Currency Regulation in the Russian Federation
5.1 Basic Concepts
The currency regulation system of the Russian Federation is based on the assumption that certain currency operations stipulated by the Central Bank of the Russian Federation may only be carried out with the possession of a licence obtained from the Central Bank. Obtaining such a licence takes from one to several months and requires that a number of documents be submitted.
Violations of the existing procedure for currency operations procedure entail penalties in the form of an exaction of 100% of the amount of the transaction to the budget of the Russian Federation.
Goods (work, services) may not be sold for foreign currency cash in the Russian Federation. For shopping purposes, foreign individuals may exchange hard currency cash into roubles in special currency exchange offices.
5.2 Regulating Operations Denominated in the Currency of the Russian Federation
Russian legal entities are free to effect unlimited settlements with each other in roubles. Russian legal entities involved in rouble transactions with foreign legal entities should follow the procedure established by the Central Bank of the Russian Federation, as such transactions are considered currency operations.
Russian legal entities must carry out all export and import transactions and transfer roubles and rouble-denominated securities across the border according to a special procedure established by the Central Bank of the Russian Federation.
There are certain restrictions imposed on foreign legal entities with regard to the following operations carried out in the Russian Federation in roubles:
- settlements between Russian and foreign legal entities;
- purchasing and using roubles in the Russian Federation; and
- the export and transfer of roubles and rouble-denominated securities from the Russian Federation, as well as the import and transfer of roubles and rouble-denominated securities into the Russian Federation.
Foreign legal entities are able to open foreign currency bank accounts in Russia without a license from the Central Bank of Russia.
Foreign legal entities may also open three types of rouble accounts in Russia: a current (T-type) account, an investment (I -type) account and a special (C-type) account, with no restrictions.
A T-type account is used for servicing export and import transactions and maintaining the operations of the representative office or branch in Russia. This account may be used for paying obligatory taxes, making social insurance contributions and covering other expenses related to the local office's operations.
An I-type account is used for various investment activities, including payments in transactions involving the sale/purchase of assets with foreign investment..
A C-type account is used to invest in Russian government securities.
Each of these accounts may only be used in accordance with the procedure established by the Central Bank of the Russian Federation and has certain restrictions.
5.3 Currency Regulation of Operations Carried out by Russian Legal Entities
In order to open bank accounts outside the Russian Federation, Russian legal entities must obtain a special licence from the Central Bank of the Russian Federation.
There are no restrictions imposed on Russian legal entities with regard to opening foreign currency accounts
in Russian banks in the Russian Federation and carrying out the following transactions:
- hard currency bank transfers to and from the Russian Federation for prompt settlement of payments for exported and imported goods, (work, services, results of intellectual activities) without deferral of payment, and for making settlements under export-import loan agreements concluded for less than 90 days;
- receiving and extending financial loans for less than 180 days;
- bank transfers to and from the Russian Federation of interest, dividends and other income on deposits, investments, loans and other capital flow operations;
- bank transfers of a non-trading nature to and from the Russian Federation, including transfer of salaries, pensions, alimony, inheritance and other similar transactions;
- bank transfers of foreign currency from the Russian Federation as payment for imported goods, work (services) after these goods have been imported into the Russian Federation or the work (services) has been accepted;
- posting foreign currency to currency accounts opened in an authorised bank in the Russian Federation as payment for exported goods (work, services) before these goods have been cleared through customs and the work and services have been accepted; and
- a number of other transactions specified by the Central Bank of the Russian Federation.
Foreign currency operations other than those listed above may only be carried out by Russian legal entities that have obtained a special licence from the Central Bank of the Russian Federation. Such operations are considered capital movement operations.
Currency operations related to capital movement include:
- direct investments, i.e. contributions to a company's charter cap ital made in order to generate revenue and to obtain the right to participate in the management of the company;
- portfolio investments, i.e. acquisition of securities;
- transfer of payments for rights of title to buildings, constructions and other property including land and its resources, which, under the laws of the country where they are located, are considered real estate property and also payments for other real estate property rights;
- granting and receiving a payment extension of more than 90 days with respect to the export and import of goods, work, services, results of intellectual activity; and
- loans to/from foreign companies for a period exceeding 180 days.
All earnings received by Russian legal entities in foreign currency from the export of goods, work and services must be credited to their accounts in authorised banks in the Russian Federation, unless the Central Bank of Russia has stipulated different payment arrangements.
75% of export revenue received by Russian legal entities in foreign currency are to be sold through Russian banks on the local currency market.
Russian legal entities may buy foreign currency on the local currency market in order to pay invoices of foreign suppliers or to make interest and dividends payments. To this end, they authorise their bank to purchase foreign currency Prior to acquiring foreign currency for making payments for imported work, services and results of intellectual activity exceeding the equivalent of 10,000 USD, Russian legal entities must obtain a statement from currency control authorities confirming that the necessity to acquire foreign currency to make such payments is justified.
5.4 Currency Regulation of Operations Carried Out by Foreign Legal Entities
Foreign legal entities are free to remit, import and transfer currency valuables into the Russian Federation in
an unrestricted fashion, provided customs regulations are followed.
Foreign legal entities are free to remit, export and transfer currency valuables from the Russian Federation, provided customs regulations are followed, if these currency valuables have been earlier remitted, imported or transferred into the Russian Federation or purchased in the Russian Federation in accordance with the legislation of the Russian Federation. Otherwise, transfer and export of currency valuables from the Russian Federation are subject to restrictions stipulated by the Central Bank of the Russian Federation.
Representative offices and branches of foreign legal entities in the Russian Federation have all the rights of foreign legal entities and are not required to obtain special licences from the Central Bank of the Russian Federation in order to carry out foreign currency operations.
Representative offices and branches may receive payments in foreign currency in their currency accounts without restrictions and are exempt from the mandatory conversion of 75% of their currency earnings, which is applicable to Russian legal entities. Furthermore, transfers of funds between a head office and its Russian representative office or branch can be carried out without restrictions. Foreign legal entities are entitled to open bank accounts outside Russia to conduct the operations of its representative offices or branches located inside the Russian Federation without obtaining special permission from the Central Bank of the Russian Federation.
5.5 Penalties For Violating Currency Regulations
Russian and foreign legal entities violating currency regulations are subject to the following penalties:
- exacting to the budget 100% of amounts received from transactions performed in violation of currency legislation of the Russian Federation; and
- and exacting to the budget 100% of the amounts received as the result
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