HARSHER COURT PRACTICE IN CASES CONCERNING THE FILING OF STATEMENTS WITH BANKS FOR CURRENCY CONTROL PURPOSES
Pepeliaev Group advises that court practice has become harsher in cases on filing statements with banks for currency control purposes.
In relation to currency transactions undertaken, residents must supply an authorised Russian bank with so-called accounting and reporting forms for currency transactions [1]. These are statements concerning:
- the receipt of Russian currency (i.e. roubles) [2];
- currency transactions (i.e. transactions involving foreign currency) [3];
- supporting documents (i.e. relating to transactions in kind which are connected with currency transactions) [4].
There is a fine for compiling accounting and reporting forms incorrectly or failing to file them on time [5].
In judicial practice, there continue to be disputes which end up in court between residents and offices of the financial regulatory authority Rosfinnadzor on the issue of how to determine how many breaches of legislation there have been if the deadline has not been complied with for notifying particular operations on a statement submitted to a bank. The question is whether to calculate according to the number of transactions or number of statements.
STATEMENT ON SUPPORTING DOCUMENTS
In its resolution published on 29 July 2011, the Presidium of the Russian Supreme Arbitration Court (the “SAC”) agreed with Rosfinnadzor on the issue of providing statements on supporting documents [6].
The same statement may deal with several import or export transactions in accordance with shipping and customs documents under a single transaction passport, i.e. under a single contract.
However the 15-day time limit for filing the statement and supporting documents runs from when declared goods are released or goods already released are declared, as marked on the customs declaration [7].
This rule differentiates the export and import of goods which are subject to customs control from (i) the performance of work, rendering of services, assignment of intellectual property rights, and export and import of goods which are not subject to customs control [8], and (ii) from the receipt of Russian roubles [9]. In cases involving export and import under customs control, the filing deadline runs from the day when the goods are cleared at customs. In the other cases, the filing deadline runs from the end of the reporting month when the transaction took place.
This means, according to Presidium ruling, that, if a resident fails to meet the deadline for filing a statement on supporting documents, each unreported instance of the import and/or export of goods which requires customs clearance constitutes a separate infringement even if all of the instances of import and/or export which are notified late in the statement took place within a 15-day period and so could validly have been set out in the same statement.
PEPELIAEV GROUP’S COMMENTS
It follows from the resolution relating to the statement on supporting documents that the Presidium of the SAC, when resolving the issue of the number of infringements, will be guided by the procedure for calculating the time period for filing reporting and accounting forms.
If the time period runs from the end of the reporting month (in which the roubles, work and services, intellectual property or goods are received, which are not subject to customs control), then, a month later, only one infringement may be committed and punished (in respect of a single contract in relation to the statement on supporting documents and in respect of a single bill in relation to the receipt of roubles).
If the time period is calculated from the date on which the transaction is completed (goods which are subject to customs control), then each transaction which is not notified on time will constitute a separate infringement, even if these transactions took place within a fifteen day period so could have been dealt with in a single statement.
The new legal position of the Presidium of the SAC will have to be followed in future disputes and pending cases (i.e. including those appealed to the higher courts). The Resolution of the Presidium of the SAC contains a provision for judicial decisions in completed cases to be reviewed, though under article 317(21) of the Arbitration Procedural Code, when such a review takes place, the position of a person who has been held liable may not be made worse.
STATEMENT OF RECEIPT OF RUSSIAN CURRENCY (ROUBLES)
The Presidium of the Russian Supreme Arbitration Court has previously set out its legal position in relation to the procedure for providing a statement concerning the receipt of Russian currency (roubles) [10], rejecting the position of the regulator:
- a single statement may deal with several currency transactions for Russian roubles to be credited to a single account in a single reporting month based on different transactions (and so-called transaction passports), on different days and under different payment documents;
- a resident's failure to comply with the obligation to file a statement in relation to several currency transactions involving Russian roubles being credited to one account in one reporting month constitutes a single breach for which a resident may be held liable only once.
After the resolution referred to above of the Presidium of the SAC was adopted, a similar approach could have been expected in relation to other forms of reporting and accounting for currency transactions and to statements on supporting documents and currency transactions.
