Cross-border transfer of personal data: new rules

On 30.12.2022 an extract from the minutes of the meeting of the sub-commission of the Government Commission for Control of Foreign Investment in the Russian Federation (hereinafter the “Sub-Commission”) No. 118/1 dated 22.12.2022 was published on the official website of the Russian Ministry of Finance.

According to the information contained in this extract, the Sub-Commission sets out the conditions that must be complied with in order to obtain permission to carry out transactions involving company shares. In particular, these include:

• independent assessment of the market value of the assets;
• sale of assets at a discount of at least 50% of the market value of the relevant assets as indicated in the asset assessment report;
• establishment of key performance indicators for the new owners;
• availability of an instalment payment for 1-2 years and/or an obligation to make a voluntary contribution to the federal budget of at least 10% of the amount of the transaction.

Please be reminded that our previously published regulations on transactions with limited liability company shares can be found in detail here.

In addition, the Sub-Commission lists conditions that will be taken into account when deciding on issuing permissions to organisations for payment of dividends to foreign participants in cases stipulated by Presidential Decrees No. 95 dated 05.03.2022 and No. 254 dated 04.05.2022, when the payment exceeds 10 million roubles per calendar month or the equivalent of this amount in foreign currency at the official exchange rate of the Central Bank of Russia set on the 1st day of each month. These include, in particular:

Dear colleagues,

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Thank you for your trust and collaboration.

With deep respect,
Your team of swilar

Earlier we brought to your attention the new requirement for mandatory approval by the Government Commission for transactions with shares in limited liability companies (OOO) (introduced by Presidential Decree No. 618 of 08.09.2022). We would like to remind you that this refers to transactions with OOO shares involving entities from foreign countries that commit unfriendly acts against the Russian Federation.

In the following overview, we have compiled for you information on the procedure for obtaining such a permit (approved by Government Resolution No. 1651 of 19.09.2022).

On 13.10.2022 the Ministry of Finance published official clarifications (letter No. 05-06-14RM/99138 of 13.10.2022) specifying types of transactions covered by the new regulations. According to these clarifications, the following types of transactions will require approval by the Government Commission:

• transfer of a part in the share capital of an OOO to one or more participants of the OOO or to a third party;
• acquisition by an OOO of a share in its share capital;
• withdrawal of a participant from an OOO by disposing of their share in the OOO or by claiming the acquisition of a share in the OOO;
• transfer of a share in an OOO to an investment fund;
• agreement with a commercial organization or individual entrepreneur on delegation of authority of the sole executive body of an OOO;
• agreement on exercising participants’ rights in an OOO;
• contract of convertible loan;
• OOO share pledge agreement;
• OOO share pledge management agreement;
• voluntary reorganization of an OOO in accordance with the legislation of the Russian Federation;
• an ordinary partnership agreement entered into by an OOO;
• agreement of trust management, agency and (or) other agreement on exercise of rights certified by OOO shares;
• other transactions.

We remind that the special procedure established by Presidential Decree No. 618 of 08.09.2022 does not apply to organisations in the financial and fuel and energy sectors.

The Russian Ministry of Finance also clarified that the approval of the Government Commission is not required for transactions executed against the will of an entity as part of the execution of a legally enforceable court decision.

At the same time we would like to draw your attention to the Presidential Decree No. 737 of 15.10.2022 which imposes additional restrictions on residents making payments in cases (1) of reduction of share capital of an OOO, (2) liquidation of an OOO and (3) bankruptcy procedures applied to an OOO.

Under the new regulations, making payments in these cases to entities from foreign countries committing unfriendly acts against the Russian Federation in an amount exceeding RUB 10 million per calendar month will require the use of a C-type special account (for a detailed overview of the use of C-type special accounts, see link) or obtain authorisation from the Russian Ministry of Finance.

Earlier we informed you that on 08.09.2022 the President of the Russian Federation issued the Decree No. 618 (hereinafter referred to as “Decree”).

This Decree establishes the requirement to obtain permission fr om the Government Commission for Control of Foreign Investment in the Russian Federation (“Government Commission”) for transactions with shares in limited liability companies (“OOO”), if the parties to such transactions are persons from foreign countries that commit unfriendly acts against the Russian Federation.

