Broadening information exchange between the Bank of Russia and the Russian Federal Tax Service

The draft of the federal law “On amending articles 86 and 102 of part I of the Russian Tax Code” (the “draft law”) proposes to establish the possibility for the tax authorities to obtain information and documents from the Bank of Russia that contain a bank secret and the personal data of individuals, and provides for the tax secret regime with respect to the information and documents transferred to the Bank of Russia by the tax authorities.

As noted in the executive summary of the regulatory impact assessment, amendments are needed because tax authorities have no possibility to obtain documents and information, including those that constitute a bank secret and contain personal data, from the Bank of Russia under the procedure established by law, and because the Bank of Russia is not able to obtain documents and information that constitute a tax secret. The draft law is aimed at tax authorities receiving such information from the Bank of Russia on a regular basis for the purposes of increasing the efficiency of the work of tax authorities in order to identify schemes of the illegal minimisation of tax obligations. Partly, the draft law enshrines the already existing practice of information exchange between the Russian Federal Tax Service and the Bank of Russia on a number of issues within the framework of tax control and bank supervision. The draft law's provisions are of a framework nature. The specific procedure for providing tax authorities with the above documents and information, as well as the list of it, will be determined in an agreement between the Bank of Russia and the Russian Federal Tax Service. It is hard to tell how limited the list will be before the text of the agreement appears. In reality this list can be broad to the maximum extent. The text of the explanatory note indirectly points to this. Though it does not follow from the text of the draft law which was published, the explanatory note declares that, as a result of such amendments, the Russian Federal Tax Service will be able to obtain and use all information concerning the activity of an audited taxpayer, including information about transactions on accounts of both credit institutions opened in local offices of the Bank of Russia and of transactions on accounts of clients of credit institutions, and to obtain any reports of credit and non-credit financial institutions provided for by internal regulations of the Bank of Russia. This will allow a risk-oriented approach to be applied more efficiently when subjects for tax control are selected[1]. Most likely, the tax authorities will be able to obtain such information without a request to the Bank of Russia and/or credit institutions as happens currently in the majority of cases. Please note that based on the published draft law it cannot be concluded that the new powers of the Russian Federal Tax Service will not cover information and documents of individuals. In any case, from the standpoint of the burden on credit institutions, the adoption of this draft law will result in a decrease of the number of requests under article 86(2) of the Tax Code.

Despite the above draft law proposing to amend only the Tax Code, it follows from the explanatory note that a draft law with similar amendments has been developed for Federal Law No. 86-FZ “On the Central Bank of the Russian Federation (the Bank of Russia)” dated 10 July 2002, which has not yet been published. The draft law establishes that the tax secret regime will among other things cover the information obtained by the Bank of Russia through information exchange, and access to information that constitutes a tax secret in the Bank of Russia will be granted to only to officials determined by the Chairperson of the Bank of Russia.

Current regulation of tax authorities' access to information that constitutes a bank secret

Currently tax authorities have the following possibilities to obtain information (documents), including from the Bank of Russia, within the framework of tax control measures carried out by them.

1. Banks must on a regular basis provide[2] local tax authorities with the following information:

• concerning the opening or closing of an account or deposit;
• concerning a change in the details of an account or deposit of a company, an individual entrepreneur, or an individual who is not an individual entrepreneur;
• concerning the grant or termination of the right of a company or an individual entrepreneur to use corporate electronic payment methods for transfers of electronic monetary funds;
• concerning the grant or termination of the right of an individual entrepreneur to use personalised electronic payment methods for transfers of electronic monetary funds;
• concerning the grant or termination of the right of an individual entrepreneur (with respect to whom a simplified identification has been carried out in accordance with legislation on combating the legalisation (laundering) of the proceeds of crime and the financing of terrorism) to use depersonalised electronic payment methods for transfers of electronic monetary funds and on the amendment of the details of such electronic payment methods.

