By June 1, 2016, resident individuals  will be required to report the activity on their accounts (deposits) opened with foreign banks. 

Even though the said obligation came into existence in 2014, its practical implementation was postponed in view of the lack of a reporting procedure. The reporting rules were enacted by Government Resolution No. 1365 dated 12 December 2015 “On the Procedure for Reporting the Activity on the Accounts (Deposits) Opened with Banks Outside of the Russian Federation by Resident Individuals” (hereinafter, the “Rules”).

Please find the background information and a description of the reporting procedure, as well as of the possible liability for its non-fulfillment, in our newsletter.

1. BACKGROUND

Only resident companies and individual entrepreneurs used to be subject to the obligation to report account (deposit) activity regarding accounts and deposits in foreign banks. Government Resolution No. 819 dated 28 December 2005 prescribed a specific procedure for such reporting.

Pursuant to that procedure, resident companies and individual entrepreneurs must submit quarterly reports with respect to every account (deposit) they hold, according to the templates approved by the Government of Russia. The companies and entrepreneurs must attach the supporting bank documents (e.g., bank statements) to their reports. The documents are to be filed in the form of notarized copies and must be accompanied by notarized translations, if composed in a foreign language.

Individuals had been exempt from this obligation. However, on 21 July 2014, the newly-enacted Federal law No. 218-FZ amended para. 7 of Art. 12 of the Federal law “On Currency Regulation and Currency Control”. According to the amendments, individuals, who used to be exempt from the obligation to disclose such information, have lost this privilege.

Please be reminded that the obligation to report the opening and closing of foreign bank accounts (deposits) has been in force well before and has applied to individuals as well.

2. REPORTING PROCEDURE FOR INDIVIDUALS

According to the Rules, individuals must file reports annually by the 1st of June of the following year. The report must contain data on all foreign bank accounts (deposits).

According to the Rules, the report may be submitted via the “Personal Taxpayer’s Account” online. The Federal Tax Service has recently announced the launch of the special e-service for submitting reports via its website. The possibility to file a printed report directly with the tax authority or by registered mail with return receipt remains in force.

The report for the year 2015 must be submitted by 1 June 2016. Attaching the supporting documents is optional.

It is important to note that the Rules do not provide for the obligation to file the supporting documents (e.g., bank statements) together with the report. The taxpayer may, but is not obliged to file them. At the same time, the tax authorities can request the supporting documents and information for the purposes of currency control later – in that case, the taxpayer will be required to submit them.

3. ADMINISTRATIVE LIABILITY

At the end of November 2015, the legislator has also extended to individuals the administrative liability for failure to comply with the reporting obligation with respect to foreign account (deposit) activity (Federal law No. 350-FZ dated 28 November 2015).

The following administrative fines have been in force since 1 January 2016 (Art. 15.25 of the Administrative Offences Code):

• for non-compliance with the reporting procedure – from 2,000 to 3,000 rubles;
• for violation of reporting deadlines:
• o up to 10 days – from 300 to 500 rubles;
• o from 10 to 30 days – from 1,000 to 1,500 rubles;
• o over 30 days – from 2,500 to 3,000 rubles;
• for recurrent violations – 20,000 rubles.

4. SUMMARY

The legislator is gradually introducing a control system for monitoring the account activity of individuals abroad.

Individuals are to file their first reports as early as by 1 June 2016 – for the previous year of 2015. It is not mandatory to attach additional documents (bank statements) to the report. This will need to be done only upon the request of the tax authorities.

Violations of these rules by individuals are punishable by fines of up to 3,000 rubles, and up to 20,000 rubles for recurrent violations.