However, as follows from the recent resolution relating to the statement on supporting documents, the fact that it is possible to deal with transactions in a single statement does not dictate how many infringements have been committed.
STATEMENT ON CURRENCY TRANSACTIONS
By now, it is also possible to suggest what the courts' legal position will be in relation to another accounting and reporting form: the statement on currency transactions.
When funds are debited from an account under a currency transaction, a statement on currency transactions is to be filed before the debit, i.e. technically, the deadline may not be breached when currency is debited from an account.
When funds are credited to a resident’s account under a currency transaction, the time period for filing a statement on currency transactions is 15 calendar days and runs from the date of receipt of the funds [11].
One statement may deal with several transactions involving the receipt of currency completed within the fifteen days prior to the statement being filed, including on different dates, involving different bank accounts and contracts, and in different currencies.
However, the rules for calculating the time period for filing statements on currency transactions - from the date of receipt - signify that each item not received on a timely basis forms a separate infringement, even if all items were received within 15 days and could have been dealt with within one statement.
POSSIBLE WAYS FOR COURT PRACTICE TO DEVELOP
It should be noted that the supervisory proceedings No. VAS-140/10 have been suspended because the Plenum of the SAC is working on a resolution on issues concerning administrative liability for infringing currency legislation. Up to now, such a resolution has not been adopted, but it may be adopted in the foreseeable future.
It is not currently likely that court practice will become less harsh in relation to the filing of statements with authorised banks for currency control purposes. However, those involved in foreign trade activity may put to the SAC their position that the punitive burden is excessive in terms of having to pay a fine for each transaction which is not notified in time. Because a resident, when complying with the law, is entitled to deal with several transactions in a single statement, it would be more proper to determine the fine according to the lowest number of statements that had to be filed, taking account of when the transaction was performed and the time period for filing the statement.
We currently recommend that care be taken to comply with time periods for filing statements on supporting documents (for goods subject to customs control) and on funds being received under a currency transaction.
[1] Article 5(4) and article 24(2)(2) of Federal Law No. 173-FZ dated 10 December 2003 On currency regulation and currency control, and Bank of Russia's Instructions No. 1950-U dated 10 December 2007.
[2] Clause 2.6 of the Bank of Russia's Regulations No. 258-P dated 1 June 2004, Clause 2.3.2 of the Bank of Russia's Instructions No. 117-I dated 15 June 2004.
[3] Clause 1.2 of the Bank of Russia's Instructions No. 117-I dated 15 June 2004.
[4] Clause 2.2 of the Bank of Russia's Regulations No. 258-P dated 1 June 2004 (statements on confirming documents must contain references to shipping and customs documents which confirm the import and/or export of goods).
[5] The fine is from RUB 40,000 to RUB 50,000 for legal entities and from RUB 4,000 to RUB 5,000 for individuals – article 15.25(6) of the Russian Code of Administrative Offences.
[6] Resolution No. 140/10 of the Presidium of the SAC dated 14 June 2010.
[7] Second and third paragraphs of clause 2.4 of the Bank of Russia's Regulations No. 258-P dated 1 June 2004.
[8] Fourth paragraph of clause 2.4 of the Bank of Russia's Regulations No. 258-P dated 1 June 2004.
[9] Cause 2.7 of the Bank of Russia's Regulations No. 258-P dated 1 June 2004.
[10] Resolution No. 17039/09 of the Presidium of the SAC dated 6 April 2010.
[11] Clause 1.2 of the Bank of Russia's Instructions No. 117-I dated 15 June 2004.
For further information, please contact:
in Moscow – Ivan Khamenushko, Senior Partner, at: (495) 967-0007 or by e-mail; Peter Popov, Senior Associate, at: (495) 967-0007 or by e-mail; Lubov Romaschenko, Senior Associate, at: (495) 967-0007 or by l.romaschenko@pgplaw.ru
in St Petersburg - Sergey Sosnovsky, Head of Tax Practice (St. Petersburg), at (812) 640-60-10 or by e-mail