How to avoid fines for undisclosed foreign accounts in Russia?

Introduction

In this article, we will discuss in detail what "undisclosed" accounts are and what consequences may be associated with their use, as well as how to properly notify tax authorities about the existence of a foreign account online.

The necessity of a foreign bank account

Citizens of Russia who plan to invest in foreignreal estate often face the necessity of opening accounts in foreign banks. In previous materials, we have already discussed the nuances of when payment can be made through Russian accounts and when it is essential to open an account outside our country. In this article, we can offer useful tips for account holders so that they know how to properly report to tax authorities and avoid unwanted financial sanctions.

What is an "undisclosed" account?

What is hidden under the concept of an "undisclosed" account? This term refers to foreign bank accounts whose information does not reach the Russian tax authorities. Due to the sanctions imposed against Russian banks, there is a belief that all accounts opened in unfriendly countries automatically become "undisclosed." However, this viewpoint is incorrect.

Citizens of the Russian Federation have the full right to open accounts in any corner of the world, but they are required to independently notify the tax authorities in accordance with Russian legislation.

Fines and liability

If a taxpayer does not report their foreign accounts, tax residents may face serious penalties. These penalties can reach1 million rublesfor legal entities. Sanctions are also provided for the late submission of information to the tax authorities.

Notification deadlines

The deadline for notifying about new foreign accounts is30 daysfrom the moment they are opened, and information about the movement of funds in already existing accounts must be provided byMarch 31the year following the reporting year.

How to notify the tax authorities?

If your foreign account was opened in 2022, you need to notify the tax authorities within a month of its opening, as well as report the account balance and transaction details in your annual declaration by the end of the first quarter of 2023.

What will happen if the notification deadline is missed?

What will happen if you miss the deadline for notifying about the account opening?June 1byDecember 31This year, a moratorium has been introduced on inspections for certain violations of Russia's currency legislation. This list includes the failure to timely notify about the existence of foreign accounts. This means that no measures will be taken against such violations this year. However, it is important to remember that the statute of limitations for such offenses is established in the administrative code.

Conclusion

In conclusion, it is important to emphasize that compliance with the legislation regarding the notification of foreign accounts is a key aspect that will help minimize potential risks and avoid penalties. Proper submission of notifications and adherence to the specified deadlines will help prevent unnecessary consequences and allow you to focus on financial plans abroad.

It's important to familiarize yourself with the new rules in advance and to closely monitor changes in legislation, so you are always up to date and can avoid legal pitfalls.

Statute of limitations and moratorium

According to current regulations, the general statute of limitations for imposing fines is two years, which opens up the possibility of sanctions being applied in the future. If the notification about the existence of foreign bank accounts was not sent before March 2022, the possibility of invoking the moratorium becomes unfeasible. This moratorium applies exclusively to offenses committed as a result of the sanctions imposed after February 23 of this year.

It is also worth noting that the Federal Tax Service clarified that this moratorium does not apply to violations for which inspections were initiated before May 31, 2022. One of the key points is that the statute of limitations for taking any action expires at the end of the current year. In this regard, it is strongly recommended to promptly notify about the appearance of new accounts, while the report on the movement and balances of funds in accounts for the previous year can be submitted until December 1, 2022, in accordance with the government decree.

Notification of foreign accounts

If you are outside the country, you can submit a notification to the tax authorities online. We have prepared a detailed guide to help you understand this process. To submit a notification about a foreign account via the internet, you will need to visit the website of the Federal Tax Service (FTS), where there is a personal account designed for both individuals and individual entrepreneurs and organizations.

Authorization in the personal account

Before you begin, you will need to log in to your personal taxpayer account on the FNS web portal. You can confirm your account using two methods:

• with the help of an electronic signature;
• through the account on the State Services portal (EPGU).

If you have decided to use an electronic signature, you need to install the special "CryptoPro" plugin in your browser. On the developer's website, you can find links to download this plugin, as well as a guide for its installation.

Confirmation through public services

If you chose confirmation through the state services, your account must be pre-verified. Please note that an account created earlier by sending a letter through Russian Post is not considered verified. There are several ways to verify your account on the state services portal to access the cabinet on the FNS website:

• personal visit to the service center;
• confirmation using an electronic signature;
• online confirmation through the bank.

Of all these methods, the last one is considered the most convenient and fastest.

The necessity of an electronic signature

As of today, while working with the tax system in Russia, you may need to obtain an electronic signature if you haven't done so already. It's important to note that individual entrepreneurs and legal entities using the taxpayer's personal account require a separate certificate specifically intended for individuals. Typically, the process of obtaining such a certificate takes from 30 minutes to 24 hours.

Filling out an online form for notification

After successfully obtaining an electronic signature, the next step, which can be labeled as the third step, is to fill out a special online notification form. As soon as your signature is activated, the required fields of the form will open automatically. You will need to enter the details of the tax authority, the type of notification, as well as information about your bank account and the organization itself.

Sending a notification

Once all the fields in the form are filled out, you will be able to save your application and proceed to submit it. After the notification is sent, you will receive a confirmation of the operation at the specified email address. Additionally, you can submit a notification about controlled foreign companies through the Federal Tax Service portal if needed.

Frequently Asked Questions

Now about frequently asked questions: indeed, you can send a notification about your account online through the tax service's website, but only if you have an electronic signature. If you don't have one, you will need to submit the notification either in person or through an authorized representative. When you visit the tax office in person, you will be able to obtain a certificate for individuals, which will allow you to use online services.

• For submitting notifications and declarations, a basic electronic signature is sufficient, which is provided for free.
• A simplified qualified electronic signature is issued on a fee basis.

Exemption from notification submission

Now let's talk about those who may be exempt from the obligation to report foreign accounts. This applies to both legal entities and individual entrepreneurs, as well as individuals. The exceptions are outlined in Article 207 of the Tax Code of the Russian Federation:

• Individuals who had tax residency in other countries during the reporting period or spent more than 183 days outside of Russia within 12 months may not be required to provide information about their accounts.
• Lists of international organizations which may impose sanctions against residents of Russia - where a taxpayer is affected by such measures, it has the right to submit a deferred notification.

Accounting of bank accounts

As for the account that was opened while living abroad, such information should only be disclosed after returning or permanently residing in Russia. For example, if a taxpayer was outside the country for more than 183 days in 2021 and opened an account there, then in this case, there is no need to submit a notification to the Russian tax authorities. However, sending a notification will be voluntary if the citizen decides to take this step.

Conclusion

In conclusion, it is important to realize that compliance with the reporting rules for foreign accounts is a responsibility that should not be ignored. I have personally experienced the significance of submitting notifications correctly and on time, as non-compliance with the law can lead to serious fines and issues with tax authorities. I hope this guide will help many Russians understand the matters of opening and reporting on foreign accounts.

We live in challenging times, and managing financial documentation is becoming an increasingly important aspect of everyone's life. Given the current tax policies and the external economic situation, knowing your rights and responsibilities not only helps avoid problems but also allows for better financial planning.

Why is it important to adhere to notification submission deadlines?

With the constant changes in tax legislation, I strongly advise you not to delay reporting and to report your foreign accounts by the deadline. Even with the moratorium on penalties, rest assured that missed deadlines can have consequences that will drag on for years to come.

Brief recommendations

• Submit the notification on time.
• Use online services to simplify the process.
• Keep abreast of changes in the law.

Use the provided instructions to submit your notification online, which significantly simplifies the process. As the account holder, you not only protect yourself from potential issues with tax authorities but also contribute to the rule of law in the country. Wishing you success in your financial matters and safe investments!