On 19.09.2022 the Government of the Russian Federation issued the Resolution No. 1651 “On Amendments to Resolution No. 295 of the Government of the Russian Federation of 6 March 2022“ (the “Resolution”) that regulates the procedure for obtaining the respective approval of the Government Commission.

The list of cases wh ere the Government Commission is authorized to issue permits includes transactions resulting directly and/or indirectly in the establishment, modification or termination of rights to own, use and (or) dispose of shares in the authorised capital of OOOs or other rights allowing to determine the management conditions of such OOOs and (or) the conditions for their entrepreneurial activities.

According to the Resolution, in order to carry out the abovementioned transactions involving persons from foreign countries that commit unfriendly acts against the Russian Federation, the rules previously issued in relation to loans and credits with persons from unfriendly countries by Resolution of the Government of the Russian Federation No. 295 of 6 March 2022 will be fully applied.

It is envisaged that a permit to carry out a transaction or a group of transactions (“permit”) can be obtained by applying to the Ministry of Finance of the Russian Federation with an application and accompanying documents, the list of which is established by the Resolution of the Government of the Russian Federation No. 295 of 6 March 2022.

Please note that the Ministry of Finance of the Russian Federation can also be approached by federal executive bodies and (or) the Bank of Russia in order to issue a permit. In this case, the application and accompanying documents must be submitted to the relevant federal executive body and (or) the Bank of Russia.

The application and accompanying documents must be drawn up in Russian. If the original documents are in a foreign language, a duly certified translation into Russian (with an apostille of the competent authority of the state in which the document was drawn up) will be required.

The application and accompanying documents may be submitted both in hard copy and electronically, including in the form of electronic documents signed with a digital signature.

We will be happy to answer your questions and assist you in preparing the package of documents required to obtain the permit.

We would like to draw your attention to the recent changes in tax legislation introducing new rules for charging and paying VAT.

Currently, and until September 30, 2022, there is a procedure for paying VAT on electronic services provided by foreign suppliers, in which the foreign supplier must independently register with the Federal Tax Service of the Russian Federation, obtain a TIN, submit a VAT return and pay it. From 01.10.2022 the Federal Tax Service and the Ministry of Finance presented the former (used until 2019) procedure for the payment of VAT from electronic services. In a letter dated 08.08.2022, the Federal Tax Service also explained the changes to be introduced.

This means that VAT is paid and recovered by the Russian organization receiving the services as a tax agent. At the same time, if a registered foreign provider of electronic services also provides non-electronic services, there is no tax agent liability for Russian buyers. However, the buyer has the right to pay VAT on such services himself (Letter of the Federal Tax Service of the Russian Federation dated 24.04.2019 №СД-4-3/7937). In practice, it is easier and more convenient for a Russian organization buying any services from a foreign supplier to transfer VAT to the Russian budget as a tax agent.

For all payments made to a foreign counterparty before 1 October 2022 under the old rules, the buyer is entitled to reimburse the VAT paid to the foreign seller.

However, these changes do not exempt foreign service providers from having to register with the FTS. The procedure for this action has also undergone changes; now a foreign organization can get registered by opening a bank account.

The principle is set out in Articles 83-84 of the Tax Code as amended by Federal Law No. 120-FZ of 1 May 2022.

The application for registration is completed, certified with an Enhanced Qualified Electronic Signature by an authorized person of the Russian bank and sent to the Federal Tax Service. Once the foreign organization has been registered, the certificate of registration is also sent electronically to the bank.

Banks have been obliged to check the registration status of a foreign client in the Open and Publicly Available Information of the Unified State Register of Foreign Entities and, if no information is available in the register, to send an application for registration.

As a reminder, tax registration and tax payment are different processes. As the regulators have not yet provided any other explanations, we recommend to maintain a conservative stance and continue to file zero VAT returns for foreign entities registered with the FTS, even considering the transition to the tax payment procedure via a tax agent.

We will be happy to answer your questions!

The high unpredictability of external conditions significantly affects the ability to meet delivery deadlines, payment terms and other important contractual terms.

What can be anticipated and what options are available to mitigate the risks of the transaction?

In order to adapt quickly to changing conditions and protect your interests, it is advisable to include clauses in contracts in advance to help withdraw from the contract, suspend its performance or reduce the risk of penalties in the event of non-performance or partial non-performance due to objective circumstances with minimal loss to the parties.

