Brokers and non-governmental pension funds will be obliged to inform tax authorities about the foreign track

2nd December 2015

Organizations in the financial market, which act as intermediaries will be required to report on the registration in a foreign tax authority, as well as to provide information on the identification of clients – foreigners to the Federal Tax Service, Federal Financial Monitoring Service and the Central Bank of the Russian Federation.

These changes are stipulated by the Decree of the Government of the Russian Federation of 26 November 2015 № 1267, which is designed for the implementation of the Federal Law of 28 June, 2014 № 173-FZ “On peculiarities of the financial transactions with foreign citizens and legal entities, on the amendments to the Russian Federation Code on Administrative Offences and the annulment of certain provisions of legislative acts of the Russian Federation”. This was reported on the official website of the Cabinet.

Organizations that must report to authorities will include banks, insurance companies, professional participants of the securities market, management companies, non-governmental pension funds, as well as clearing organizations and joint-stock investment funds.

It is planned that the Federal Tax Service will exchange all information received from brokers with Federal Financial Monitoring Service and the Central Bank of the Russian Federation. The system of data transmission is to be developed until 19 December 2015 as an interactive online service.

“In addition, it is specified that organizations of the financial market have the right to transmit information to foreign tax authority only when the client - foreign taxpayer agrees to provide such information, - the message says. - The consent of the client - foreign taxpayer on the transfer of information to a foreign tax authority is both consent to transfer such information to the Federal Tax Service of the Russian Federation.

Since 1 July 2014 the compliance with FATCA – the US Foreign Account Tax Compliance Act (main purpose - to prevent tax evasion of American citizens working and living in other countries) is gradually introduced in Russia. Last summer the procedure for individuals was introduced in the Russian Federation, and from 1 January 2015 - for legal entities.

As explained earlier by Federal Financial Monitoring Service there is a rule that the bank can terminate the contract with the client in its sole discretion if the client is the US citizen. Thus, credit institutions were given the opportunity to go out of FATCA control, but only under certain conditions.

They are stipulated by the Federal Law of 28 June 2014 № 173-FZ, which the President Vladimir Putin had signed shortly before the FATCA provisions entered into force in Russia. The document says that Russian banks transmit data on foreign clients to foreign tax authorities, in particular to the US Internal Revenue Service, but only with the consent of the taxpayer. The client is given 15 days to decide and if no response is received, the bank acquires the right to terminate the contract.


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