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- Do it yourself with accounts: the authorities will weaken currency control over foreign "subsidiaries" of Russian banks
Do it yourself with accounts: the authorities will weaken currency control over foreign "subsidiaries" of Russian banks
The Ministry of Finance proposed to soften currency controls over foreign "subsidiaries" of Russian banks — Izvestia has a draft resolution of the ministry. The relief will affect, for example, the structures of Sberbank in Belarus, VTB in Kazakhstan, Armenia and Azerbaijan, as well as Gazprombank in Luxembourg. They will no longer have to report to the tax service on opening or closing accounts and deposits, as well as on changing their banking details. Against the background of sanctions, experts say, this may simplify making payments abroad.
How will foreign exchange control over foreign "subsidiaries" of banks change?
The authorities want to weaken currency controls on non-resident banks that are part of the International Group of Companies (IGC) with Russian financial institutions. The relevant draft resolution was prepared by the Ministry of Finance, Izvestia found out.
— Now, foreign banks will not have to submit notifications to the tax authorities about closing, opening or changing account details. Currently, only residents are exempt from this duty," explained Irina Kuznetsova, head of the audit and consulting company Justicom.
The authorities also propose extending the deadline for submitting documents on the movement of funds on foreign accounts from 30 calendar days to 30 business days after the end of the reporting quarter or half-year.
It is noted that the current initiative appeared at the request of the business. As follows from the explanatory materials, companies often do not have enough time to receive the necessary information and documents from foreign organizations, therefore, the current deadlines are considered too short.
Almost every transaction of Russian companies with foreign counterparties is subject to currency control. This is necessary to check whether the operation does not contradict the legal requirements. Non-resident banks are required to inform the tax authorities about the opening and closing of accounts and deposits, as well as about the change of account details. All this requires a large number of documents and creates an administrative burden on the business.
Last year, the number of cases of currency violations increased by 60%, Oleg Abelev, head of the analytical department at the Rikom-Trust investment company, recalled. Prior to this, the authorities systematically tightened control in this area.
The expected effective date of the changes is February next year. Izvestia sent a request to the Ministry of Finance, the Central Bank and major banks.
The changes are being introduced due to the difficulty of obtaining supporting documents from non-residents, explained Alexey Chichirenkov, Senior Associate at BBNP Corporate Practice. All this will help simplify formal procedures and optimize business operations, he believes.
It will also make transactions within financial groups more flexible, said Arthur Leer, Vice President of the Association of Exporters and Importers, Managing partner of Lex Alliance Law Firm. Within groups of banks, such changes can simplify the management of correspondent accounts and speed up the transfer of funds, creating more comfortable conditions for the operating activities of subsidiaries, the expert noted. Also, reducing the burden on subsidiaries may allow Russian banks to actively develop business in other countries.
Who will be affected by the cuts and how will it affect the work?
The Federal Tax Service does not publicly publish official statistics on the number of Russian companies belonging to international groups, said Vladimir Chernov, an analyst at Freedom Finance Global. We can talk about several thousand legal entities from the Russian Federation as part of the MGK, he said.
— International groups of companies include almost all major Russian corporations operating through subsidiaries abroad or owned by foreign holdings. Among them are industrial, raw materials, financial and trading holdings that use foreign companies for settlements, investments and loans within the group," the expert noted.
Most of them have dozens of subsidiaries abroad, from trading houses and service centers to financial companies through which contracts, supplies and financing are executed. Such divisions are registered in Switzerland, China, Kazakhstan, Cyprus and the UAE. These "subsidiaries" are subject to the rules of currency control and provide notifications on the movement of funds on foreign accounts, said Vladimir Chernov.
At the same time, the document refers only to those who have a foreign bank in MGK. Among them are VTB (in Kazakhstan, Armenia and Azerbaijan), Sber (in Belarus) and Gazprombank (owned by Bank GPB International S.A. in Luxembourg), the expert noted.
Increasing the reporting time and freeing the subsidiaries from the obligation to submit notifications to the tax service will reduce the administrative burden: companies will no longer have to collect and submit to the regulatory authorities a large number of documents for each change in the foreign account, Vladimir Chernov said. This will free up resources and time for banks and their subsidiaries, which can be used for operational work — conducting cross-border settlements and interacting with counterparties.
This is especially important in the context of sanctions restrictions, when each international payment is accompanied by additional checks, confirmations and approvals. Simplified reporting will make it possible to prepare payment documents faster, conduct transactions through foreign banks more quickly, and reduce the risk of delays due to formal inconsistencies or bureaucratic delays.
Most likely, the changes are related to the complication of the logistics of monetary settlements after the strengthening of sanctions against Russian companies, said Alexander Abramov, head of the Laboratory for the analysis of institutions and financial markets at the Presidential Academy. Restrictions may force banks to frequently change correspondent relationships with partners and conduct more different calculations, the expert said. Because of this, administrative costs are increasing. At the same time, it is through the "subsidiaries" that cross-border settlements are carried out.
In October, the EU imposed new sanctions and banned transactions with a number of Russian banks. Alfa-Bank's subsidiaries, VTB and Sberbank in Belarus, as well as VTB in Kazakhstan and China, are subject to restrictions that will take effect on December 2. In the context of increasing pressure on foreign representative offices of Russian banks, measures to reduce the administrative burden on them are especially important, as they contribute to the stability of financial groups.
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