Some examples of clauses that can be included in a contract:

• the obligation of the contracting party to notify the counterparty of its inclusion on the sanctions lists,
• the extension of the deadline for the fulfilment of obligations,
• currency clauses, e.g. a currency corridor clause,
• changes in the currency of payment under the contract,
• etc.

In each case, you should consider which terms and conditions would be most suitable for your contractual relationship.

We will be happy to answer your questions and assist you in formulating the necessary contract terms for your individual case.

On 14 July 2022, Law No. 263-FZ on Amendments to Part One and Part Two of the Tax Code of the Russian Federation was published.

The main change is the introduction of the concepts of a Single Tax Account (STA) and a Single Tax Payment (STP), as well as new practices of tax payment administration. 

The new rules come into force from 01.01.2023 and are binding for all taxpayers.

The single tax account is maintained for every natural person and every organization that is a taxpayer, payer of charges, payer of insurance contributions and/or a tax agent.

Thus, the settlement of each individual tax, contribution, or other charge is turned into an aggregate liability to the tax authority. The aggregate liability for payment is formed on the payer’s STA on the basis of submitted tax declarations, revised tax declarations, and notifications on the calculated amounts of taxes, fees, advance payments of taxes, insurance premiums, and decisions of the tax authority.

The law introduces a single date for submission of tax returns and notifications – the 25th of the month following the reporting month, for quarterly taxes – the last month of the reporting quarter.

To help keep an overview of what is important for doing business in the vast flow of information, we have summarized the essential news and practical advice for foreign businesses in Russia on payments, deliveries and other aspects to look out for.

More detailed and up-to-date information is upd ated weekly in the swilar Telegram channel.

PAYMENTS

New SWIFT removals

In June, as new sanctions packages were adopted, the list of banks cut off fr om SWIFT was expanded. Three more Russian banks were added to the list: Sberbank, Rosselkhozbank and Moscow Credit Bank.

Thus, the following banks are currently excluded fr om SWIFT (full list): “Otkritie”, Bank Rossiya, VTB, VEB.RF, Moscow Credit Bank, Novikombank, Promsvyazbank, Rosselkhozbank, Sberbank, Sovcombank.

PAYMENTS: RESTRICTIONS BY THE RUSSIAN FEDERATION

Over the course of June-July 2022, regulatory authorities have gradually lifted some of the previous restrictions and provided further clarification on the remaining regulations in force. 

Below you will find a brief overview of the most significant changes.

Abolition of 30% lim it on prepayment under service contracts

The limit introduced in March 2022 by the Board of Directors of the Bank of Russia on the amount of advance payment under service contracts has been officially abolished as of July. The relevant announcement is published on the Bank of Russia’s website with reference to the Board of Directors’ Decision of 19.07.2022.

Abolition of compulsory currency conversion

The regulation on compulsory sale of foreign currency earnings introduced in February (initially 80% of incoming funds were to be sold within 3 days of crediting; later the regulation was gradually relaxed to 50% within 120 days) was officially abolished from 10.06.2022.

The decision was made by a sub-committee of the Government Commission for the Control of Foreign Investment in Russia, which was authorized to do so by a Presidential Decree of 09.06.2022.

The new regulation is effective from 10.06.2022 and applies both to the revenues received on the resident’s transit account in the authorized bank after the specified date and to the revenues received earlier in respect of which the mandatory conversion has not yet been carried out.

Abolition of the requirement to repatriate foreign currency earnings

On 21.06., a government commission allowed exporters to credit foreign currency proceeds to foreign accounts without the obligation to transfer them to Russian accounts within 120 days. Excluded are exporters of certain commodities such as oil, oil products, timber, precious stones, etc. For them, the 120-day rule remains in force.

Permission to repay foreign currency loans from foreign banks

The Government Commission for the Control of Foreign Investment has given permission to Russian companies to repay foreign currency loans of foreign banks ahead of schedule until 1 September. The permission is issued on condition that the borrower repays at least 20% of the debt, also if the resident borrower’s obligations are fulfilled by a third party, the press service of the Russian Finance Ministry has clarified. Exceptions are those obligations in which the borrower and the foreign lender are related parties.

