The Ministry of Finance together with Rosfinmonitoring, the Bank of Russia and the Federal Tax Service have finalized the draft Resolution of the Government of the Russian Federation, which clarifies the procedure for updating information on tax residency, previously received by the Financial Market Organization (FMO) from its clients. 

The report emphasizes that the data of the remote service channels of the OFR will not be the basis for automatic recognition/non-recognition of the client as a tax resident of this or that state, but will only be the basis for requesting the client to update the information. Alexey Stanchin, Head of Tax Practice at TC, commented for RBC on the prospects of the new mechanism.

Effectiveness of the mechanism and possible risks

In terms of efficiency, according to numerous materials of tax audits, we can say that at the moment the infrastructure of banks is aimed at solving slightly different tasks. 

Based on our experience, most often banks provide the tax authorities with information only on the methods of authorization of clients in the bank. Authorization takes place using logins and passwords that bank clients receive when opening a personal account. At the same time, as practice shows, in most cases banks do not have information about MAC addresses of their clients, and in some cases banks do not even know the actual phone numbers of their clients. Such a conclusion can be drawn from the answers provided by banks to the requirements of the tax authority. 

Also, based on the banks' responses to the requirements, we can conclude that they mainly provide the tax authority with data on IP-addresses from which the client-user accessed the bank, but the degree of detail varies from bank to bank. In addition, our experts have not yet encountered in the responses an indication of whether the address is static or dynamic, which also affects the ability to determine residency. 

Thus, at the moment, from the information and data available to us, bank updating will not replace the record of residence days performed by passport control. This is due to the fact that bank information on residency status is based on indirect factors, which can be challenged by providing evidence of movement. 

It should also be noted that at the moment, given the geopolitical situation, some users have switched to cards of foreign banks, which also reduces the efficiency of information exchange between banks and the tax authority. However, if Russian cards will be accepted abroad again, the efficiency of interaction between banks and the tax authority in terms of determining the status of a resident will be able to increase.

Impact of the new actualization mechanism on the work of the FTS 

From the analysis of available reports, the mechanism of actualization through banks is a reason to request data from the taxpayer. This follows from the decree of the Government of the Russian Federation from 16.06.2018 № 693 «On the implementation of the international automatic exchange of financial information with the competent authorities of foreign states (territories)». Updating the information will help banks acting as tax agents to correctly determine the amount of tax payments. 

We can assume that as soon as banks will receive information on changes in the resident status through their internal channels, the relevant information will be sent to the tax authority. 

It should be noted that it is not yet known whether the information of the tax authorities on the automatic determination of residency will be available for verification by the taxpayer itself or whether there will be an exchange of data solely between the tax authority and banks.