Legalization of accounts at foreign banks
Our client asked us to examine possible consequences of declaration of data on his account at a Swiss bank. Money debited from the account is intended for investments in securities as well as transferred free of charge to close relatives and as “friendly” loans to accounts in various countries. Sources of money: own funds and credit given by the Swiss bank.
Having analysed the information provided, we detected some violations of the foreign exchange law, such as:
- Failure to provide tax authorities with a notification of opening the account at a foreign bank (of changing the account details). Such a notification shall be submitted no later than within the 1st month from the date when such actions were performed. Failure to submit the relevant notification results in an administrative fine amounting from 4 000 to 5 000 RUB.
- Failure to submit bank statements on accounts opened at foreign banks. Such statements shall be submitted on an annual basis no later than on 1st June of a year that follows the reporting year. Failure to provide such statements results in an administrative fine amounting from 2 500 to 3 000 RUB.
- A number of foreign exchange transactions on the account at the Swiss bank were made in violation of the foreign currency law (accounts at authorised banks were bypassed). In particular, such transactions include the following: credit funds provided by the Swiss bank were credited to the account (if credit period is less than 2 years); “friendly” loans were credited to accounts at foreign banks (loan and interest repayment). In addition, before 01.01.2018, if money received from alienation of foreign securities were credited to accounts at a foreign bank without using accounts at Russian banks, such a transaction was recognised as a forbidden operation.
Under the general rule, transactions on accounts at foreign banks are authorised without using accounts at Russian banks, if currency valuables are provided to closed relatives as gifts. In addition, since 01.01.2015, transactions on crediting the coupon yield from foreign securities have also been authorised.
In addition, in the opinion of the Federal Tax Service of the Russian Federation (FTS RF), if notifications of opening (closing) of accounts at foreign banks and cash flow reports on such accounts are not provided, transactions on such accounts shall be recognised as made in violation of the foreign exchange law.
According to the opinion of the FTS RF, as neither notifications nor reports on the account at the Swiss bank were submitted, all foreign exchange transactions on the account shall be recognised as made in violation of the foreign exchange law, which results in an administrative fine imposed on citizens, officers and legal entities at the rate from 75% to 100% of the amount of the illegal foreign exchange transaction.