Amendments to the Federal Law “On Currency Regulation and Currency Control” came into force on July 1, 2024. These amendments introduce an obligation for legal entities resident in the Russian Federation (hereinafter – RF) that are members of the same international group of companies (hereinafter – MNEs) with non-resident legal entities to provide tax authorities with information on accounts (deposits) and cash transactions of non-resident legal entities that are members of MNEs.
Who is obliged to provide the information?
Legal entities – residents of the Russian Federation that are members of the same MNEs with non-resident legal entities. Legal entities established in accordance with the legislation of the Russian Federation, except for foreign legal entities registered in accordance with the Federal Law “On International Companies”, are recognized as residents of the Russian Federation.
An MNEs participant does not submit information if it is submitted by the MNEs parent company, which is a resident of the Russian Federation, or by an MNEs participant – a resident of the Russian Federation, which is entrusted with such an obligation by the parent company, as well as in a number of other cases stipulated by the Government of the Russian Federation in coordination with the Central Bank of the Russian Federation.
For example, a resident legal entity shall not submit reports in respect of MNEs, more than 50 percent of the assets of which are located outside the territory of the Russian Federation. Reports are also not submitted by resident legal entities that do not participate directly or indirectly in the capital or otherwise control non-resident legal entities that are members of the same international group of companies with them, as well as by resident legal entities in whose capital non-resident legal entities do not participate directly or indirectly or otherwise exercise control over their activities.
Where is the information being submitted to?
To the tax authorities at the place of registration of the legal entity – resident of the Russian Federation submitting the information.
Composition and method of providing information
The following information must be provided to the tax authorities:
- Notification of the opening (closing) of accounts (deposits) and changes in details of accounts (deposits) of non-resident legal entities belonging to MNEs in banks and other financial market organizations located outside the territory of the Russian Federation. A notification may be submitted to the tax authority in person, through a representative, by registered mail, in electronic form via telecommunications channels, in electronic form via the taxpayer’s personal account;
- Report on cash flow and other financial assets on accounts (deposits) of non-resident legal entities – MNEs members in banks and other financial market organizations located outside the Russian Federation and on transfers by such non-resident legal entities of funds without opening a bank account using electronic means of payment provided by foreign payment service providers together with supporting documents. Reports and supporting documents may be submitted in person, through a representative, by registered mail, in electronic form via telecommunication channels, in electronic form via the taxpayer’s personal cabinet.
Deadlines for providing information
Notification on opening (closing) of accounts (deposits) and on change of details of accounts (deposits) of non-resident legal entities – members of MNEs in banks and other financial market organizations located outside the territory of the Russian Federation shall be submitted not later than one month from the date of opening (closing) or change of details of such accounts (deposits) in banks and other financial market organizations, respectively.
Reports on cash flows and other financial assets on accounts (deposits) of non-resident legal entities – members of MNEs in banks and other financial market organizations located outside the Russian Federation and on transfers by such non-resident legal entities of funds without opening a bank account using electronic means of payment provided by foreign payment service providers shall be submitted within 30 days after the end of the reporting six-month period. The report on transfers of funds without opening a bank account using electronic means of payment shall be submitted within 30 days after the end of the reporting six-month period in which the amount of funds credited to an electronic means of payment exceeded, starting from the first day of the reporting year, the amount in monetary terms of RUB 600 thousand (or the amount in foreign currency equivalent to RUB 600 thousand). The reporting year is a calendar year, the reporting half-year is the half-year of the reporting year.
Procedure for providing information
A separate report shall be submitted with respect to each non-resident legal entity, participant of MNEs, which shall contain information on all accounts (deposits) opened with banks and other financial market organizations located outside the territory of the Russian Federation, as well as on all electronic means of payment of this non-resident legal entity.
Each report shall be accompanied by documents confirming the information specified in the report as of the last calendar date of the reporting half-year. Statements or other documents issued by a bank or other financial market organization, foreign supplier of payment services in accordance with the legislation of the state where the bank, other financial market organization, foreign supplier of payment services is registered shall be considered as confirming documents. In case of submission of the report by the authorized participant of MNEs, the authorized participant of MNEs shall provide documents confirming its authority to submit each report.
When submitting a report in electronic form, the documents for the report are submitted to the tax authority in electronic form in the form of electronic images of documents (hard copy documents converted into electronic form by scanning while retaining their details). A hard copy report submitted directly by a representative of a resident legal entity whose powers are confirmed in accordance with the legislation of the Russian Federation, or sent by registered mail with return receipt requested, shall be submitted in 2 copies. Documents to the report shall be submitted in the form in which the report is submitted (on paper in the original or in the form of a duly certified copy or in electronic form). Simultaneous submission of the report and documents to the report in different forms (paper and electronic) is not allowed.
Documents drawn up in a foreign language shall be accompanied by a Russian translation duly certified in accordance with the requirements of the legislation of the Russian Federation. If necessary, at the request of the tax authorities, a translation into Russian duly notarized in accordance with the requirements of the legislation of the Russian Federation shall be provided.
If necessary, a tax authority official has the right to request other documents confirming the information specified in the report, as well as to request for review the original documents, which are to be returned to the persons who submitted them.
Consequences of breach of duty to provide information
In case of detection by the tax authority of inaccurate information specified by the resident legal entity in the report, filling out the report incompletely, as well as the failure of the resident legal entity to submit documents to the report or the submission by the resident legal entity of documents to the report, executed improperly, the tax authority shall notify the resident legal entity in writing of the need to submit a corrected (revised) report and (or) properly executed documents to the report. The notification is sent electronically via telecommunication channels through an electronic document management operator or electronically through the personal account of the taxpayer, or issued by the tax authority directly to the representative of the resident legal entity against a receipt, or sent by registered mail with return receipt requested.
Administrative liability, depending on the period of violation, is provided for violation of the deadlines for submitting reports on the movement of funds on accounts (deposits) with banks and other financial market organizations located outside the territory of the Russian Federation and on transfers of funds without opening a bank account using electronic means of payment provided by foreign payment service providers, and (or) supporting documents:
- warning or imposition of an administrative fine on officials in the amount of five hundred to one thousand RUB; on legal entities – from five thousand to fifteen thousand RUB shall entail violation of the deadline for submission of the report for not more than 10 days;
- shall entail the imposition of an administrative fine on officials in the amount of two thousand to three thousand RUB; on legal entities – from twenty thousand to thirty thousand RUB;
- violation of the term for more than 30 days shall entail an administrative fine for officials in the amount of four thousand to five thousand RUB; for legal entities – forty thousand to fifty thousand RUB
Failure to comply with the established procedure for the submission of reports on the movement of funds on accounts (deposits) with banks and other financial market organizations located outside the territory of the Russian Federation and on transfers of funds without opening a bank account using electronic means of payment provided by foreign payment service providers, and (or) supporting documents shall entail the imposition of an administrative fine on officials in the amount of four thousand to five thousand RUB; on legal entities – forty thousand to forty thousand RUB In case of repeated violation, the fine on officials will be from thirty thousand to forty thousand RUB; and on legal entities – from four hundred thousand to six hundred thousand RUB.
Author
Artur Dorokhov
- Senior Auditor / Senior Tax Consultant
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