Possible resolution of set-offs of counterclaims under international contracts

A draft decree of the Russian Government “On Approving the List of Cases for Offsetting Counterclaims for Obligations from Foreign Trade Contracts Concluded between Residents and Non-Residents and Determining the List of Offsetting Obligations” was published on the official internet portal of draft regulatory legal acts.

The draft decree lists the cases in which it will be possible to se t off claims between foreign and Russian companies. The listed situations include: transfer of goods by non-residents to residents, performance of work for a resident, provision of services, transfer of information and results of intellectual activities to a resident, claims for payment by a resident to a non-resident under loan agreements and other cases.

The resolution is expected to come into force on 1 January 2023.

Authorisation for payment of shares in non-resident property

From 1 June 2022, residents will be entitled to pay, without the permission of the Central Bank, shares in the property of non-residents if the payment is made in rubles or the currency of a friendly state or in the currency of a hostile state for an amount not exceeding 15 million rubles.

The respective regulations were approved by the Decision of the Working Group of the Bank of Russia dated 23.06.2022, No. PRG-12-4/138.

By decision of the Board of Directors of the Bank of Russia on 24 June 2022, the regulations for special ruble accounts type C were updated. The regulatory authority has clarified the cases in which money can be credited to and debited from C-type special accounts. Special accounts are still to be used for mutual settlements between resident debtors and foreign creditors from unfriendly countries. C-type accounts can be debited for taxes, duties, fees and other mandatory payments, for bank account maintenance fees, and for refunds of erroneously credited funds.

Clarifications by the Ministry of Economic Development on overseas royalty payments

Presidential Decree No. 322 of 27 May restricted payments to certain rights holders from “unfriendly” countries.

According to the Decree, a special regulation using the special account type “O” was introduced, in particular, for right holders from unfriendly countries who publicly support the imposed sanctions and restrictions, who prohibited after 23.02.2022 to use their intellectual property results or means of individualization, who terminated, suspended or significantly limited their activities due to sanctions;

The restrictions do not apply to recipients of payments duly fulfilling their contractual obligations, payments up to 100,000 rubles from individuals, as well as payments in cases involving medication, medical devices, communication services and some other cases.

Clarifications of the Ministry of Economic Development of 19.07.2022 have answered some urgent business questions on practice of application of the Decree provisions and payment of royalties. 

It was clarified that restrictions apply, among other things, to domestic payments and sub-licences. Also, difficulties may arise if the price for the result of intellectual activity is not indicated separately and/or is not fixed by a separate agreement – in this case, an agreement should be reached with the right holder and such price should be highlighted in a complex agreement or an independent appraiser should be engaged.

Procedure for paying VAT on electronic services

According to the new version of Article 174.2 of the Russian Tax Code, when providing electronic services to organisations and individual entrepreneurs (B2B), VAT must be paid by the buyers as tax agents.

We remind you that previously foreign companies providing electronic services had to register for tax purposes in the Russian Federation, file quarterly tax returns and pay VAT themselves (for more details, please refer to the overview posted on our website). The biggest problem in the last half of the year for foreign suppliers who had already been registered was the payment of the tax: tax payments were often withheld by foreign banks.

At the same time, it should be noted that the obligation to register for tax purposes in the Russian Federation and to file tax returns remains unchanged for foreign entities providing electronic services.

New aspects of banking services

Due to the continuing difficulties in dealing with intermediary banks and the turbulence of exchanges in terms of currency transactions, the current situation is as follows:

• Most banks have 0% interest rates on foreign currency deposits. At the same time, on 14.07. the Russian president signed a law introducing negative interest rates on foreign currency deposits of legal entities. Under the new rules, a commission can be charged in excess of the amount of interest paid on the deposit.

• A number of banks have restricted the ability to transfer funds in foreign currency to other banks within the Russian Federation. Funds can only be transferred in rubles and need to be converted.

• Many banks are introducing or have already introduced additional commissions for maintaining foreign currency accounts, including holding foreign currency over a certain lim it on current accounts.

New Presidential authority to introduce special measures in the financial market

On 28.06.2022, a law was signed providing for the President’s authority to introduce special measures on the financial market. The law authorises the President to impose bans and restrictions on certain transactions and operations (including currency transactions), as well as to establish specific features for the settlement of certain liabilities, including changes in the currency of the liability and the offsetting of claims against them. Special permits may be required for certain transactions. Separate powers in financial market regulation could be delegated to the Central Bank and the Cabinet of Ministers.

