Accounts abroad. It is worth notifying the state

Just a few weeks precede a significant date, which keeps all those who have financial assets abroad in suspense. But many are not yet aware of the consequences that will occur after the first of June, in the event that you do not inform the tax authorities about own foreign accounts. And what happens if you inform? Then we will introduce you to all the options.

As it was already informed above, before the beginning of summer, all citizens of the Russian Federation are obliged to notify the tax authorities about their foreign assets that are kept in foreign banks:

• on the movement of funds between accounts;
• about received and spent money;
• about the balances on the accounts.

The Federal Tax Service reports that this reform is aimed at increasing the legitimization of foreign exchange transactions and improving their level of "transparency" and control by the state. And meanwhile, the tax authorities are now charged with the responsibility to conduct profile activities and to identify a deviation from these norms.

New rules concerning Russian individuals, as well as their foreign assets, emerge from the current changes in the currency control legislation. In December last year, a regulatory act was issued that regulates and clarifies the reporting procedure.

And in order to decide for yourself whether it is worth reporting on available foreign financial assets or not, it is worth to be aware of the possible consequences.

After analyzing the innovations, we can report that problems can arise, as in the case of assets concealment and making them public.

The structure of the report is quite simple. It consists of only two parts:

• on the first sheet it is necessary to indicate information about who submits the reporting;
• on the second one you should indicate the data about the accounts in the banking institutions of a foreign country.

In the event that the number of accounts is not limited to one copy, a separate sheet must be sent to the federal tax service for each account.

It is true that after the submission of this report, the verification procedure may not be completed, and the tax authorities may apply to an individual to provide other documents within the framework of financial control.

In this scenario, the payer of taxes has one week in the reserve to provide the necessary documentation, for example, different statements on opening accounts in banks, moving or withdrawing their assets with regard to them.

The good news is that you do not need to visit the country where the banking institution is located, it is sufficient just to send an e-mail request. But here it should be noted that in the future the tax authorities may require a confirming seal, but so far no one has explained this.

As for the consequences of providing all the documentation, we immediately warn that you may have problems of all kinds.

The first kind of trouble you will have to face is problems with the tax authorities. To begin with, you will have to pay all taxes at the specified rates, where it is possible to include the following:

• coupon profit;
• rent from foreign real estate;
• also you will have to pay tax on the sale of securities through the main office.

It is also worth noting that tax is levied on interest on deposits in a foreign bank since 2016.  

The past declarative special period that expired at the end of April had a special feature, which consisted in reporting on profits, including foreign ones, which was regulated by a special form. Then a partial or total evasion entails a fine equal to almost half the amount.

It is worth noting that if the profit tax that the company received from any type of activity is paid in the same state, its foreign bank, and exceeds 13%, then the Russian tax authorities have nothing to do with such a company.

However, for the purpose of belt and braces, lawyers still recommend that a declaration from another state and other supporting documents be submitted to the tax authorities of the Russian Federation. In the event that the head has a trustee, then the required certificate should be obtained from him. The foregoing person in this case is a tax agent.

In the same case, if before July 1 a special declaration was filed, the company has all the chances to avoid disputes with tax authorities.

It is possible to be exempt from non-payment of taxes if you specify the residual amounts in foreign accounts in the special declaration, and also demonstrate a letter about opening an account.

As for the troubles that may arise due to currency legislation, here, firstly, it should be noted that most of the Russians can consider themselves to be currency residents, and not just tax ones.

In our everyday life, the term "currency resident" appeared relatively recently, 4 years ago, and it means that individuals (citizens) possess a Russian passport. But this category does not include persons who live more than 12 months abroad on the basis of residence permits or special visas.

But even such a simple statement at first sight as "live more than twelve months" provokes controversy.

The first group of experts believes that a person need to stay at least a day on the territory of the Russian Federation, and he/she automatically becomes a currency resident.

Another group of experts says that in order to obtain this status, the fact of registration is still necessary.

In the event that the person who emigrates is considered, his registration at the place of residence is terminated, and then his visit to the RF is problematic to track by the tax authorities. After all, within 3 months he/she can freely travel to the territory of the Russian Federation without registration.

As to the possibility of using accounts in banks located in other countries, it is worth noting that, despite a number of restrictions, foreign currency residents can transfer their assets from other banks, including Russian ones, and they can receive income from converting their assets and rely on the interest rate from deposits.

