On 1st January 2020, the Federal Law of 02.08.2019 № 265-FZ “On Amendments to the Federal Law” “On Currency Regulation and Currency Control” entered into force in terms of liberalization of restrictions on foreign exchange transactions that are made by residents using accounts (deposits) opened with banks located outside the territory of the Russian Federation and repatriation of funds1.
Changes in requirements for repatriation
The adopted amendments significantly relieve residents, who choose Russian ruble as currency of foreign trade agreements concluded with non-residents, of the regulatory burden. Highlighting the positive changes in currency legislation, the new version of the Law is gradually repealing the requirement for repatriation of funds under foreign trade agreements between residents and non-residents, when the agreement value has been determined and all settlements are made in Russian rubles. However, it is necessary to list the goods transferred between the parties under the foreign trade agreements, in respect of which the provisions of clause 1 of part 1 of article 19 of the Federal Law № 173 of 10.12.2003 do not apply. The list is stipulated in clause 4 of article 2 of the Law, and specifies the codes of goods included in the EAEU CN of FEA, mostly related to oil, oil products, natural gas, precious stones, scrap metals. The cancellation will be taking place between 1st January 2020 and 1st January 2024 in the following order:
- from 1st January 2020 — for no more than 10% of the amount of the foreign trade agreement;
- from 1st January 2021 — for not more than 30% of the amount of the foreign trade agreement;
- from 1st January 2022 — for not more than 50% of the amount of the foreign trade agreement;
- from 1st January 2023 — for not more than 70% of the amount of the foreign trade agreement;
- from 1st January 2024 — for the entire amount of the foreign trade agreement.
Starting from 1st January 2020, exporters of non-resource goods, as well as residents performing work, provide services or transfer intellectual property objects to non-residents under foreign trade agreements will no longer be subject to the requirement for repatriation of funds in rubles under foreign trade agreements for the entire amount of such agreements.
However, in respect of foreign trade agreements concluded between residents and non-residents, the amounts of which are determined in Russian currency, under the terms of which payment may be concluded in rubles, and which provide for the transfer of goods related to wood and timber from a resident to a non-resident, the requirement for repatriation is not canceled. The requirement for repatriation is also not repealed for foreign trade agreements concluded between residents participating in the budget process at the federal level, federal-state budget (autonomous) institutions, federal state unitary enterprises and non-residents.
Despite the seeming liberalization, article 24 of the Law was supplemented with part 4, establishing the obligation for residents to ensure proper performance or termination of obligations under foreign trade agreements concluded between residents and non-residents and subject to the requirements of the Law, other acts of the foreign exchange regulation authorities and foreign exchange control authorities, by receiving from non-residents funds due in accordance with terms of these agreements to their bank accounts with authorized banks, or by other means permitted by the legislation of the Russian Federation, in case of trade agreements concluded between residents and non-residents the requirements set forth in paragraph 1 of part 1 of article 19 of the Law were cancelled. At the same time, article 23 of the Law includes clause 21 establishing the right of foreign exchange control agents to request from resident’s documents confirming fulfillment or termination of non-residents obligations under foreign trade agreements in accordance with clause 4 of article 24 of the Law.
Summing up, the amendments made to the currency legislation of the Russian Federation, on the one hand, broaden opportunities for use of the Russian currency, open up new prospects in the development of the Russian economy, business of foreign contractors with Russian partners and provide an opportunity for implementation of important national projects, such as the «International Cooperation and Export» project, the key objectives of project are to increase export of non-resource non-energy goods, to increase the share of export of manufacturing products, and to increase the export of non-resource goods2. But at the same time, the amendments currently apply only to a narrowly defined list of goods and services, in any case giving a positive direction for further development. It can be assumed that in the future, further changes in the currency legislation will be aimed at actual liberalization and will provide the necessary and broader opportunities to use the national currency.
1Federal Law dated 02.08.2019 № 265-FZ (ed. dated 02.12.2019).
2http://government.ru/info/35564/#