Obligation of Russian residents
to repatriate currency back to Russia

Statutory provisions establishing the obligation

Part 1 of article 19 of the Law of December 10, 2003 No. 173-FZ On Currency Regulation and Currency Control:

"When carrying out foreign trade activities the residents, unless specified otherwise by this Federal Law, are bound to provide within the time terms stipulated by foreign trade agreements:

1) the receipt in their bank accounts with authorized banks of foreign currency or currency of the Russian Federation from the non-residents payable pursuant to the terms and conditions of those agreements (contracts) for the goods delivered to the non-residents, work performed for them, services provided for them, or information and results of intellectual activities including exclusive rigths thereof delivered to them;

2) the repayment into the Russian Federation of the funds paid to the non-residents for non-imported into the customs territory of the Russian Federation (non-received in the customs territory of the Russian Federation) goods, non-performed work, non-provided services, or non-delivered information and results of intellectual activities including exclusive rights thereof.

2. The residents are entitled to not credit foreign currency or currency of the Russian Federation in authorized banks to their accounts in the following instances:

1) when the currency earnings are credited to the accounts of resident legal entities or third persons with banks outside of the territory of the Russian Federation - for the purposes of performing of obligations of resident legal entities under lending agreements and loan contracts with non-resident organizations being agents of governments of foreign states as well as under lending agreements and loan contracts made with the residents of states being the OECD or FATF members, for the period of more than two years;

2) when payments are made by clients (non-residents) for local expenses of the residents with regard to erection by the residents of objects in the territories of foreign states - for the period of construction upon expiration of which the balance is subject to transfer to accounts of the residents opened with authorized banks;

3) when the foreign currency payable to the residents for arranging of exhibitions or sport, cultural, and other similar events outside of the territory of the Russian Federation, is used to cover expenses for arrangements thereof - for the period of arranging of those events;

The provisions of paragraph 4 of part 2 of article 19 (in wording pursuant to Federal Law dated December 30, 2006 No. 267-FZ) are to be applied to the legal relationships arising from January 1, 2007 (article 2 of Federal Law dated December 30, 2006 No. 267-FZ).

4) when making a set-off of counterclaims regarding obligations between the residents carrying out fishery outside the customs territory of the Russian Federation and non-residents providing services to those residents outside the customs territory of the Russian Federation under agency contracts (agreements) made therewith as well as between resident transport organizations and non-residents providing services to those residents outside the customs territory of the Russian Federation under contracts (agreements) made therewith as well as when making a set-off of counterclaims regarding obligations between resident transport organizations and non-residents where the payments between them are made through specialized payment organizations created by international organizations in the field of international carriages whose members such resident transport organizations are;

5) when making a set-off of counterclamis regarding obligations arising from reinsurance contracts or contracts for provision of services with regard to entering into and performance of reinsurance contracts, between a non-resident and a resident both being insurance organizations or insurance brokers;

The provisions of paragraph 6 of part 2 of article 19 introduced by Federal Law dated December 30, 2006 No. 267-FZ are to be applied to the legal relationships arising from January 1, 2007 (article 2 of Federal Law dated December 30, 2006 No. 267-FZ)

6) when crediting the currency earnings to accounts of resident transport organizations with banks outside the territory of the Russian Federation - for the purposes of payment of expenses arising at such transport organizations outside the territory of the Russian Federation, with regard to payment for aeronavigation, airport, port charges, and other obligatory charges in territories of foreign states, expenses with regard to maintaining of air or river or sea vessels and other transport means of such transport organizations located outside the territory of the Russian Federation and their passengers as well as expenses to ensure activities of branches, representative offices, and other subdivisions of such transport organizations located outside the territory of the Russian Federation.

3. The foreign currency credited pursuant to paragraphs 1 and 3 of part 2 of this article to accounts of the residents or third persons with bank outside the territory of the Russian Federation must be either used for the purposes of performance by the residents of their obligations provided for by paragraphs 1 and 3 of part 2 of this article, respectively, or transferred to the resident's accounts opened with authorized banks".

Legal liability

The criminal liability is provided for by art. 193 of the Criminal Code of the Russian Federation:

"The non-repayment in great amount from abroad by organization's chief of funds in foreign currency subjected in accordance with the legislation of the Russian Federation to obligatory transfer to accounts with an authorized bank of the Russian Federation -

shall be punished by the imprisonment for the period of up to three years.

Note. The act specified by this article is deemed to have been committed in great amount if the sum of non-repaid funds in foreign currency exceeds thirty million roubles". (About $1,000,000.)

The administrative liability is provided for by parts 4 - 5 of art. 15.25 of the Code of the Russian Federation for Administrative Violations:

"4. The non-performance by the resident within the established time of obligation to receive in its bank accounts with authorized banks of foreign currency or currency of the Russian Federation payable for either goods delivered to non-residents, work performed for non-residents, services provided to non-residents or information or results of intellectual activities including exclusive rights thereof delivered to non-residents -

will entail imposing an administrative fine on officials and legal persons in the amount of three quarters to one amount of the funds non-credited to accounts with authorized banks.

5. The non-performance by the resident within the established time of obligation to repay into the Russian Federation the funds paid to non-residents for non-imported into the customs territory of the Russian Federation (non-received in the customs territory of the Russian Federation) goods, non-performed work, non-provided services, or non-delivered information and results of intellectual activities including exclusive rights thereof -

will entail imposing an administrative fine on officials and legal persons in the amount of three quarters to one amount of the funds non-repaid into the Russian Federation".

Note. This administrative liability regarding officials is to be applied only to persons carrying out entrepreneurial activities without formation of a legal person.