Also, based on the legislation on currency regulation, these accounts can be credited, among other things, with pensions, salaries, scholarships and other payments, except for receiving grants, as reported by the Ministry of Finance of the Russian Federation.

In states that are members of the Organization for Economic Cooperation and Development, as well as members of the FATF (Financial Action Task Force), all of the above can be credited with amounts received to foreign accounts, for example:

• from loans;
• profit from the rent of real estate;
• profits from asset management that are in trust ownership, in the event that they are managed by a non-resident from the Russian Federation.

Other transactions that are not included in this list are banned, for violation of which there should be a substantial fine, which can cover from 2/3 to the entire sum of the transaction. This provision is also contained in the Code of Administrative Offenses.

An illustrative example is as follows: if the account in a foreign bank received $ 1000 from the sale of securities, the penalty will be from $ 750 to 1000. An amnesty of capital can be subscribed to in order not to pay such considerable amounts. All deals are subject to amnesty of capital, which was considered illegal with foreign banks as of the date of registration of the special declaration.

The declaration could be submitted before the beginning of July this year.

About the concealment of accounts, we can tell you the following. Experts say that the report to the Federal Tax Service is so complicated with regard to the form and submission procedure, including the procedure of extracts from foreign banks and collection of various kinds of claims that many, that many persons will not refuse to use such accounts, but will certainly hide them from the tax authorities.

What sanctions entail concealing accounts? Proceeding from the norms of the law, in the event that you did not inform the authorities about the bank account abroad, and the authorities found out about it themselves, you will need to pay a fine of 4 to 5 thousand rubles. And for a delay in the notification about the presence of an account, a fine of up to 1,500 rubles is provided.

There are also deadlines for not providing documents on the transfer of funds, where 10 days or less - from 300 to 500 rubles, and more than a month - from 2.5 to 3 thousand rubles. An offense of this kind will again cost about 20 thousand rubles.

As for violations related to tax legislation, penalties in the form of fines are foreseen to be stronger. In the event that you made a tax evasion, that is, did not notify the tax service about the presence of an account abroad and received money from profit on it, the tax authorities will require you to pay a surcharge and pay a fine of 100 to 300 thousand rubles, depending on hidden amount.

International financial experts still advise to report to the tax authorities on own accounts, because hiding this information can lead not only to fines, but also more serious consequences.

In mid-May, Russia signed an international agreement with more than 80 countries on the exchange of data on financial assets among themselves. The agreement will enter into force in early 2018, and reports will be fully drawn up by the end of that year. Although it is worth considering that this agreement was signed in the general part, and Russia now needs to sign an agreement with each state individually, only then there will be a result from the use of this system.

It is also worth noting that, according to international lawyers, Russia will be able to send inquiries about the existence of bank accounts for an earlier period. Therefore, in their opinion, this is an extra argument in favour of reporting own accounts and using amnesty.

Next, we will consider the situations of those who rent a house, study abroad, emigrated or is a trader, in the event that he has a foreign account.

As for the first category of persons, everything depends on the fact in which state a foreign account was opened in the bank. If these states are members of the Organization for Economic Cooperation and Development, or members of the FATF (Financial Action Task Force), then the letting of housing and the receipt of profits from this activity to your bank account is legal. In other cases, you are subject to the sanctions provided for by currency legislation. It is worth considering that in any case, the profit from the letting of real estate is taxed at a 13% rate.

As for the account statements, here it is necessary to pay attention to the following features of the tax legislation:

1. Firstly, it is 13% of the tax in “legal states”.
2. Secondly - this is a prescribed penalty for violating the rules, which amounts to 20 to 40% of the total amount for tax avoidance.

As for the norms of currency legislation, for violation of its norms a fine of 75 to 100% of all profits is provided, although if the account is not in the bank of a "legal" state. A fine of up to 300 thousand rubles is provided for late notification of movement of funds on your account, and for a repeated violation - up to 20 thousand rubles.

As for the concealment of one's own accounts in banks that are located on the territory of foreign states, the tax legislation provides for such sanctions for the commission of this offense:

1. 1. Payment of tax in connection with the 13% rate.
2. 2. The fine is from 100 to 300 thousand rubles for tax evasion.

For violation of currency legislation, a fine of 4 to 5 thousand rubles is foreseen for failure to report documentation on the account. Also, if the account is in a bank of th state, which is not included in the above list, then the person must pay a fine of 75 to 100% of the funds received.

