Every company with foreign trade activity faces the procedure of submitting documents under currency control legislation. The legislation in this area is quite strict and brings a threat of significant fines and sanctions.
In the near future, amendments to the laws on currency regulation will come in force. Amendments aimed, on the one hand, at liberalizing the requirements and reducing the burden on legal entities, and on the other hand at introducing additional control measures for transactions with non-residents, come into force on March 1, 2018 and on May 14, 2018 (concerning the legislation on the repatriation of funds).
Changes aimed at simplifying currency control
- Passport of deal is canceled – now the contract itself will be registered in the bank with the assignment of a unique number
- Reference on currency transactions is canceled – the company shall submit the documents and/or information confirming the payment
- The thresholds for certain types of contracts subject to currency control are increased – for import and credit contract the threshold is 3 million RUB, for export contracts – 6 million RUB (previously the threshold for all contracts to become subject to currency control was 50 000 USD)
- A simplified registration procedure for export contracts is introduced – these contracts will be registered in the bank within one working day
- For contracts below 200 000 RUB – payment receiving or writing off could be confirmed to the bank simply with the code of currency transaction
Changes introduced to tighten control over the repatriation of proceeds under foreign trade contracts
- Contracts shall be obliged to contain the specified deadlines of their obligations’ fulfillment, otherwise the contract and the related transactions will be declined by the bank
- The specific liability on the company’s officials is now foreseen for non-compliance with the repatriation of funds procedure. It should be noted that the penalties for this violation are already high
- Banks are obliged to submit information (and the respective currency control documentation) about all violations to the currency control supervisor (Tax authority) three times a month
We have noticed the following trends in the control procedures taken by the tax authorities:
- More official requests were received during 2017 with regards to the provision of contracts, acts and currency control documentation to the tax authorities
- The requests are aimed at certain deals and transactions – such detailed information is received by the tax authorities directly from the banks
What you need to do
Taking into account the expected changes and general strengthening of control over currency operations and related documentation submission, we would recommend:
- Developing comprehensive internal procedures to ensure compliance with the Currency Control legislation (if this area is not a part of accounting outsourcing contract)
- Monitoring the terms of agreements and dates of acts of the services rendered and taking preventive measures to avoid Currency Control legislation noncompliance (e.g. timely preparation of additional agreements to the contracts and correction of currency control documentation)
- Paying special attention to the requests of your Client Managers regarding the timely provision of signed contracts, additional agreements and acts of services rendered
- Checking existing foreign trade contracts in terms of compliance with the new requirements on the Currency Control and Repatriation of earnings legislation,
- Considering the necessity of changing the contractual deadlines of obligation fulfilment in order to avoid non-compliance with the legislation on Repatriation of earnings
Please be reminded that there are high penalties for both legal entities and officials for non-compliance with the requirements of the currency legislation. We are always ready to provide you with more detailed information about the consequences of violations at your request and at our events.