residents will be supplemented by the following operation:

resident individuals will be able to transfer funds in foreign currency paying for goods, work, services to resident individuals’ foreign accounts.

Moreover, to perform such operation, the following conditions should be complied with:

• persons who have transferred goods, performed work or rendered services are considered individual entrepreneurs according to the legislation of the country of their stay (in 2020, foreign exchange control agents will be able to request confirmation of the right of a resident individual to perform entrepreneurial activities without establishing a legal entity in the territory of the foreign country of their stay)⁹;
• the period of stay of such resident individuals performing entrepreneurial activities outside Russia is more than 183 days during the year¹⁰.

Thus, from the beginning of 2020, the currency residents of Russia will be required to notify about the flow of funds not only on the accounts of foreign banks, but also other financial organisations. At the same time, there will be no obligation to submit notifications if the account is opened in an FATF or OECD member country, with this country exchanging financial information with Russia and the total amount of funds on the account not exceeding 600,000 (six hundred thousand) rubles.

 

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¹ Federal Law dated 10.12.2003 No. 173-ФЗ “On Currency Regulation and Currency Control”.
² Foreign currency residents are all citizens of Russia, as well as foreigners permanently residing in Russia on the basis of a residence permit. Tax residents are in their turn all persons who stay in Russia at least 183 days a year.
³ Part 7, Article 12 of the Federal Law dated 10.12.2003 No. 173-ФЗ “On Currency Regulation and Currency Control”.
⁴ To date, such list of cases has not been published, therefore, transactions with accounts of other financial market organisations are not allowed.
⁵ Letter of the Federal Tax Service of Russia dated 24.05.2018 N ОА-4-17/9891.
⁶ Clause к, Part 1, Article 1 of the Federal Law dated 02.08.2019 No. 265-ФЗ “On Amendments to the Federal Law “On Currency Regulation and Currency Control” Regarding the Liberalisation of Restrictions on Foreign Exchange Transactions by Residents Using Accounts (Deposits) Opened with Banks Located outside the Territory of the Russian Federation and Repatriation of Funds”.
⁷ Part 6 – 6.4, Article 15.25 of the Administrative Offence Code of the Russian Federation dated 30.12.2001 No. 195-ФЗ.
⁸ Ibid, — clause ж, part 1, Article 1.
⁹ Ibid, — clause ф, part 5, Article 1.
¹⁰ Ibid, — clause а, part 1, Article 1.