Dear colleagues,

We would like to wish you a happy New Year!
May the coming year be peaceful, prosperous and successful!
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.

We would like to draw your attention to the recent clarifications issued by the Central Bank of Russia (hereinafter referred to as the “Central Bank”) regarding the relevant changes in legislation in accordance with the Presidential Decrees.

On 05.03.2022, Presidential Decree No. 95 “On the temporary procedure for meeting obligations to certain foreign creditors” (hereinafter referred to as Decree No. 95) was issued. Decree No. 737 of 15.09.2022 also introduces additional restrictions on payments to foreign residents – in particular, it concerns the implementation of payments to the participant in case of liquidation or reduction of shared capital (entered into force on 15.10.2022).

For which purposes it is compulsory to open a type C special account:

For payments in excess of 10 million rubles (or the equivalent in a foreign currency) per calendar month to “unfriendly” foreign counterparties, as well as to “friendly” foreign creditors, if the rights of claim on obligations passed to them fr om unfriendly foreign creditors after March 1, 2022 (Item 8 of Decree № 95) for:

• total liabilities of the debtor (including loan repayment and interest on it) on loans and borrowings, as well as payment of dividends/distribution of profits of Limited Liability Companies
• loans, borrowings, and financial instruments (including securities) of Joint Stock Companies 
• fulfillment of obligations under concluded agreements which are derivative financial instruments
• purchase of real estate fr om “unfriendly” individuals
• Disbursement of funds by residents due to reduction of shared capital, liquidation or bankruptcy proceedings of resident legal entities (or permission obtained – Decree № 737 of 15.09.2022).

Who, where and in what currency should a type C account be opened:

• A resident sends an application to a credit institution in the name of a foreign creditor for a C-type account, whereby a bank account agreement does not need to be concluded.
  A foreign creditor cannot open a C-type account on its own initiative (Letter of the Bank of Russia No. 019-12-4/2759 dated 06.04.2022).

• The C-type account is kept in rubles, is not opened in a foreign currency and cannot be opened in a foreign credit institution (clauses 3,5 of Decree No. 95).
• A bank account previously opened in the ordinary course of business will not be suitable for use as a C-type account, but depo accounts opened in the name of a foreign creditor before 24.03.2022 can be used.

When is a special account NOT needed?

• C-type accounts are not used if the aggregate amount of all debtor’s liabilities to all foreign creditors mentioned in Clause 1 of Decree No. 95 in a calendar month does not exceed 10 million rubles or its equivalent in foreign currency (at the official exchange rate of the Bank of Russia set as of the first day of the respective calendar month) or there is a permit from the Government Commission.
• If the obligation stipulated by Decree No. 95 is performed to a person who is not “unfriendly” (at the same time meeting the requirements set out in clause 12 of Decree No. 95 that the ultimate beneficiaries are the Russian Federation, its legal entities or individuals, and this information is disclosed to the tax authorities in an appropriate manner)

What is allowed when using a Type C account:

• It is possible to use a C-type account opened to a non-resident upon application of one resident for performance of obligations by other residents to the same non-resident and not to open a new C-type account.
• Transfer of funds to a non-resident to a C-type account opened with a bank different from the bank wh ere the resident is serviced.
• Transfer of rubles from a C-type account opened in favour of a non-resident legal entity of an “unfriendly” state in one credit institution to a C-type account of the same legal entity opened in another credit institution.
• There are no restrictions on residents using several C-type bank accounts for different obligations (contracts, products) in favour of one non-resident or applying one C-type account.

Limitations and specifics of the Type C account:

• Funds in the C-type account opened in the name of a foreign creditor belong to the foreign creditor from the moment the account is credited and until an agreement is concluded with the foreign creditor.
• The bank wh ere the C-type account was opened may not unilaterally close such account due to the absence of the foreign creditor’s application.
• A resident is not entitled to dispose of or request refund from a C-type bank account, except in case the funds were mistakenly credited to a C-type account. 
• Transfer by the client from a C-type bank account to another non-resident bank account (opened both in the Russian Federation and abroad) is currently not possible (without authorisation).

