The repatriation of foreign trade revenue has been partially abolished
Residents are no longer obligated to receive revenue payable by non-residents under foreign trade contracts and denominated in foreign currency to an account in a Russian bank (including contracts for services, for work and other contracts). Exceptions are contracts for the delivery of certain types of primary commodities and contracts with federal state institutions and enterprises.
The duty to repatriate revenue under contracts in roubles has already been abolished with the same exceptions (the list of codes of the primary commodities being slightly different). In relation to contracts in roubles for the export of primary commodities (save for wood), provision is made for the step-by-step abolition of repatriation (starting from 1 January 2020 - for 10% of the contract amount, starting from 1 January 2021 - for 30%, etc.). Meanwhile, the repatriation requirement is preserved in full with respect to foreign currency payments for exported primary commodities.
It is permitted to credit funds to accounts of residents in foreign banks under contracts that are no longer subject to the repatriation requirement, including contracts concluded earlier. This means that there will be no fine for crediting revenues to a foreign account.
However, instead of repatriation, residents are to ensure that contractual obligations are discharged in a manner permitted under the law (including an offset, compensation etc.) under the threat of a fine amounting to 5-30% of the amount payable by a non-resident to a resident, which is the same as the fine for a failure to repatriate. The amendments additionally stipulate that this statutory duty extends to contracts concluded earlier, under which the obligations have not been performed.
|The position of residents is improved by the possibility to receive export revenue to a foreign bank account, as well as to discharge contractual obligations by offset or by paying compensation. However, they will still have to ensure performance on the part of non-residents under the threat of a penalty that will be charged if the resident fails to ensure performance by the non-resident.|
Despite repatriation having been abolished, currency control, meaning the requirement to submit documents and information to the bank, remains for export contracts. Previously, when the repatriation under contracts in roubles was cancelled, the Bank of Russia, the Federal Tax Service and Federal Customs Service clarified that authorised banks still had to maintain a record of such contracts, that the contracts had to specify the performance timeline, and that the relevant information had to be submitted to the bank.
|It remains unclear what the reasoning is behind the preservation of currency control when a foreign trade contract does not stipulate payments to a Russian bank account. If such procedures and the associated costs remain unchanged, banks will likely try to keep their income from currency control commissions by changing the calculation procedure for them, taking account of the outflow of a portion of the payments to foreign banks.|
The amendments additionally stipulate that the Bank of Russia will publish on its website a list of residents that must report to it, under the procedure established by the Bank of Russia, any funds that they receive from non-residents, any other discharge of non-residents’ contractual obligations, as well as assets and liabilities assigned to and/or payable by such residents to non-residents in foreign currency.
|At present, it is unclear how this rule will correlate with the above statutory duty to register contracts with the bank and provide the bank with the necessary information. It is also unclear whether the residents who belong to categories specified on the website must perform the new statutory obligation in place of the previous statutory obligations or along with them, and whether the previous statutory obligations will be preserved for the remaining residents. During the period of uncertainty we recommend adhering to a conservative approach.|
The requirement to repatriate revenue does not extend to:
- refunds of a prepayment transferred to non-residents (import contracts);
- loan agreements with borrowers that are non-residents.
The collection of fines has ceasedIf a statutory obligation is abolished, and the administrative sanction for the breach of such obligation has not been enforced, then the administrative body must cease the enforcement of the sanction.
This approach, in particular, is applicable to fines for receiving revenue to a foreign bank account (for instance, to an account opened for the resident’s foreign office), given that at present such action is permitted.
However, this legal position is not in mainstream practice, so fines may continue to be charged and residents may have to go to court seeking to have the sanctions ceased or collected fines refunded.
What to think about and what to doThe abolition of the repatriation requirement with respect to a major part of export agreements allows residents to reconsider the terms and conditions of foreign trade contracts and be more flexible in doing business with non-residents.
Help from your adviserThe lawyers of Pepeliaev Group are ready to assist you with amending the terms and conditions of foreign trade contracts and stopping the collection of fines that have been previously assessed for the discharge of a non-resident’s contractual obligations in any manner other than by payment to a Russian bank account, as well as for crediting funds to the resident’s foreign bank accounts.
 Articles 2(4) and 2(5) of Federal Law No. 265-FZ dated 2 August 2019.
 Article 24(4) of Federal Law No. 173-FZ dated 10 December 2003 “On currency regulation and currency control”.
 Part 4.3 of Article 15.25 of the Russian Code of Administrative Offences.
 The Bank of Russia’s Letter No. IN-014-12/102, the Federal Tax Service’s Letter No. 01-28/80440, and the Federal Customs Service’s Letter No. ОА-4-17/26935@ dated 26 December 2019; articles 19(1.1)(1) and 23(4)(21) of Federal Law No.173-FZ "On currency regulation and currency control" dated 10 December 2003.
 Ruling No. 306-KG17-22270 of the Russian Supreme Court's Judicial Panel dated 15 May 2018 on case No. А65-30241/2016, and Ruling No. 2017-О of the Russian Constitutional Court dated 27 September 2016.