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Temporary rules for the payment of profits to foreign participants

Temporary rules for the payment of profits to foreign participants

LEGAL DIGEST, NEWS \ 18.05.2022

The President of the Russian Federation has signed a Decree determining the procedure for fulfilling obligations to pay profits to foreign companies – residents of “non-amicable” countries.

Starting from May 4, 2022, Russian companies associated with foreign legal entities – residents of “non-amicable” countries and who have made a decision on the distribution of profits will be able to pay it to such foreign companies in accordance with clauses 2-9 of the Decree No. 95 of the President of the Russian Federation dated March 5, 2022. Therefore, the rules of the Decree dated March 5 now are applied not only to promissory notes, but also to corporate commitments.

According to the current rules, Russian organizations have the right to make settlements on the payment of profits to foreign legal entities in the currency of the Russian Federation. To do this, it is necessary to send an application to a Russian bank to open a special account of type “S” in the name of a foreign lender and transfer payments to it in ruble equivalent at the exchange rate of the Central Bank of the Russian Federation on the day of the payment. The “S” type account mode is set by:

  • the Central Bank of the Russian Federation (non-banking financial institutions);
  • the Ministry of Finance of the Russian Federation (for other residents).

The established settlement procedure is applied to payments exceeding 10 million rubles per month (or a similar amount in foreign currency equivalent).

The amendments also establish a list of transactions to which the actions of this Decree are not applied. For example, transactions for the acquisition of rights to additional shares or bonds of Russian legal entities purchased in rubles, or transactions with real estate acquired by citizens of “non-amicable” states.

Please be reminded that the list of foreign states and territories that commit non-amicable actions against Russia, its legal entities and individuals includes such countries as the United Kingdom, the Member States of the European Union, Monaco, Norway, the USA, Montenegro and others. A more detailed list is indicated in the Order No. 430-r approved by the Government of the Russian Federation dated March 5, 2022.

Acsour recommends to pay special attention to carrying out operations to pay amounts of profit to resident companies of foreign countries included in the specified List. Our specialists are ready to advise you on this issue and help in carrying out the relevant settlements.