On September 16, 2022, the Swiss Government decided to suspend the exchange of information on tax issues with Russia. The Russian tax authorities will not receive information about the accounts of Russian residents in Switzerland as early as 2021.
What does the termination of automatic exchange mean for currency residents?
The termination of auto-exchange can actually equate accounts opened in Swiss banks to accounts in US and UK banks in terms of currency transactions.
Recall that the deposits allowed to accounts opened in jurisdictions that are not on the list of countries that carry out auto-exchange with the Russian Federation, for example, the United States and the United Kingdom, are extremely limited. In particular, it is not allowed to perform almost any foreign exchange transactions on investment portfolios, for example, to transfer amounts from the sale of shares, bonds, to credit coupons, dividends, as well as to receive loans (loans), etc.
In case of crediting these types of income, a fine in the amount of 20 to 40% of the amount of the currency transaction may be levied from the account holder.
Accordingly, if Switzerland is excluded from the list, the above restrictions will also apply to accounts opened in Swiss banks.
The Federal Tax Service of Russia has not commented on the Swiss Government's decision under discussion at the moment. However, we cannot exclude that an adjusted version of the list of states participating in auto-exchange with the Russian Federation will be approved in the near future.
Please note that this restriction does not apply to foreign currency non-residents (i.e. persons who do not have a Russian passport or residence permit), as well as foreign currency residents who have been outside the Russian Federation for more than 183 days and who will be able to continue crediting funds to foreign accounts without restrictions (except for currency transactions between residents).
How to prepare for the changes?
Despite the fact that Switzerland is not excluded from the list at the moment, and the restrictions described above have not yet entered into force, we recommend structuring assets in advance (selection of a foreign structure, accounts) to offset the risks of upcoming changes.
In addition to Switzerland, Germany and Latvia also announced the termination of auto-exchange with the Russian Federation, which indicates a trend to which it is important to adapt the asset structure.
ALPINE Tax employees have extensive experience in advising on tax and currency issues and will help you choose a working mechanism for individual needs.