What Are the Restrictions for Foreign Accounts of Individuals?

Russian law establishes special regulation for individuals’ foreign accounts. Individuals (Russian currency residents) cannot receive on their foreign accounts the majority of funds transfers. Spending of funds is less problematic, however subject to certain restrictions as well. Fine for non-compliance is 75%-100% out of the amount of illegal funds transfer. For more details please follow…

What Are the Restrictions for Foreign Accounts of Individuals?

In 2013 amendments to the Russian Administrative Offenses Code introducing significant administrative fines applicable to individuals for non-compliance with foreign accounts regulations came into force.

The restrictions to foreign accounts are applied only to individuals that are regarded as currency residents, particularly to Russian citizens (with some exemptions). Thus, a Russian citizen is not considered to be a currency resident after one year of living abroad without visiting Russia. If a Russian citizen crosses the Russian border, a one year term for getting a non-resident status restarts.

Residents, with exemption for state officials, can freely open foreign accounts. However Residents must notify within one month Russian tax authorities about opening, closing or changing details of their foreign accounts.

Resident individuals can only receive on their foreign accounts types of funds that are expressly allowed by the law. Under the first sight almost all types of funds transfers are forbidden. Thus, residents are not entitled to receive on their foreign accounts the following transfers:

  • dividends;
  • proceeds from the sale of shares and jewellery;
  • scholarship;
  • stock options;
  • salary, if a resident works in a foreign company (in such a case, salary should be transferred to resident’s account with a Russian bank) and others.

Interest on deposits and bonds are not directly allowed by the law, however, according to the position of Russian currency supervisory authorities individuals are entitled to receive such transfers on their foreign accounts. Meanwhile, such position is not confirmed by any references to the law. Therefore, it is unclear how it will be applied in practice.

The law also forbids individuals to spend funds from the foreign accounts for services and property in Russia. With the abovementioned exception, individuals can freely spend funds for all other purposes outside Russia.

The fine for violation of the above rules is up to 100 % out of the amount of illegal currency transaction.

 

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We hope this information was helpful for you. Should you have any further queries with regard to the above, please contact Kira Egorova ALRUD LAW Firm.