01.09.2017
Letter of the Federal Tax Service dated July 16, 2017 N ZN-3-17/5523 expresses the controversial position of the tax authority on recognizing all foreign exchange transactions on the accounts of residents of the Russian Federation in foreign banks as illegal due to the failure to provide notifications and reports on such accounts.
A letter from the Federal Tax Service is a non-regulatory document, and its provisions are of an informational and explanatory nature. In this case, the authority expressed its position on violations of currency legislation by residents of the Russian Federation, in the first part of the letter citing the provisions of legislative acts, namely the norms of the Federal Law of December 10, 2003 N 173-FZ “On Currency Regulation and Currency Control” (hereinafter referred to as Law No. 173 -FZ). In particular, rules were introduced establishing the obligation of residents to notify the tax authority about the opening of accounts in foreign banks, as well as about changes in account details and their closure. In addition, the text of the Letter mentioned the obligation of a resident of the Russian Federation to submit a report on the movement of funds in accounts. For failure to fulfill these duties, administrative liability is provided (Article 15.25 of the Code of Administrative Offenses of the Russian Federation, hereinafter referred to as the Code of Administrative Offenses of the Russian Federation).
Having listed the legislative framework, the Federal Tax Service comes to the conclusion that "currency operations using funds in accounts (deposits) in banks located outside the territory of the Russian Federation, according to which Resident individuals have not submitted notifications and reports to the tax authorities at the place of their registration, in violation of the requirements of parts 2 and 7 of Article 12 of Law N 173-FZ, which, in the opinion of the Federal Tax Service of Russia, will also constitute illegal currency transactions.” Moreover, such a conclusion is not based on the law, because does not follow from the norms of the relevant acts given in the letter itself.
The definition of illegal currency transactions is given in Part 1 of Art. 15.25 of the Code of Administrative Offenses of the Russian Federation: “prohibited by the currency legislation of the Russian Federation or carried out in violation of the currency legislation of the Russian Federation, including the purchase and sale of foreign currency and checks (including traveler’s checks), the nominal value of which is indicated in foreign currency, bypassing authorized banks, or the implementation of currency transactions, settlements for which were made, bypassing accounts in authorized banks or accounts (deposits) in banks located outside the territory of the Russian Federation, in cases not provided for by the currency legislation of the Russian Federation, or carrying out foreign exchange transactions, settlements for which were made using funds credited to accounts ( deposits) in banks located outside the territory of the Russian Federation, in cases not provided for by the currency legislation of the Russian Federation.” As we can see, there is no mention here of such a sign of an illegal currency transaction as failure to provide a notification and/or report on the flow of funds. These are independent offenses for which separate administrative liability is provided.
At the same time, Law N 173-FZ also does not contain rules by which a currency transaction could be qualified as illegal due to the fact that it was carried out on the account of a resident of the Russian Federation without prior submission of notification and/or a report on the movement of funds in the account.
The opinion of the Federal Tax Service regarding the issue of illegality of the mentioned operations, as indicated in the Letter itself, is not a legal norm and does not entail legal consequences. One can make an assumption as to why such an opinion arose and for what purpose it was stated in an official document. With such actions, tax authorities can encourage residents of the Russian Federation who have not yet submitted notifications and reports on foreign accounts to transfer information, including by listing penalties for violations of currency legislation.
Question: On administrative liability for violation by a resident of the Russian Federation of the procedure for submitting notifications and reports on the movement of funds in accounts (deposits) in banks outside the Russian Federation and on the transfer of funds from these accounts.
Answer: The Federal Tax Service, having considered the online appeal, reports the following.
The lack of specific documents and information that would allow us to assess the terms of contractual obligations between the parties and other circumstances related to them does not allow us to give full answers to the questions specified in the appeal.
At the same time, we consider it possible to report the following.
The definition of the concepts of resident and non-resident for the purposes of the currency legislation of the Russian Federation is not related to the concept of a tax resident of the Russian Federation.
In accordance with subparagraph "a" of paragraph 6 of part 1 of Article 1 of Law No. 173-FZ, residents are recognized as individuals who are citizens of the Russian Federation, with the exception of citizens of the Russian Federation who permanently reside in a foreign state for at least one year, including those who have an authorized a residence permit issued by a government agency of the relevant foreign state, or temporarily staying in a foreign state for at least one year on the basis of a work visa or study visa with a validity of at least one year or on the basis of a combination of such visas with a total validity of at least one year.
Federal Law of December 10, 2003 N 173-FZ “On Currency Regulation and Currency Control” (hereinafter referred to as Law N 173-FZ) established the obligation for residents to submit to the tax authorities at the place of their registration notifications about the opening (change of details, closure) of accounts ( deposits) in banks located outside the territory of the Russian Federation (hereinafter referred to as the notification), and reports on the movement of funds in such accounts (deposits) (hereinafter referred to as the report).
