As of 00:00 on 16 December 2022, foreign exchange transactions involving the crediting of dividends and interest (coupons) on securities, as well as income from the sale of securities, to Swiss accounts will be deemed prohibited foreign exchange transactions.
If such income is credited to a Swiss account from 00:00 on 16 December 2022, a fine of 20% to 40% of the transaction amount may be imposed. However, a currency resident may be exempt from such liability if, within 45 days from the date of the prohibited foreign exchange transaction, the amount received is transferred to a Russian bank account.
Q&A:
1) What will happen if a Russian currency resident credits to a personal account with a Swiss bank the proceeds from the sale of securities, coupon payments on bonds, or dividends on shares before 16 December 2022?
Accounts (deposits) of individuals who are currency residents of the Russian Federation and are opened with banks located outside the territory of the Russian Federation may be credited without restriction with funds received from foreign currency non-residents of the Russian Federation, provided that such banks are located in the territory of a foreign state (territory) with which automatic exchange of financial information is carried out.
Until 23:59 on 15 December 2022, the List adopted by Order of the Federal Tax Service of Russia No. ЕД-7-17/449@ dated 27.05.2022, which includes Switzerland, remains in force. In other words, until 16 December 2022, the regime applicable to Swiss bank accounts permits credits in the form of dividends, interest (coupons) on securities, as well as income from the sale of securities. At the same time, there is no obligation to repatriate or transfer funds to the Russian Federation.
Accordingly, transactions involving the crediting of funds by Russian currency residents to accounts in Switzerland are unrestricted only until 23:59 on 15 December 2022.
2) What will happen if a Russian currency resident credits to a personal account with a Swiss bank the proceeds from the sale of securities, coupon payments on bonds, or dividends on shares on or after 16 December 2022?
Currency residents who have been present in the territory of the Russian Federation for more than 183 calendar days are subject to currency control requirements concerning a limited number of transactions that a resident may carry out on their accounts in jurisdictions not listed in the List.
The list of permitted foreign exchange transactions that currency residents may carry out in respect of their foreign accounts (regardless of automatic exchange of financial information) is set out in parts 4 and 5 of Article 12 of Law No. 173-FZ.
For example, transactions such as crediting coupon payments and amounts from bond redemptions, crediting dividends on shares, and crediting proceeds from the sale of securities are not included in the specified “permitted” list. Therefore, for the purposes of currency legislation, they are deemed “prohibited”.
Accordingly, the crediting of such amounts will be deemed prohibited foreign exchange transactions after Switzerland was excluded from the list of countries that carry out automatic exchange of financial information with the Russian Federation (from 00:00 on 16 December 2022).
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3) Liability for committing prohibited foreign exchange transactions and exemption from liability
The fact of crediting income in the form of dividends and interest (coupons) on securities, as well as income from the sale of securities, to one’s own Swiss accounts from 00:00 on 16 December 2022 may result in a fine of 20% to 40% of the amount of each transaction.
In other words, if a coupon payment of USD 10 000 is credited to a Swiss account at 00:01 on 16 December 2022, such transaction will be deemed “prohibited”. Accordingly, the currency control authority may impose a fine of 20% to 40% (i.e. from USD 2 000 to USD 4 000).
However, pursuant to Note 7 to Article 15.25 of the Russian Code of Administrative Offences, a currency resident may be exempt from liability if the funds received under a prohibited transaction are transferred to a Russian bank account within 45 days after such transaction is carried out.
Under part 1 of Article 4.8 of the Code of Administrative Offences of the Russian Federation, time limits under the Code begin to run on the day following the commission of the offence. Accordingly, if coupon income is credited to a Swiss account on 17 December 2022, the 45-day period will begin on 18 December 2022 and end on 31 January 2023.
Thus, a currency resident may be exempt from liability under part 1 of Article 15.25 of the Code of Administrative Offences of the Russian Federation if they transfer funds received in their personal account in Switzerland from a prohibited foreign exchange transaction to a Russian bank account within 45 days from the date of each unlawful transaction.
Our services
We will be pleased to provide you with services to analyse your personal situation involving ownership of a Swiss personal account, specifically:
- Analysis of account transactions for compliance with Russian foreign exchange legislation;
- Analysis of the foreign exchange consequences of certain transactions on Swiss accounts;
- Support in communications with foreign exchange control authorities;
- Assistance in preparing documents for the purposes of using the 45-day grace period;
- Ongoing monitoring of accounts for unlawful foreign exchange transactions in order to use the 45-day grace period.
