Please note that the Russian Federal Tax Service has begun issuing clarifications on the procedures for fulfilling the new foreign exchange obligations for resident companies belonging to international groups (IGCs). These obligations pertain to notifying and reporting on the foreign accounts of non-resident companies within the group.

This requirement was introduced into currency legislation* as of 1 July 2024. However, there have been many questions regarding the applicability of these rules to Russian subsidiaries of international groups and the timeline for their implementation.

Currently regulations and issued clarifications outline the scope of the obligations and responsible parties as follows:

• The obligations apply to resident legal entities belonging to the same international group of companies as non-resident legal entities.
• An IGC is defined under tax law as a group of entities and/or unincorporated entities linked through participation or control, for which consolidated financial statements are prepared (or would be required under regulations for publicly listed companies). There are no additional thresholds similar to those used in tax reporting for an IGC.

If the parent company is a resident or an authorised resident member has been appointed, responsibilities outlined below must be fulfilled by them.

1. Notification of opening, closing and changing account details

Effective 1 July 2024, resident companies are required to submit notifications no later than one month after the following events:

• The opening of new accounts by non-resident entities;
• Any changes to account details;
• The closing of any accounts.

For the purposes of filing notifications, a resident company other than the parent company can be designated as the authorised participant. If no authorised participant is designated, each resident company is required to submit notifications individually.

Failure to submit a notification may result in a fine ranging from RUB 800,000 to RUB 1,000,000 (approx. EUR 8,000 to EUR 10,000).

2. Submission of cash flows statements and other financial assets reports

The reporting period is every six months, with the first report due no later than 30 January 2025.

The report must be submitted by the parent company or an authorised participant. If an authorised participant submits the report, it must be accompanied by a notice in the prescribed format.

Failure to submit a report may result in a fine ranging from RUB 40,000 to RUB 50,000 (approx. EUR 400 to EUR 500).

For repeated violations, the fine increases to between RUB 400,000 and RUB 600,000 (approx. EUR 4,000 to EUR 6,000).

3. Exceptions

There are exceptions to the reporting requirement. A report is not required if one of the following criteria applies:

• More than 50% of IGC’s assets are located outside of the Russian Federation (the calculation procedure is expected to be clarified);
• The resident company does not directly or indirectly participate in the capital or otherwise control the non-resident legal entities that are part of the IGC;
• Non-resident companies that are part of the international group do not directly or indirectly participate in the capital of the Russian resident company or otherwise control its activities.

Recommendations

Mind the obligation to notify of opening, changing details or closing non-resident’s accounts within one month. You should also begin preparations for the first cash flow statement, which must be submitted by 30 January 2025.

If you are a Russian company that is part of an international group, you should consider applicability of the exceptions above. If a Russian company falls under the exemptions, there remains a risk of liability for failing to submit a notification during the period from 1 July to 16 September, when the list of exemptions was not yet in effect. For example, if an account was opened on 1 July, the resident company should have summited a notification by 1 August.

We will monitor further developments in notifications filing and other related matters.

* In Russian

Authors:

Leonid Zubarev, Senior Partner

Yulia Smourova, Counsel

Valeriy Chelnokov, Associate