Expected extension of restrictions beyond September 2022

The current restrictions on foreign exchange transactions previously introduced until September 2022 may be extended. This particularly concerns the regulation of cash foreign currency withdrawals by individuals. A statement to that effect was made by Elvira Nabiullina at a press conference on 22.07.2022.

As of 01.08.2022, the Central Bank has issued information on the extension of the restrictions until 09.03.2023. The extension concerns withdrawals of foreign currency (dollars, EUR) by both individuals and legal entities.

DELIVERIES

Parallel import

On 28.06.2022, the Russian President signed a law legalising parallel imports, subject to appropriate authorisation for the use of intellectual property rights/individualisation tools.

As a reminder, under the general regulation, parallel import is allowed in relation to brands and trademarks that have ceased operations in Russia. Under the newly adopted regulation, the importation of goods into Russia without the consent of the rights holders will not lead to criminal and administrative liability for the importer.

At the same time it should be remembered that the legalization of parallel importation does not imply the legalization of counterfeit. This has been specifically pointed out by the Ministry of Economy. The TROIS system will also continue to restrict the import of counterfeit goods into the country.

SUPPORT MEASURES

Moratorium on inspections

From 01.06.2022, a moratorium on currency law checks has been introduced. The moratorium will be in effect until 31.12.2022 with respect to all currency law checks, except for checks for which violations have been previously detected and the statute of limitations on such violations has expired by the end of 2022. Also, the moratorium will not apply to violations/actions related to the implementation of restrictions and regulations imposed by the Russian Federation.

Minimisation of business fines

On 14.07.2022, the President signed a federal law providing for milder regulations on fines for business offences.

The new regulations provide for:

• Reduction of the fine by 50% if paid within 20 days;

• Issuance of a warning rather than a fine for the first offence (previously, a similar regulation only applied to SMEs and non-profit organisations)

• A minimum fine if the harmful consequences of the offence have been prevented or the damage caused has been remedied

• Increase in the postponement of execution of a resolution on imposing an administrative fine, arrest, deprivation of a special right, compulsory deportation from Russia for foreigners from 1 to 6 months.

Reduced fines for participants in foreign trade activities

On 13.07.2022, a law signed by the president was published to reduce fines for currency law violations.

Main changes:

• It is established that administrative liability for a number of violations of currency legislation will not be incurred if the failure to comply with the currency legislation is due to the application of restrictive measures by foreign states or foreign state institutions carrying out unfriendly acts in relation to the Russian Federation.

The new rule will apply retrospectively, including to legal relationships arising between 23 February and 31 December 2022.

• From the moment the law enters into force, pending proceedings for certain violations of currency legislation shall be terminated and the unenforced decisions to impose administrative penalties for such administrative violations that have already been issued shall not be enforced – with regard to violations occurring after 23 February 2022 in connection with restrictive measures of foreign states;

• Administrative liability for a number of violations of Russian currency legislation is mitigated, in particular, fines for illegal currency transactions, non-repatriation of earnings by exporters, and fines for officials for violating currency legislation are significantly reduced.

OTHER IMPORTANT CHANGES

Changes in health insurance for foreign workers

Federal Law No. 240-FZ of 14 July 2022 has been published. Foreigners temporarily staying in Russia will be recognised as insured under the Mandatory Health Insurance (ОМС). Naturally, the changes will affect the calculation of social contributions for this category of workers. Thus, in the future there will also be no requirement to obtain a private health insurance, previously mandatory for foreign workers with a work permit.

The changes will not affect the category of highly qualified specialists. The law enters into force on 1 January 2023.

Foreign HQS no longer have to undergo a medical check-up once a year

According to Law No. 357-FZ from 14 July 2022, foreign HQS will have to undergo medical testing once every three years (when renewing the work permit), instead of once a year as was previously established.

Expansion of the list of unfriendly countries

By Order No. 2018-p of 23.07.2022, the Russian government included Greece, Denmark, Slovenia, Croatia, Slovakia, the Bahamas and the islands of Guernsey and Man in its list of unfriendly countries. Read the original list at the link.

