In 2022 and 2023, currency legislation underwent a large number of changes. Serious restrictions affected the requirement to repatriate currency proceeds and the procedure for conducting currency transactions through an account with an authorized bank. Certain transactions with unfriendly residents were also subject to restrictions.

Anton Kulakov, Junior Tax Consultant at Tax Compliance, shares an overview of current changes in currency legislation"

What currency restrictions are in force today and how to comply with them in foreign economic transactions?

Repatriation of foreign currency proceeds

Repatriation of currency proceeds means the obligation to return foreign currency funds to the territory of the Russian Federation. Until 2022, all income of Russian residents was subject to repatriation, except for certain transactions.

In 2022, for the first time there was a requirement for mandatory sale of received foreign currency proceeds. During the year, the percentage requirements on the amount of sale of foreign currency proceeds were repeatedly reduced. For example, the obligation to sell 80% of foreign currency proceeds under all foreign trade agreements was reduced to 50%, and as of today the Government Commission for Control over Foreign Investments in the Russian Federation has reduced the mandatory percentage of foreign currency proceeds sales to 0. 

At the same time, when fulfilling obligations under foreign trade contracts, under which residents transfer certain types of goods (most often oil and gas) to non-residents, exporters continue to be obliged to carry out the mandatory sale of foreign currency proceeds credited to accounts in foreign banks [1].

Exporters of goods suffered the most from the imposed restrictions - the sale of foreign currency in the domestic market led to a serious strengthening of the ruble exchange rate against world currencies. The CBR also noted [2] that many residents have already switched to settlements in rubles.

Currently, the currency repatriation requirement does not apply. The Presidential Decree suspended the provisions of the Law on Currency Regulation until 2026.

Transactions between resident and non-resident

In 2023, restrictions on certain currency transactions between residents and non-residents will continue to apply. These include, in particular:

• Currency transactions related to the provision of foreign currency by residents in favor of non-residents under loan agreements;
• Crediting by residents of foreign currency to their accounts (deposits) opened with banks and other financial market organizations located outside the territory of the Russian Federation;
• Transfer of funds without opening a bank account using electronic means of payment provided by foreign payment service providers.

However, in accordance with the Presidential Decree [3] , these operations can be performed, but only with the individual permission of the Government Commission for Control over Foreign Investments in the Russian Federation.

Restrictions for residents within the framework of business activities

Transfer of currency and foreign exchange to foreign banks

The rules introduced for the period 2022-2023 also affected the ability of residents to dispose of foreign currency as part of their business activities.

Currently, a resident may credit any foreign currency proceeds to its accounts (deposits) opened with banks and other financial market organizations located outside the territory of the Russian Federation. The restrictions apply to the following transactions: 

• Dividends on shares of Russian JSCs;
• Profit distributions of Russian LLCs, business partnerships and production cooperatives.

At the same time, if the relevant permission of the Government Commission is obtained, it becomes possible to distribute dividends of a Russian organization to a non-friendly resident.

Establishment of legal entities in "unfriendly" jurisdictions

The Presidential Decree [4] and the Decision of the Central Bank of the Russian Federation set restrictions on the payment for shares, stakes and other forms of participation in corporate structures of "unfriendly" states. The restrictions apply to the following transactions:

• Transactions involving payment for shares, contributions, units in the property (authorized or share capital, share fund of a cooperative) of non-resident legal entities;
• Transactions involving the payment of a contribution by residents to non-residents under simple partnership agreements with investment in the form of capital investments (joint activity agreements).

It is possible to carry out the above transactions without obtaining individual authorizations from the Bank of Russia, but one of the following conditions must be present:

• Funds are deposited in rubles or in the currency of a friendly state;
• Payment is made in the currency of the hostile state, the maximum amount of the transaction should not exceed the equivalent of 15 million rubles at the official exchange rate of the Central Bank of the Russian Federation on the date of payment.

Currency control

During 2022, there was a moratorium on currency control by the Federal Tax Service. At the same time, authorized banks continued to monitor and register all currency transactions and send information about them to the Federal Tax Service, the CBR and the FCS.

In 2023, the Federal Tax Service resumed currency control based on Government Decree No. 977 dated 28.05.2022 "On currency control measures in conditions of external sanctions pressure".

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[1] Paragraph 3 of the Protocol of 21.06.2022 N 64/4

[2] https://www.kommersant.ru/doc/6196202

[3] Presidential Decree No. 81 of 01.03.2022

[4] Decree of the President of the Russian Federation of March 18, 2022 N 126