2. Statements of whether there are accounts or deposits, and of balances of monetary funds (precious metals) on accounts or deposits, extracts with regard to transactions on the accounts or deposits of companies or individual entrepreneurs in the bank, statements of the balances of electronic monetary funds and of transfers of electronic monetary funds can be requested by the tax authorities if they conduct audits of the above persons or if they request documents (information) under article 93.1 of the Tax Code and if a resolution is issued to collect tax, if resolutions are adopted to suspend transactions on the accounts of a company or an individual entrepreneur, to suspend transfers of electronic monetary funds or to cancel transactions on accounts of the company or the individual entrepreneur, or to cancel the suspension of transfers of electronic monetary funds.

The same information with respect to individuals can be requested from banks by tax authorities if they have the consent of the head of the senior tax authority or the head (deputy head) of the Russian Federal Tax Service, in cases when tax audits are being carried out with respect to these persons, or documents (information) are (is) requested from them under article 93.1(1) of the Tax Code, and with respect to legal entities, individual entrepreneurs and individuals under a request of an authorised body of a foreign state in cases provided for by international treaties of the Russian Federation.

3. Currently information exchange is carried out between the Bank of Russia and the Russian Federal Tax Service under Agreement No. 01-15/3182 of the Bank of Russia and the Russian Federal Tax Service No. MMV-27-2/5@ “On information exchange between the Central Bank of the Russian Federation and the Federal Tax Service” dated 29 June 2010.

Based on this Agreement the Bank of Russia transfers the following to tax authorities (to the Central Department or local offices, depending on the nature of the information) as soon as it comes or on a periodical basis:

• information concerning credit institutions and their correspondent accounts;
• information concerning licences of institutions that are under the Bank of Russia's supervision;
• the list of companies that have signs of an inactive legal entity pursuant to article 21.1(1) of Federal Law No. 129-FZ “On the state registration of legal entities and individual entrepreneurs” dated 8 August 2001; and
• different forms of reports of credit and non-credit financial institutions, including auditor's opinions.

4. Currently at the request of tax authorities the Bank of Russia can transfer the following[3]:

• information necessary to coordinate audits held by the Bank of Russia in credit institutions and by the Russian Federal Tax Service with respect to taxpayers;
• information relating to founders (participants) of credit institutions, clients and correspondents of credit institutions for the Russian Federal Tax Service to perform its functions.
  
  

What to think about and what to do

As a result of the adoption of the draft law, the volume of information to be transferred by the Bank of Russia to tax authorities and affecting all those in economic and financial relationships will undoubtedly increase. The draft law provides for entry into force 180 days after it is officially published. We recommend even now analysing current bank transactions and document flow in credit institutions with regard to criteria which may cause increased interest from tax authorities when they select targets for tax control, taking into account the specifics of different types of activity and the possibility for tax authorities to obtain information in real time.

Help from your adviser

The Pepeliaev Group team is ready to assist in assessing potential risks of tax control and bank supervision taking into account planned investments and to develop legal aspects of the necessary business solutions. 

[1] The Bank of Russia will have real-time access to the information about all transactions of the clients of a credit institution that are connected with the flow of funds on a correspondent account opened in the Bank of Russia. Information about transactions made on accounts of a client/clients within the same credit institution is not available to the Bank of Russia under such regime. In order to obtain this information, a request must be sent directly to the credit institution.
[2] The Bank of Russia's Regulation No. 377-P “On the procedure for how the bank informs a tax authority in electronic form of the grant or termination of a right to use the corporate electronic payment method for the electronic transfer of monetary funds, and of a change of the details of the corporate electronic payment method” dated 28 April 2012, and the Bank of Russia's Regulation No. 311-P “On the procedure for how the bank informs the tax authority in electronic form of the opening or closing of an account or deposit, and of a change in details of an account or deposit”.
[3] Except for cases when it contradicts Russian legislation.