In accordance with Part 2 of Article 12 of Law N 173-FZ, residents are required to notify the tax authorities at the place of their registration about the opening (closing) of accounts (deposits) and about changes in the details of accounts (deposits) no later than one month from the date of opening (closing) or changes in the details of such accounts (deposits) in banks located outside the territory of the Russian Federation, in the form approved by Order of the Federal Tax Service of Russia dated September 21, 2010 N ММВ-7-6/457@ "On approval of forms of notifications of opening (closing), changes details of an account (deposit) in a bank located outside the territory of the Russian Federation, and about the existence of an account in a bank outside the territory of the Russian Federation."
For failure by a resident to submit a notification to the tax authority, paragraph 2.1 of Article 15.25 of the Code of the Russian Federation on Administrative Offenses (hereinafter referred to as the Code of Administrative Offenses of the Russian Federation) imposes administrative liability on citizens in the form of a fine in the amount of four thousand to five thousand rubles.
For a resident submitting a notification to the tax authority in violation of the established deadline and (or) not in the prescribed form, paragraph 2 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation establishes administrative liability for citizens in the form of a fine in the amount of one thousand to one thousand five hundred rubles.
According to Part 7 of Article 12 of Law N 173-FZ, reports are submitted in the manner established by Decree of the Government of the Russian Federation dated December 12, 2015 N 1365 “On the procedure for the submission by resident individuals to tax authorities of reports on the movement of funds on accounts (deposits) in banks outside the territory Russian Federation" (hereinafter referred to as the Rules).
By virtue of paragraph 2 of the Rules, reports are submitted annually before June 1 of the year following the reporting year (with the exception of the cases specified in paragraph 9 of the Rules).
Failure to comply with the procedure for submitting reports and (or) supporting bank documents, in accordance with Part 6 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation, entails the imposition of an administrative fine on citizens in the amount of two thousand to three thousand rubles.
In the event of repeated commission of an administrative offense (from the date of entry into force of the resolution on the imposition of an administrative penalty until the expiration of one year from the date of completion of execution of this resolution), expressed in the failure to submit reports in the manner established by the currency legislation of the Russian Federation, a citizen of the Russian Federation who is a resident, may be brought to administrative liability again in accordance with Part 6.5 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation with the imposition of an administrative fine in the amount of twenty thousand rubles.
For violation by citizens of the established deadlines for submitting reports and (or) supporting bank documents for no more than ten days, a warning or the imposition of an administrative fine in the amount of three hundred to five hundred rubles is provided (Part 6.1 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation); for more than ten, but not more than thirty days - the imposition of an administrative fine in the amount of one thousand to one thousand five hundred rubles (part 6.2 of article 15.25 of the Code of Administrative Offenses of the Russian Federation); for more than thirty days - the imposition of an administrative fine in the amount of two thousand five hundred rubles to three thousand rubles (part 6.3 of article 15.25 of the Code of Administrative Offenses of the Russian Federation).
According to Article 4.4 of the Code of Administrative Offenses of the Russian Federation, when a person commits two or more administrative offenses, an administrative penalty is imposed for each administrative offense committed.
Additionally, we inform you that information on the procedure and methods for notifying a resident about accounts is posted on the official website of the Federal Tax Service of Russia (www.nalog.ru) in the “Accounting for Organizations and Individuals” section, subsection “Bank Accounts”.
Regarding the legality of a foreign exchange transaction involving the transfer of funds in foreign currency from an account opened in a bank located outside the territory of the Russian Federation, we inform you as follows.
In accordance with Article 6 of Law No. 173-FZ, currency transactions between residents and non-residents are carried out without restrictions, with the exception of currency transactions provided for in Article 11 of Law No. 173-FZ.
Currency transactions between residents are prohibited, with the exception of transactions listed in Article 9 of Law No. 173-FZ. Such exceptions include, among other things, transactions involving the transfer by a resident individual of foreign currency to the Russian Federation from accounts opened in banks located outside the territory of the Russian Federation in favor of other resident individuals to their accounts in authorized banks.
Carrying out illegal currency transactions, that is, currency transactions prohibited by the currency legislation of the Russian Federation or carried out in violation of the currency legislation of the Russian Federation, in accordance with paragraph 1 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation, entails the imposition of an administrative fine on citizens in the amount of three-quarters to one of the amount of the illegal currency transaction.
Taking into account the above, we draw your attention to the fact that currency transactions using funds in accounts (deposits) in banks located outside the territory of the Russian Federation, for which resident individuals report to the tax authorities at the place of their registration in violation of the requirements of parts 2 and 7 of Article 12 According to the Federal Tax Service of Russia, notifications and reports not submitted under Law No. 173-FZ will also constitute illegal currency transactions.
