Who can make use of the amnesty and for what purposes

— It is said that due to the sanctions, the fourth wave will be more popular than the previous ones.

— I agree, based on my 15 years of experience in this field. Sanctions are making it increasingly difficult to own and dispose of foreign assets. Overseas structures are faltering, and European banks are refusing to work with our compatriots. On 10 May, the EU and the countries that have joined it, including Switzerland, will stop providing Russian citizens with trust administration services.

— What should beneficiaries do with these trusts?

— These trusts need to be wound up and something needs to be done with the assets, or they need to be transferred to other jurisdictions where they are still operational. This is one of the important aims of the amnesty — to help Russians wind up foreign structures that are ceasing to function. They can be transferred to Russia. Since 1 March 2021, a similar institution has existed in Russian law — a personal fund.

— What is new in the fourth stage?

— Another obvious reason for the popularity of the fourth wave of the amnesty is the ability to declare cash, which was not available previously. This is very convenient: it makes it possible to bring into the transparent flow funds from lawful activities that were received in breach of cash transaction rules and tax payment rules. In addition, although cryptocurrency is not expressly mentioned in the regulations, the law offers a number of mechanisms for bringing income from crypto assets into lawful circulation.

— Who would you advise to think about the capital amnesty?

— Those who may face risks under currency and tax legislation. Our currency legislation is very complicated. Many people violate it without even realising it. The prohibitions can be non-obvious. For example, one Russian citizen buys a house in Italy from another and transfers the money to a foreign account — this is not allowed, because the funds must be transferred through a Russian bank.

The fines for currency violations are enormous and can amount to 70–100% of the transaction value. The amnesty is an opportunity to avoid them.

In addition, it can be used to declare indirect ownership if a company is registered in the name of nominees (presumably under foreign law). The state has created a mechanism that makes it possible, after filing a special declaration, to transfer assets from the nominee to the real beneficiary without unnecessary tax issues. Special tax incentives introduced in March can also help with this.

On freedom to dispose of assets, declaration specifics, and trust in the state

— One of the declarant’s obligations is repatriation of funds. Does this mean they must remain in Russia?

— That is a misconception. There are no restrictions on the further disposal of the money. It can be withdrawn from the bank, and it can even be returned abroad.

By the way, if accounts are disclosed in connection with guarantees against currency violations, it does not matter how much money is in those accounts. There may be only a small amount there. The main thing is that these are the very accounts through which currency transactions were carried out.

— What are the specifics of filing declarations?

— The declaration is filed once; it cannot be amended later. So everything must be carefully considered. With clients, we begin by analysing the situation: what prompted them to think about the amnesty, and what risks they see for themselves. We analyse the accounts relating to the transactions and assets: how they were acquired, how the income used for the acquisition was obtained. We then determine which assets and accounts definitely need to be disclosed and for which assets there are no risks.

It is possible to declare something that was already declared in earlier stages of the capital amnesty. This makes it possible to “refresh” the guarantees and extend them to that time period. For example, in 2017 a person filed a special declaration, in 2019 they underpaid tax, but if they file another special declaration in 2022 with the relevant content, the guarantee will apply.

— And where should they be filed?

— Special declarations are accepted by any tax inspectorate, although it makes sense to file them directly with the Central Office of the Federal Tax Service. There, these documents are placed in a special storage facility where they are inaccessible to territorial tax inspectorates and can be obtained only upon the declarant’s request.

— When you disclose assets to the state, that is an act of trust. But people do not always trust the Russian state. The Valery Izrailit case comes to mind (the businessman was accused of fraud, transfer of funds abroad and laundering, and the special declaration was added to the criminal case file. — Ed. note). What can you say about this, and what do you advise clients?

— Of course, there is a problem of trust in the state. At the same time, the information about the Izrailit case in open sources is incomplete, and it is not entirely clear what position each side has taken. If a businessman tried to take advantage of the amnesty when violations had already been alleged against him, the guarantees do not work in that case — this is clearly provided for by law.

As a whole, according to the Ministry of Finance, around 19,000 declarations have been filed. The cases of Valery Izrailit and Nikolai Kuragin (beneficiary of the Vyatsky Kvass group of companies) are known. These may be exceptions that prove that the rule works.

A person discloses assets and receives guarantees — trust is certainly required. And this is a difficult issue. I advise clients to weigh the risks and benefits; analysis is necessary for this. In my clients’ cases, there have been instances where a special declaration helped eliminate claims concerning violations of currency legislation.

Sergey Gerasimov is the Managing Partner of a law firm that brought together one of Russia’s largest practices serving private clients in tax matters and private structuring.

Sergey leads projects related to the development of personal holding structures for asset protection and inheritance / succession, CFCs, tax amnesty in Russia (all four waves), restructuring of operating businesses, “tax-free” liquidation of foreign companies, currency regulation and control. Sergey’s personal professional expertise and his team’s achievements have been recognised by authoritative international and Russian rankings: Chambers & Partners, International Tax Review (World Tax), The Legal 500, Best Lawyers, Pravo-300 and Forbes.

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