Fourth stage of the ‘capital amnesty’: the conditions are the same, but new items to declare have arisen

Pepeliaev Group advises that on 14 March 2022 the law[1] on the fourth stage of the ‘capital amnesty’ came into force. This law was adopted at the initiative of the Russian Government. Still, the ‘amnesty’ has a procedural form for the voluntary declaration by individuals of assets (filing a special declaration).

As in the previous stages of the ‘amnesty’, it is possible to declare real estate, the right to participate in organisations that are not recognised as controlled foreign companies (CFCs), as well as CFCs and monetary funds on foreign accounts. As in the third stage of the ‘amnesty’, it is required to redomicile CFCs in Russia in special administrative areas (Oktyabrsky Island and Russky Island),[2] as well as to repatriate monetary funds on foreign accounts. However, now it is necessary to repatriate all, and not only declared, funds and financial assets from foreign accounts (at least this is what the literal text of the law means).

New items to declare have emerged:

  • other financial assets (derivative financial instruments), in addition to securities, provided that they are transferred to a Russian account in the relevant financial market institution;

  • cash - provided that it is deposited in a Russian bank account not later than 30 calendar days after filing a special declaration;

  • vehicles - subject to their registration in the Russian register.

Filing a declaration gives an exemption from the collection of taxes (except for profit tax of CFCs) and from liability for tax or customs violations committed before 1 January 2022 in connection with the acquisition and possession of declared items.

As part of the third stage of the ‘amnesty’, the Russian Ministry of Finance explained that the indication as of the beginning of the year (then, 2018) covers the tax periods that expired before it, when the tax obligation should be considered to have arisen,[3] although the deadline for paying tax for a later previous year comes later. In the absence of other explanations, the same approach can be applied to the fourth stage: the declaration gives an exemption from collection, including taxes for 2021 (with the exception of tax on the profit of CFCs).
In terms of currency violations, transactions performed before the declaration is filed will be considered legal, and in terms of declared cash, before the expiration of 30 days from the day when the declaration was filed. If for a violation of currency restrictions imposed by recent decrees of the Russian President, in practice, liability will be imposed as for currency violations, then the new law raises the question of whether it is possible to lawfully avoid such liability.

As before, the exemption applies if the procedure for identifying and preventing the relevant violation had not started before the declaration was filed.

The special declaration must be filed by the end of February 2023. It can be submitted only once, and adjusted special declarations are not provided for. If the declaration has been filed at any of the previous stages, a new one can be submitted.

What to think about and what to do

Individuals interested in mitigating the risks of owning assets and ready for their disclosure in the Russian jurisdiction may consider filing a special declaration.

Help from your adviser

Pepeliaev Group’s lawyers have provided legal support to clients who participated in previous stages of the special declaration and are ready to provide legal support within the current stage.

[1] Federal Law No. 48-FZ dated 9 March 2022.
[2] The State Duma is considering draft laws introduced by the Russian Government that mitigate the redomiciliation procedure and update the tax regime for redomiciled international companies.
[3] Letter No. 03-04-05/93986 of the Russian Ministry of Finance dated 24 December 2018.

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