Ban on foreign ERP systems and the requirement to migrate to local Russian software in 2024

The requirement to migrate to Russian software is connected with the entry into force of several new legal restrictions at the end of 2023 and the beginning of 2024.

Requirement to store accounting databases in Russia

On January 1, 2024, Federal Accounting Standard No. 27/2021 came into force, and all Russian companies are obliged to ensure storage of accounting documents and the data contained therein, as well as databases containing such accounting data in Russia.

This issue is particularly relevant for Russian companies being part of international groups with headquarters abroad. Such companies often keep accounting records in a single corporate accounting system stored on servers abroad (e.g. in the country of the headquarters location). After the new standard entered into force, the companies have to decide how to comply with the requirement of the accounting databases localization in Russia.

It is necessary to mention that Russian legislation does not prohibit the storage of databases abroad – Russian companies can still continue keeping records in corporate accounting systems and store this information on servers located in other countries. However, based on the literal interpretation of the requirements of the new standard, it is necessary to ensure simultaneous parallel storage of databases also on a server located on the territory of the Russian Federation.

The EU’s 12th sanctions package against Russia: ban on foreign software

On December 18, 2023, the 12th sanctions package of the European Union against Russia came into force. The provision of software for the management of enterprises and manufacture to Russian companies has been banned – the list of software includes all ERP, CRM, EDW and other systems specified in Annex XXXIX to EU Regulation No. 833/2014.

There is a transitional period that lasts until March 20, 2024 for the termination of legal and contractual relations with Russian companies under contracts already concluded.

Subsidiaries of European companies in Russia may use such software a little longer – until June 20, 2024. After that date, European companies will generally be able to grant the right to use the software to their Russian subsidiaries only upon permission of a competent national authority in charge for control over the sanction observance and for issuing respective permissions. However, according to BAFA's General Authorization No. 42, there is an exception for German companies: they are allowed to continue providing business software to Russian users that are under the control of European companies or companies from partner countries listed in the above-mentioned EU Regulation until March 31, 2025, subject to certain conditions set out in the said General Authorization No. 42.

What should Russian companies do?

Obviously, if a company from the EU is unable to obtain the necessary permission for further granting of software rights to Russian users after the deadlines mentioned above, it will have to stop any use of their software in Russia under eventual risk of criminal liability for violation of sanctions.

Therefore, companies need to think already right now about the migration to Russian software.

SCHNEIDER GROUP can help you to migrate from ERP systems to 1C products (1C:ERP, 1C:Complex Automation, 1C:Accounting) and ensure that the accounting system complies simultaneously with local Russian legislation and international corporate standards, including post-project and user support. Over recent years our specialists from IT and Financial Department have supported many client projects on migration to Russian software and its further individual customization to the needs of specific companies in various sectors of the economy.

The Director ERP & Financial Management of SCHNEIDER GROUP St. Petersburg Ms. Elena Vorobieva comments on the experience of migration to 1C: “Considering the tight timeline of the new sanction bans coming into force, companies have only a limited time to migrate from foreign ERP systems to 1C. In order to avoid disruption of key business processes migration should be started as quickly as possible. Based on our experience of transferring data from SAP to 1C, it is definitely best to start the migration as early as possible, namely, at the beginning of the calendar year to avoid the necessity of parallel bookkeeping in both accounting systems. This will help not only to avoid the double work of the accounting team, but also significantly save the client’s money”.

Experts of SCHNEIDER GROUP will be happy to provide comprehensive support in all matters related to migration to 1C and will provide full and prompt answers to your questions.