The Cabinet of Ministers proposed the listed changes to the draft law “On the federal budget for 2021 and for the planning period 2022 and 2023”.
What changes are proposed in the draft law
At the suggestion of the Government of the Russian Federation, the tax service will be able to receive information about Russian banks’ customers directly, without being bound to tax audits. We are talking about individual clients and transactions on their accounts. The mechanism of access, categories of available information are not yet specified.
Also the Federal Tax Service can receive the right to transfer such data upon request from tax authorities of foreign countries.
In addition, the Cabinet of Ministers calls for legislation to establish data exchange between the FTS and the Central Bank. In this case the tax service will have access to private bank accounts, and the Central Bank – to the tax information of individuals.
The Government believes that the changes will help to whitewash the country’s economy and strengthen control over the financial operations of individuals.
This is not the first time that the FTS access to bank secrecy has been raised. For example, in the summer of 2018 the Ministry of Finance and the Central Bank of Russia opposed the amendments. They believed that the abandonment of bank secrecy could undermine confidence in the banking system. And as a result of the loss of trust, 一 capital withdrawal.
What powers does the FTS currently have?
Russian banks are obliged to inform FTS if their clients open or close accounts and deposits. This rule applies to individuals, individual entrepreneurs and companies.
Since April 1, 2020, the Tax Service also receives information about popular services’ electronic wallets, which conduct transactions through banks. Such services include Yandex.Money, QIWI Purse, WebMoney, PayPal.
In some cases, the FTS has the right to request information from the bank about the client: whether he has accounts and deposits, the amount on the account, financial transactions for a certain period.
In order to request such information, the tax authorities must have good reasons:
- In the case of legal entities and sole proprietors it is possible, if the FTS conducts tax audit or receives a court decision to collect debts on tax payments.
- In order to check on individuals, the Tax Service must first obtain the permission of a higher tax authority. Another possible reason is a request from the tax authority of another country with which Russia exchanges fiscal data.
If the bill is passed in its current form, the FTS will not need to request a permit. The Tax Service will be able to directly check bank accounts and individuals’ transactions.
Possible consequences if the bill is passed
If the State Duma, then the Federation Council and the President of Russia pass the bill in its current form, this could lead to undesirable consequences for clients of Russian banks:
- The FTS will conduct more checks on individuals. The tax service will have more information about cash flows, which means that the FTS will be able to conduct more frequent spot checks of citizens. Now the tax service applies this approach to legal entities.
- The load on banks will increase, and settlement of transactions may slow down.
- Russians’ trust in the banking system as a whole will decrease, which may lead to an increase in the share of shadow transactions.
In the light of changes, it will be even more profitable for wealthy people to open accounts with European banks that observe banking secrecy.
How can an investor become a client of foreign banks?
Today it is difficult for Russians to access the services of European banks. The situation is constantly worsening due to the geopolitical situation in the world.
A possible solution is to obtain a residence permit or citizenship of one of the EU countries. Or citizenship of a Caribbean state. Official status in these countries allows free use of European banking services. The fastest option is to take part in a residence permit or permanent residence programme for investment.
For example, you can get a residence permit for Portugal for an investment. The minimum investment amount for the country’s programme is 250 000 €. The registration period will be from 2 to 6 months.
The conditions of the programme allow you to apply for Portuguese citizenship after 5 years of maintaining residency status.
Another option is to arrange a permanent residence in Malta. The terms of the programme are comparable to those of the Portuguese programme: the required investment from 250 000 € and the processing period from 5 months.
In addition to simplified access to the services of European banks, investors with residence permit status or second citizenship receive other benefits.
- Visa-free travel within the Schengen area with the right to stay in the 90-day zone for six months.
- Opportunity to change tax residence to optimise taxation for yourself and your business.
- Opportunity to quickly leave for a country with a high standard of living and a stable economy.
We recommend that you think about obtaining a European residence permit or a second citizenship for yourself and your family members now.
Immigrant Invest is a licensed agent for European and Caribbean citizenship and residence permit investment programmes. We help investors find the best option for their tasks and provide full support.