Update of the list of countries with which information is automatically exchanged

The Federal Tax Service has approved new lists of territories with which automatic exchange of financial information and country reports is carried out. As a reminder, the exchange of country reports on international groups of companies is carried out within the framework of the Multilateral Agreement on Automatic Exchange of Financial Information.

Albania, Brunei, Ecuador and Peru have been added to the list of countries with which the automatic exchange of financial information takes place.

Azerbaijan, Bahrain, Gibraltar, Kazakhstan, Macao, Oman, Turkey and Gibraltar have been added to the list of countries approved for automatic exchange of country reports.

We make every effort on our part to keep processes stable for our clients and always stay in touch.

More up-to-date information in our Telegram channel.

to help keep an overview of what is important for doing business in the vast flow of information, we have summarised the news and practical advice essential for foreign businesses in Russia on payments, deliveries of goods and other aspects to pay attention to. 

More detailed and up-to-date information is regularly posted on swilar’s Telegram channel t.me/swilar.

The information is posted in Russian, but with the translation function in Telegram you have access to the most up-to-date news in the language of your choice.

DELIVERIES

List of goods restricted for export

As a reminder, with the imposition of sanctions, a large number of goods have become restricted both for export fr om the EU territory and for export fr om the territory of the Russian Federation.

To view the current list of EU restrictions on the export of goods, please click here. To check whether your goods are subject to restrictions, you can contact your Chamber of Commerce and/or the responsible approval authority (BAFA, SECO or other, depending on the country of residence of the sender).

The Russian Federation has also imposed export restrictions on a number of goods in recent months. The latest Resolution of the Government of the Russian Federation No. 850 of 11 May 2022 (published on 12.05.2022) clarifies the list of goods restricted for export from the Russian Federation. Some of the previous restrictions have been lifted, and the customs codes (TN VED codes) of the EAEU for commodity items from Resolutions No. 311, 312, 313 have also been clarified. 

To find out whether your goods can be exported from the territory of the Russian Federation under this regulation, you need to check whether your TN VED code is in the list of customs codes in the regulation.

Licences, certificates and permits for importing goods into the Russian Federation

Government Resolution No. 353 of 12.03.2022 extends the validity of a number of permits and licences and simplifies the conditions for importing and certifying products in the Russian Federation:

– It postpones the need to undergo periodic conformity assessment for products for a year in many industries;

– It also makes it possible to use documents from foreign certification bodies or foreign laboratories as proof that products are safe.

To find out whether you can benefit from this measure, you should check whether your licences and certificates are included in the list of permits renewable under the Resolution.

Please note that the Resolution applies only in the Russian Federation and not in other EAEU Member States.

Permission of parallel imports

On 19.04.2022 the Ministry of Industry and Trade signed Order No. 1532 approving the list of goods for which the protection of the exclusive rights to the results of intellectual activity expressed in such goods and the means of individualization with which such goods are marked will not be applied (the Order entered into force on 07.05.2022). A list of goods provided for inclusion in the list of parallel import authorisations can be found here.

The list contains both customs codes and names of specific brands/trademarks. The ministry suggested that more than 50 groups of goods should be sold without the permission of the rights holder. In total, the document contains about 200 items.

According to further comments from the Ministry of Industry and Trade it is understood that the list may be updated: foreign brands that continue to operate on the Russian market may be excluded from the list.

INTERNATIONAL PAYMENTS

In the list of frequently updated restrictions, it is not easy to pick out important details. For your convenience, we have compiled an overview of the experience we have gathered with regard to the payment situation.

As a reminder, 7 Russian banks have been cut off from SWIFT. The latest (6th) sanctions package also includes new restrictions on the banking sector. The list of banks to be excluded from SWIFT was extended by 3 Russian banks: Sberbank, Rosselkhozbank and Moscow Credit Bank, which will be cut off on 14.06.2022.

On the side of the EU

Other than this, there are no current EU restrictions on payments to counterparties in the Russian Federation. However, the majority of payments are processed manually by banks in Europe and/or include additional compliance checks to avoid money transactions involving sub-sanctioned individuals or entities. The sender/receiver of a payment from the Russian Federation may therefore need to provide additional explanations, disclose more detailed information and the processing of the payment may be delayed.