To obtain clarification on the application of legislation on currency regulation and currency control, we also recommend using the online service on the main page of the official website of the Federal Tax Service of Russia (www.nalog.ru) in the “Frequently Asked Questions” section.
This clarification (letter) is not a normative legal act, does not entail changes in the legal regulation of currency relations, does not contain norms entailing legal consequences for an indefinite number of persons, is of an informational nature and does not prevent residents (non-residents) from following the norms of the currency legislation of the Russian Federation in the understanding different from the provisions of this letter.
Valid
state councilor
Russian Federation
The Federal Tax Service of Russia commented on its position on the possible recognition of transactions on accounts in foreign banks as illegal. An illegal currency transaction, in turn, is fraught with a fine ranging from 75% to 100% of the transaction amount.
This tough position of the Federal Tax Service has attracted enormous attention from both tax experts and foreign account holders. The Bell agency sent an official request to the Federal Tax Service with a request to clarify the position stated in the letter. The Federal Tax Service responded to the request very quickly, and their response is briefly as follows:
- On the one hand, the position given in the letter of the Federal Tax Service of Russia dated July 16, 2017 No. ZN-3-17/ “is a response to the specific situation described by the applicant in the appeal.” That is, the specified letter seems to be an answer to a private question.
- On the other hand, the Federal Tax Service once again confirmed “that if a currency transaction on a foreign account is carried out in violation of the requirements of currency legislation, then the violator may be brought to administrative liability as provided for in Part 1 of Article 15.25 of the Code of Administrative Offenses of the Russian Federation” (let me remind you that Part 1 of Art. 15.25 of the Code of Administrative Offenses provides for a fine of 75% to 100% of the transaction amount).
- And now, in my opinion, the most important thing. The Federal Tax Service said that in the event of identifying accounts opened in foreign banks for which notifications of opening and/or cash flow statements were not submitted, the tax authorities “will examine foreign exchange transactions carried out on these accounts to determine their compliance with the requirements of foreign exchange legislation.”
The full text of the response from the Federal Tax Service can be found.
I would like to dwell on the last point in more detail. In essence, the Federal Tax Service, intentionally or unintentionally, spoke about the administrative procedure that tax officials should follow if a currency resident did not notify about the opening of an account or did not file a cash flow report, and information about such an account became available to the tax authorities.
Thus, without notifying the Federal Tax Service about an open account in a foreign bank or without submitting a report on the flow of funds in the account, you risk not only receiving a fine for these violations (from 3 to 20 thousand rubles), but also receiving a detailed audit of all your transactions on this account from the tax service. As part of such a check, the Federal Tax Service has the right to request copies of bank account statements, as well as your explanations for them. The deadline for submitting all documents cannot be less than 7 working days (clause 3, clause 1, article 23 of the Law on Currency Regulation and Currency Control), but, for example, it can be 8 days. In this case, all bank statements must be officially translated into Russian, with notarization of the translation.
The problem may be that many standard transactions that are carried out on accounts in foreign banks are nevertheless prohibited from the point of view of the Foreign Exchange Regulation and Control Law. Here are 5 examples of such “illegal” operations:
Example 1
A Russian citizen who permanently resides in the Czech Republic (OECD member) and comes to Russia twice a year sells his house located in the Czech Republic. Money from the sale is credited to an account in a Czech bank. This is an operation not permitted by law, the fine is from 75% to 100% of the sale amount.
Example 2
A Russian citizen permanently residing in Bulgaria (not a member of the OECD or FATF), and coming to Russia once a year, rents out a house located in Bulgaria. The rent is credited to an account in a Bulgarian bank. This is an operation not permitted by law, the fine is from 75% to 100% of the rental amount.
Example 3
A Russian citizen, permanently residing in New Zealand (member of the OECD and FATF), and coming to Russia twice a year, is selling his car. The proceeds from the sale are credited to a New Zealand bank account. This is an operation not permitted by law, the fine is from 75% to 100% of the sale amount.
Example 4
A Russian citizen who permanently resides in Germany and comes to Russia a couple of times a year works as a private entrepreneur (Einzelunternehmen - an analogue of an individual entrepreneur in Russia). Crediting income from business activities is an operation not permitted by law, the fine is from 75% to 100% of the amount of receipts from clients.
Example 5
A Russian citizen who permanently resides in Australia and comes to Russia once a year submits a tax return (tax return) and receives a tax refund (refund) from the Australian Taxation Service. This is an operation not permitted by law, the fine is from 75% to 100% of the amount of the returned tax.
Thus, to summarize the above, failure to notify about opening an account with a foreign bank or failure to submit a cash flow statement could potentially attract closer attention from the Federal Tax Service to you and your accounts. By the way, when submitting a cash flow statement, you do not need to attach copies of bank statements to it.
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