Foreign exchange revenues don’t have to be sold. Do funds need to be transferred to Russia?

22 June 2022
Law Messenger
In June the Russian authorities eased or eliminated most foreign exchange restrictions that had applied to residents since late February. This primarily concerns the requirement that exporters sell a portion of their foreign exchange revenues (the so-called surrender requirement). Presidential Decree No. 360, dated 9 June 2022, authorized the Government Commission for Control of Foreign Investment (the Government Commission) to determine the share of revenue to be sold. On the same day, the Government Commission adopted a resolution that zero percent of a resident’s foreign exchange revenues would be subject to mandatory sale (Protocol No. 61, dated 9 June 2022.) The surrender requirement has thus been cancelled for the present.

At the same time, certain restrictions on receiving foreign exchange funds on foreign accounts remain in effect. Presidential Decree No. 79, dated 28 February 2022, imposed a general ban on crediting any such amounts for any reason. The following exceptions currently apply:
The introduction of a zero rate for the surrender requirement has raised the question as to whether a resident is required to transfer foreign exchange revenues received under a foreign trade contract to its Russian account. Earlier, the CBR, in its Explanation No. 3-OR, dated 4 April 2022, directly stated that the requirements of Decree No. 79 applied to transactions for which the requirement to transfer foreign exchange revenues to a Russian account was canceled as of 1 July 2021 as a result of the liberalization of foreign exchange law.

However, taking into account the introduction of a zero rate for the surrender requirement, it remains to be seen which government interests may be impacted, should a resident exercise its right under the Law on Currency Control to credit such revenue to its foreign account for an indefinite term or to discharge a liability to a nonresident in a different way (offset, novation of liability, debt forgiveness, etc.).

In any event, as long as the regulator has not stated its position on the issue, a resident enjoys a grace period of 120 business days during which it may keep funds on its foreign account and request a written explanation of regulatory provisions from its authorized bank.

Authors:
Georgy Kovalenko
Partner
Law Group
Vasily Makovkin
Director
Law Group
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