On the side of the Russian Federation

The Russian Federation has introduced a number of restrictions that need to be taken into account when planning payments.

In particular, there are restrictions on (the list is incomplete and is based on the most frequent questions from companies):

• the refunding of loans and interest to foreign legal entities from unfriendly countries (carried out in rubles, for amounts exceeding 10 million rubles per month a special type C account must be opened and authorised by a special Government commission).

• purchase of currency by foreign residents in the Russian Federation and transfer of foreign residents’ own funds abroad (representative offices and branches are restricted from transferring funds to the head office).

• Payment of dividends from both AOs and OOOs. According to Presidential Decree No. 254 of 04.05.2022, dividends are subject to the same regulation as loans (see above).

• Payment of royalties and remuneration for the use of intellectual property/individualisation tools. Presidential Decree No. 322 of 27.05.2022provides that in relation to this type of payments to foreign right holders who meet certain criteria (e.g. who have ceased business in Russia) payments will have to be made in rubles using a special type O account.

It should be taken into account that the restrictions, however, do not apply to payments for goods under supply contracts. With regard to foreign currency payments, significant relaxations have been introduced in the currency control regulations of Russian banks.

For payments for services, there is a lim it on prepayments (not more than 30% of the total amount to be paid). However, the lim it does not apply to a certain list of services or to contracts of less than USD 15,000 (or its equivalent in another currency).

The regulation on compulsory sale of foreign currency earnings introduced in February (initially 80% of incoming funds were to be sold within 3 days of crediting; later the regulation was gradually relaxed to 50% within 120 days) was officially abolished starting from 10.06.2022. The decision was taken by a sub-committee of the governmental commission for the control of foreign investments in Russia, which was authorised to do so by a Presidential Decree of 09.06.2022.

FORCE MAJEURE

At the moment there is no clear understanding as to whether the current restrictions on both parties constitute force majeure.

That said, under the general procedure in Russia, the parties concerned (the party to the contract who has not fulfilled/unduly fulfilled the obligation) are entitled to apply to the Chamber of Commerce and Industry of the Russian Federation (or the subject of the Russian Federation) to obtain an opinion on force majeure circumstances occurring in the territory of the Russian Federation.

In this case the decision on the acceptance/non-acceptance of the received opinion will be made by the counterparty independently. If the counterparty disagrees, the dispute will be resolved in court, with the CCI opinion being one of the pieces of evidence of the party’s inability to meet/properly meet its obligations.

Information on how to apply, deadlines and fees, as well as all contact details are available on the official website of the Chamber of Commerce and Industry of the Russian Federation.

If the foreign supplier company can produce a force majeure certificate from its authorised body, the Russian buyer will not need to apply to the CCI of the Russian Federation separately. A foreign certificate of force majeure can also be presented in the Russian Federation.

OTHER

Moratorium on bankruptcy

С From 1 April to 1 October 2022 there is a moratorium on initiating bankruptcy proceedings at the request of creditors in Russia. The moratorium applies to all companies as well as sole proprietors with the exception of property developer debtors.

Companies covered by the moratorium are prohibited from:

• paying out dividends,

• paying out the actual value of shares,

• repurchasing own shares,

• terminating monetary obligations by setting off a counter claim of the same kind (if this violates or is likely to violate the order of priority for the satisfaction of creditors’ claims).

These restrictions can be avoided by submitting a simple waiver of the moratorium by the company through a personal account on the Fedresourcewebsite.

Business support measures in the Russian Federation

The Russian Federation has introduced a number of both tax and non-tax related support measures for businesses.

The measures include:

• deferral of the payment of insurance premiums;

• special treatment of exchange rate differences for the period 2022-2024;

• accelerated VAT refund procedure;

• and others.

A summary overview of support measures in Russian can be found on the Russian Government website. More information is also available on our website.

Transactions with shares in Russian companies

In a number of cases, transactions with shares (sale, withdrawal of a participant, call option) may require authorisation from a special Government Commission.

However, this rule does not apply to all transactions: a number of exceptions have been named in the Presidential Decree of 04.05.2022. There are also differences in the regulations for joint stock companies and limited liability companies.

We are actively working with these issues for our clients and will be happy to provide further information on request. We make every effort on our part to help keep processes stable for our clients, and we always stay in touch.

More up-to-date information in our Telegram channel.