Over the past few years, such a transaction as the transfer of own financial assets to the accounts of foreign banks in connection with emigration has become popular.

Of all the situations we considered, this is the least questionable. Your transfer simply can not be released from the Russian Federation, since you personally transfer money from a Russian account to a foreign bank account, which means that it will not be possible to notify the opening of an account, as the Russian bank will immediately request a notice with a stamp of the tax service on the formation of an account in bank abroad.

As for the account reporting itself, there is a tax of 13% on the residual amount on the account. As for the fine for possible non-payment of the tax, then it fluctuates from 20 to 40% of the total amount.

Norms of currency legislation provide for sanctions for late reporting on the movement of funds between accounts up to 3 thousand rubles, and for a repeated violation - the fine will reach 20 thousand rubles. The same concealment of the account, as already indicated above - is impossible.

Next, we will consider the provision of a scholarship of a foreign higher education institution.

To begin with, there are two aspects to consider:

• the first one tells us that if an individual is studying at a foreign university, then he is not generally recognized as a tax resident of the Russian Federation.
• the second aspect tells us that if the academic year, as is customary, began in September, and before that, more than six months, he stayed on the territory of Russia, the student will be recognized as a tax resident of the Russian Federation.

Also, this individual can be recognized as a resident if the educational process takes less than a year, or he periodically visits the territory of the Russian Federation. The currency transaction about receiving a scholarship is completely legal and does not violate any norms. It is necessary to make a digression here and pay attention to grants, since they can not be credited to accounts that are in foreign banks. Moreover, according to the Tax Code of the Russian Federation, the scholarship itself is not taxed in principle.

As for the reporting itself, here the norms of the currency legislation inform us about a possible penalty for the untimely submission of a report on the movement of finance in the amount of up to 3 thousand rubles. For a second violation, the penalty will be up to 20 thousand rubles.

As for the concealment of the account, here the norms of currency legislation provide for a sanction in the form of a fine of 4 to 5 thousand rubles for failure to report documents.

Next, we will consider another popular situation, such as emigration and the receipt of wages in a foreign company.

We will Immediately let you know that you will not violate the norms of the Russian currency legislation, even if you do not stop your status as a citizen of Russia, so no one bans to receive payment for your work on a foreign account. You become a tax resident only on the condition that you are on the territory of Russia for more than 182 days a year.

This situation means that you have withdrawn from the register in Russia and no longer reside on its territory, so you are not a currency resident. Short visits to Russia imply no consequences, only if they do not exceed more than 3 months without a break. Also, there is no need to file reports on accounts in foreign banks. But in the event that you make a decision to return to the territory of the Russian Federation for permanent residence, all the reporting will have to be registered anew.

Summing up we will repeat that the account report is not provided under this situation, and there are no sanctions for concealment of the bank account.

As for the sale of securities, it is worth noting that this is the most problematic situation.

To begin with, we will inform you that the norms of currency legislation have a clear and exhaustive list of legal operations, which in fact are not very large. Roughly speaking, only interest and coupon profit from the sale of securities and payments on bonds can be credited to the account of a foreign bank, but exclusively in "permitted or legal" countries. From the beginning of this year, the bank accounts of foreign banks are also allowed to transfer profits from trust management, in the event that the manager is a person that is not a resident of the Russian Federation.

The profit from the above is taxed at a rate of 13%, and the tax will also be calculated from exchange rate differences. In practice, this means that if you bought a $ 100 bond and sold it for $ 100, then most likely you received some income because of the difference in the exchange rate in the ruble equivalent, which is due to the growth of the dollar's exchange rate. So you will need to pay tax from this operation.

Also, according to international lawyers, since January 1, 2018, it will become official to be able to transfer profits from the sale of securities to the accounts of foreign banks.

But at the moment this is a serious offense, for which a fine of 75% to 100% of the total income is foreseen.

As for filing an account statement, there is a 13% tax on the residual amount on the account. As for the fine for possible non-payment of the tax, then it fluctuates from 20 to 40% of the total amount.

Norms of currency legislation provide for sanctions for late reporting on the movement of funds between accounts up to 3 thousand rubles, and for a repeated violation, the fine will reach 20 thousand rubles. Penalties also provide for 75 to 100% of the funds credited to bank accounts.

Law&Trust International has many years of experience in opening accounts abroad. The company's professional lawyers have opened thousands of accounts in various jurisdictions. Open an account abroad using the services of professionals and get a full consultation on all the nuances and issues of your interest.