For which purposes money can be written off:

• payment of taxes, duties, fees and other mandatory payments payable to the budget
• transfers for the purchase of federal loan bonds
• transfers to current accounts of non-residents in the currency of the Russian Federation, as stipulated by the permit
• transfers for other transactions provided for by the permit
• payment of commissions to the authorised bank servicing the account.

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.

On 26 March 2022 the Law No. 67-FZ was adopted, later clarifications of the Ministry of Finance were published – in the Letter No. 03-12-12/1/37761 of 26 April 2022 the Ministry of Finance informed that fr om 1 January 2022 the threshold for recognizing transactions as controlled was raised to 120 million rubles instead of the previous 60 million rubles valid for transactions in 2021. Similar clarifications were also issued later by the Federal Tax Service (No. ШЮ-4-13/6548@ of 27 May 2022).

The Tax Service also previously published a letter (No. ШЮ-4-13/2724@ of 5 March 2022) on the application of discounted prices that could result in transaction losses if certain legal entities are subject to sanctions. Such circumstances should be taken into account by the tax authorities when considering transactions and price levels.

Another novelty is the non-application of the 40% penalty on unpaid tax (at least RUB 30,000) for transactions in 2022-2023, regardless of the date of the contract (Russian Tax Code, Article 129.3). However, transfer documentation defining the price corridor and level must be available. Please note that the cancellation of penalties does not remove the risk of additional tax charges from the tax authorities.

In addition to updating the lim it and removing the penalty mentioned above, a number of other changes have been spelled out in Law 67-FZ of 26.03.2022.

With the new amendments, the so-called “safe margin” for interest rates in intragroup loan agreements will change between 2022 and 2023. If the interest is within this range (not above the maximum and not below the minimum), the company may recognise it as an expense in full for tax purposes. If the interest rate is outside this range, there is a risk of the expense not being recognised.

Based on the example of the euro (Euro short-term rate), the following interest rate ceilings for liabilities denominated in euro will be established as of 1 January 2022 (for USD or any other currency other than RUB, the values will be equivalent, applying the rates corresponding to the currency, such as SOFR for USD, SHIBOR for CNY, SONIA for GPB):

Minimum: STR rate in EUR +0% (previously stated as + 4% in the Tax Code);

Maximum: STR rate in euros +7% (+5% for SARON rates and contracts in Swiss francs, TONAR and Japanese yen).

For ruble-denominated liabilities, a range of 0 to 180% of the Bank of Russia key rate (previously 75 to 125%) has been adopted.

The interest rate ceilings for debt instruments have also been modified: for loans, overdrafts and intercompany receivables denominated in a foreign currency from 1 January 2022 to 31 December 2023, the maximum rate will be that of 01.02.2022 (86.5032 for euro); interest on liabilities during these two years will be determined at the rate on the last day of the reporting period and must not be higher than the rate on 01.02.2022.

Changes are also made to the calculation of the thin capitalisation rule – the value of liabilities (existing before 01.03.2022) in foreign currency for the purposes of controlled debt is determined at the regulatory rate on the last reporting day, and the rate cannot be higher than the rate set by the Central Bank as of 01.01.2022.

We would also like to point out that as a result of the suspension of tax information exchange between Russia and certain countries, Russian tax residents who are members of an international group of companies will have to send a “Country Report” to the tax authorities upon request. It is currently known that the UK (from 17.03.2022), Germany (from 01.04.2022), USA (from 05.04.2022) have temporarily stopped the exchange of tax information with the Russian Federation.

On 08.09.2022, the President of the Russian Federation issued Decree No. 618 which established a special procedure for transactions with shares in the authorised capital of limited liability companies (“OOO”).

In particular, these are 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.

Now, for the purposes of performing the above transactions involving persons from foreign countries who commit unfriendly acts against the Russian Federation, permits issued by the Government Commission for the Control of Foreign Investment in the Russian Federation are required and, if necessary, must contain the conditions for performing such transactions.

The new rules do not apply to entities in the financial and fuel and energy sectors.

It is expected that the procedure for issuing the above permits by the Government Commission for Control of Foreign Investment in the Russian Federation will be approved by the Russian Government within 10 days after the Decree is issued.

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.