On 16 September 2022, the Swiss Government decided to suspend the exchange of tax information with Russia. Russian tax authorities will not receive information on the accounts of Russian residents in Switzerland already for 2021.
What does the suspension of the automatic exchange mean for currency residents?
The suspension of the automatic exchange may in practice equate accounts opened in Swiss banks with accounts in banks in the US and the UK in terms of foreign currency transactions.
As a reminder, credits permitted to accounts opened in jurisdictions not included in the list of countries exchanging information with the Russian Federation automatically, such as the US and the UK, are extremely limited. In particular, it is not permitted to carry out virtually any foreign currency transactions in respect of investment portfolios, for example, to credit proceeds from the sale of shares or bonds, to credit coupons or dividends, or to receive loans (credits), etc.
If such types of income are credited, the account holder may be fined 20 to 40% of the amount of the foreign currency transaction.
Accordingly, if Switzerland is removed from the list, the above restrictions will also apply to accounts opened in Swiss banks.
To date, the Russian Federal Tax Service has not commented on the Swiss Government’s decision under discussion. However, we cannot rule out that an updated version of the list of states participating in automatic exchange with the Russian Federation will be approved in the near future.
We note that this restriction does not apply to currency non-residents (i.e. persons who do not have a Russian passport or residence permit), as well as to 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 foreign currency transactions between residents).
How should you prepare for the changes?
Although Switzerland has not yet been removed from the list and the restrictions described above have not yet entered into force, we recommend structuring assets in advance (selecting a foreign structure, accounts) in order to mitigate the risks of the upcoming changes.
In addition to Switzerland, Germany and Latvia have also announced the suspension of automatic exchange with the Russian Federation, which indicates a trend to which it is important to adapt the asset structure.
ALPINE Tax team members have extensive experience advising on tax and currency matters and will help you select an effective mechanism tailored to individual needs.
