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Towards a selective administrative liability mechanism for breaches of the currency control legislation

03/2016

On 15 February 2016, the Federal Law "On Amendments to Article 15.25 of the Code on Administrative Offences" was adopted to improve the mechanism for the establishment of administrative liability for breaches of the legislation on currency control.

In terms of currency control and in the context of imports to Russia, when goods are not delivered, work is not performed or services are rendered, organisations that are resident in Russia under the currency control rules are obliged to repatriate any advance payment made within a reasonable time. The timeframe for the repayment of the amount is determined based on the payment terms provided for in the international trade agreement. Most of the time, the exporter/importer tries to set the earliest possible payment date to encourage the other contracting party to fulfil its obligations more quickly. However, this approach poses significant currency exchange risks for Russian residents. In the event of late payment, the previous wording of the Code on Administrative Offences provided for a fine of up to 75% of the amount of the non-repatriated amount and if such amount was repaid late, the Russian resident still remained liable for the breach.

The new wording of Article 15.25 of the Code on Administrative Offences now differentiates between the following two sets of circumstances when currency control legislation has been breached:

  • If the due amount is repatriated late, a fine in an amount equivalent to 0.66% of such amount multiplied by the refinancing rate of the Russian Central Bank will accrue for each day of delay. Since 1 January 2016, the refinancing rate of the Central Bank is equal to its key rate, i.e. 11%.
  • In the event of non-repatriation of foreign currency amounts, a fine is also applicable, but for an amount up to 75% of the entire outstanding amount.

Those who are involved in the export-import trade and are in good faith unable to repatriate monies in foreign currency within the time specified in the relevant international trade agreement, will benefit from these changes.

Although the administrative liability mechanism becomes selective, it is recommended that any exporter carefully considers the exact wording of the payment terms in foreign trade transactions and informs its foreign counterparty of the risk that the exporter may be held administratively liable when its counterparty is late in paying.

Authors

Safaryan Hayk
Hayk Safaryan
Partner
Moscow