Russia’s Federal Tax Service substantially shortens the list of states eligible for automatic exchange of financial information

Background

Historically, Federal Law No 173-FZ of 10 December 2003 “On Currency Regulation and Currency Control” has strictly regulated transactions performed by currency residents of the Russian Federation on their foreign bank accounts.

In general, currency residents of the Russian Federation are required to credit any receipts from currency non-residents to their Russian bank accounts.

It is only permitted to use foreign bank accounts to receive funds from foreign persons for certain transactions, such as:

• crediting interest income on deposits and account balances;
• receiving salaries for employment outside the Russian Federation;
• crediting income from foreign economic activities (sales of goods, performance of services and work);
• insurance proceeds.

All other transactions are prohibited, including such typical transactions with currency non-residents of the Russian Federation as:

• receiving dividends and coupons on foreign securities;
• crediting proceeds from the sale of securities;
• receiving loans and credit facilities;
• receiving fees for services rendered;
• sales of real property.

Subsequently, these requirements were largely cancelled:

• for tax non-residents of the Russian Federation (who become quasi-currency non-residents of the Russian Federation);
• for transactions on bank accounts held in EAEU member states;
• for transactions on bank accounts held in countries which automatically exchange financial information with the Russian Federation.

The list of countries eligible for automatic exchange of financial information with the Russian Federation was established by Order No ED-7-17/986@ of the Federal Tax Service of Russia of 28 October 2022 and included 85 states and 11 territories, including many “unfriendly” states.

What has changed?

On 20 December 2024 the Federal Tax Service of Russia published Order No ED-7-17/916@ of 30 October 2024 “On the Approval of the List of States (Territories) with Which Financial Information Is Automatically Exchanged.”

This order significantly shortened the list of states automatically exchanging financial information with the Russian Federation (to 63 states). In particular, all EU member states were removed from the list.

The order’s entry into force on 31 December 2024 means that, for currency residents of the Russian Federation, most transactions involving the crediting of funds to accounts in a significant number of popular jurisdictions, including all EU countries, will become illegal.

It should be noted that the Federal Tax Service list (both the new and old versions) does not include a number of “friendly” jurisdictions frequently used by Russian currency residents at present, such as Hong Kong, Serbia and Uzbekistan, while other popular jurisdictions, including Armenia, Turkey, Kazakhstan and Israel, are included in the current list.

Liability for illegal currency transactions, including the transfer of funds to foreign bank accounts (not provided for by law or in jurisdictions not included in the list) is established by part 1 of Article 15.25 of the Administrative Offences Code of the Russian Federation and constitutes 20%-40% of the amount of funds transferred.

In view of the foregoing, we recommend analysing the list of planned transactions even more carefully and selecting jurisdictions suitable for them in 2025.

We would be happy to discuss the possibility of applying the changes described in the Law to your specific situation and provide our professional assistance.