Entities and individual entrepreneurs may submit reports concerning the movement of funds on foreign accounts for Q1 2020 within later timeframes which do not include the non-working period

The Russian Federal Tax Service (the “Federal Tax Service”) has published Letters No. VD-4-17/7012@ dated 24 April 2020 and No. VD-4-17/8044@ dated 15 May 2020, which contain clarifications of issues relating to currency control in the conditions of the measures taken to prevent the spread of the coronavirus infection, including the timeframes for entities and individual entrepreneurs to submit reports concerning the movement of funds on foreign accounts.

Letter No. VD-4-17/7012@ dated 24 April 2020 was published on 25 May on the Federal Tax Service’s website in the section “The Federal Tax Service’s Letters to Regional Tax Authorities”.

The timeframes for entities and individual entrepreneurs to submit reports concerning the movement of funds on foreign accounts (deposits)

The usual timeframe for entities and individual entrepreneurs to submit reports concerning the movement of funds on foreign accounts (deposits) is 30 days from the last day of the reporting period^[1]. For Q1 2020 the reports were to be provided before 30 April, but the periods between 30 March and 30 April and then between 6 and 8 May were announced as non-working days pursuant to the Russian President’s orders.

The Federal Tax Service emphasises that when tax authorities exercise control over the submission of reports for Q1 2020, they should take into account that the non-working days were established under orders of the President.

The letters clarify that in the existing situation residents may submit reports for Q1 within 30 days from the time when the restrictions are lifted, i.e. from the time when the normal working regime is restored.

Taking into account the tax authorities’ conservative approach to exercising currency control and the Federal Tax Service’s approach to the application of the provisions on the non-working days in tax legal relationships, there is a high risk that the tax authorities will treat such clarifications as applicable not to all entities and individual entrepreneurs, but only to those of them who are subject to the regime of the non-working days established by the Russian President. It is also worth mentioning that despite the broad wording “from the time when the restrictions are lifted, i.e. from the time when the normal working regime is restored”, the letters, including the letter dated 15 May 2020, concern only the non-working days established by the Russian President. The letters do not mention any other restrictions that in practice also prevent the operation of specific types of entities and individual entrepreneurs. Therefore it may appear that the tax authorities will construe the clarifications narrowly, understanding “the time when the normal working regime is restored” to mean only the end of the non-working days. Such risk is also confirmed by the clarifications concerning the timeframes for responding to requests to submit documents (see below), which are calculated depending on the time when the non-working period ends.

The timeframes for responding to requests to submit documents and information

In its letter No.VD-4-17/7012@ dated 24 April 2020 the Federal Tax Service clarified that in the event the tax authorities request entities and authorised banks under their control to provide documents and information, the tax authorities should take into account that the documents and information in accordance with the previous requests may be provided after the cancellation of the non-working days established under the Russian President’s orders, which should not be included in the timeframe for providing the response set out in the request.

The absence of fault owing to force-majeure circumstances

The Federal Tax Service clarifies that in the event of the timeframes for the submission of reports being violated or it being impossible to provide supporting documents to the reports, the documents and information confirming that the obligation has not been performed owing to force-majeure circumstances that are grounded, among other things, in measures taken to prevent the spread of the coronavirus infection must be reviewed when determining whether the resident is at fault.

Also the Federal Tax Service refers to the position of the Russian Ministry of Finance that a resident should not be subject to administrative liability for non-performance of the repatriation obligation owing to force-majeure circumstances that are grounded, among other things, in the measures taken by foreign governments to prevent the spread of the coronavirus infection.

Please be reminded that the relevant information letter was published on 20 March 2020 on the website of the Russian Ministry of Finance .

The Federal Tax Service’s letters concern documents and information that the resident has provided to the tax authority and that confirm the non-performance of an obligation owing to the force-majeure circumstances. Therefore, the resident should take an active position and collect the relevant evidence to justify the absence of fault for violating currency legislation

The rules for submitting reports for Q1 2020.

In April 2020 the rules for submitting reports on the movement of funds were amended [2] (for details please refer to the alert concerning this issue ). Letter No. VD-4-17/8044@ of the Federal Tax Service dated 15 May 2020 confirms that legal entities and individual entrepreneurs should provide reports according to the new rules starting from the report for Q2 2020.

There is also a clarification that legal entities and individual entrepreneurs may submit the report for Q1 2020 and for previous periods (including adjusted reports) in accordance with the previous or with the new rules.

Help from your adviser

Pepeliaev Group's lawyers are ready to assist in identifying the risks associated with operations being consummated on foreign accounts (deposits). They will prepare and submit to the tax authorities notifications of the opening (the changing of details or the closing) of foreign accounts (deposits) and reports on the movement of funds. They will also represent taxpayers before tax authorities and provide other legal support with regard to issues of currency legislation.