Events and Regulatory Updates

Starting from March 27, Russian companies may make advance payments for work (services) performed by non-residents, as well as for IP rights, within a limit of 30% of the contract price. 

Representative offices of US, European and some other companies cannot purchase foreign currency. Earlier Central Bank suspended bank transfers of foreign currency and Roubles by non-residents to foreign banks.

Amendments to Tax Code set new tax rules in case foreign lender writes off the debt of Russian borrower. Generally, release of debt creates CPT base for the borrower; exemption for foreign lenders may facilitate exit for foreign shareholders from Russian business.

Standard method of calculation of CPT advances paid within the year is based on figures of the last quarter (e.g., in Q1, 2022 CPT advance is equal to 1/3 of CPT advance paid in Q4, 2021). Transfer to calculation of CPT advances based on actual profits of the current month was allowed starting new calendar year only. Amendments to Tax Code allow taxpayers to do it within the year, thus reduce tax burden in case figures of 2021 was more optimistic than 2022.

As of now FX gains due to decrease of Rouble FX rate should be included into CPT calculation on monthly basis. According to amendments to Tax Code, FX gains in 2022-2024 should be accrued only at the moment of fulfillment of corresponding obligation, i.e. "cash method" is actually introduced.

As for FX losses,  the new method of accrual (upon fulfillment of obligation) will starts to work in 2023 only. This should help companies to go through volatile currency jumps.

Starting from March 5, Russian companies may pay interest to creditors originating from " countries that engage in hostile activities " over 10 Mln. Roubles only in Roubles. Payments should be credited to special RUR- denominated accounts of foreign lenders. 

No impact for loan agreements in USD/Euro, where monthly interest does not exceed Roubles 10 Mln.

Block of VISA and MasterCard affects only credit/debit cards issued by Russian banks.

No impact for bank transfers on export-import operations between Russian and foreign companies/individuals, as SWIFT transactions continues to work at most Russian banks, except for full-sanctioned ones.

No impact for settlements between Russian daughter companies and their suppliers/customers, including cases where prices are denominated in USD/Euro.

Prime-Minister has announced that the government is preparing decree on ban on exit for foreign investors. It may be done in the form of prohibition of change of corporate structure or in the form of ban of expatriation of sale proceeds.

The Government considers three scenarios for foreign shareholders:

• continuation of full-fledged operations in Russia;
• transfer of shares to Russian partners, including cases where pressure of foreign regulators calls for it;
• leaving the Russian market, closing the enterprise and firing employees, which is considered by the government virtually as an intentional bankruptcy.

Many Russian importers and wholesalers selling goods for Roubles temporarily stop domestic deliveries, preparing updated pricelists. Some of them switch from payment deferrals to prepayments. No impact for prices set in USD/Euro.

Important: at consolidation by head offices  of Russian Financial Statements of the year 2021 events after reporting date should be taken in consideration

Full-blocking sanctions: VTB bank.  Blocking sanctions: Otkritie, Novikom, Sovcom, Promsviazbank. Non-blocking sanctions: Sberbank, Gazprombank and some others.

We recommend to check banks of suppliers/customers/employees to identify sanctioned ones.

Russian companies should sell for Roubles 80% of foreign currency proceeds from export of goods, supply of work and services. This should be done retroactively starting  Jan. 1, 2022. Procedure and FX rates should be set by Central Bank (not published yet).

Russian companies should not grant new loans in foreign currency to non-residents. Loans attracted by Russian companies, payment of interest, payment of dividends are not influenced yet.

Tax penalising interest is linked to key rate: within first 30 days of arrears - 1/300 of key rate daily, starting from 31 day: 1/500 of key rate daily.  Therefore, now penalising interest is equal to 46.47%.

Prime-Minister has announced that the government is preparing decree on ban on exit for foreign investors. It may be done in the form of prohibition of change of corporate structure or in the form of ban of expatriation of sale proceeds.