Obligation to repatriate export funds is cancelled
On 1 July 2021 the Federal Law No. 223-FZ 'On Amendments to the Federal Law 'On Currency Regulation and Currency Control' came into force, which continued the trend for weakening the requirements regarding the obligations of resident companies to repatriate funds (Article 19 of the Federal Law 'On Currency Regulation and Currency Control').
We recall that from 1 January 2020 the obligation to repatriate funds under export contracts (with the exception of a number of raw products) where the Ruble is the currency of the contract and of the payment, has been canceled. Moreover, since January 2021, the amount of Ruble revenue that exporting residents have the right not to repatriate under raw product contracts has been increased to 30%.
In its turn, the Federal law of 1 July 2021 cancels the obligation of residents (except those participating in the budget process at the federal level, federal state budgetary (autonomous) institutions, federal state unitary enterprises) to repatriate funds from non-residents under export contracts (transfer of goods, performing of work, provision of services, transfer of information and IP assets), where the due amounts are determined in foreign currency and (or) where payment in foreign currency is provided for, with the exception of contracts for the export of goods classified in accordance with the unified Customs Code of the EEU in the positions:
Despite the fact that the obligation to repatriate funds has been cancelled, currency control remains in force (the obligation to register contracts, submit documents and information to the bank).
These amendments bring opportunities for resident companies to use other ways to settle the payment obligations of their foreign counterparties besides receiving payments into their bank account in Russia: in particular, they will be able to use accounts opened outside Russia or methods that do not involve payment (e.g., set-off). The obligations still need to be settled within the timeframe stipulated in the contract, otherwise a fine may be imposed on the resident company.
The amendments that entered into force on 1 July 2021, also apply to contracts concluded before 1 July 2021, in case the obligations have not been fulfilled at the time the amendments enter into force.
At the same time, we would like to draw your attention that:
the obligation of residents to repatriate funds under loan agreements (regardless of the currency of the agreement and the currency of payment) remains in force;
the obligation of residents to return the advance payments paid to non-residents for goods not imported into Russia, work not performed, services not rendered, information and IP assets not transmitted, remains in force.
In addition, the Federal Law establishes the authority of the Central Bank of Russia to determine the procedure for residents, the list of which will be compiled and posted on the official website, to provide information on:
the receipt of funds under foreign trade contracts under which the obligation to repatriate has been abolished;
other performance or termination of obligations of non-residents under foreign trade agreements;
assets and liabilities denominated or payable by such residents in foreign currency in favor of non-residents.
It is not yet clear how this requirement will correlate to the general requirements for currency control established for all residents.
Mazars experts are ready to help in assessing the possibilities to settle payment obligations under contracts with non-resident companies, considering the requirements of Russian legislation on currency regulation and currency control.