Anyone with experience doing business in Russia knows how complicated it can be to make payments abroad and receive payments from overseas. And I’m referring here to the obstacles created by Russian legislation, not those resulting from sanctions against Russia. Russian currency legislation is extremely strict.
If you become a Russian currency resident as a natural person, similar rules (but not exactly the same ones) partially apply to you as an individual. This blog explores how foreigners can become Russian currency residents and what far-reaching consequences this has for their personal financial obligations.
Table of Contents
- What is a Currency Resident?
- Legal Framework
- The Underlying Logic of Currency Control in Russia
- The Difference Between Currency and Tax Residency
- How Do Foreigners Become Currency Residents of Russia?
- The Consequences of Currency Residency
- Practical Considerations for Foreigners
- Strategies for Foreigners
- Conclusion and Recommendations
What is a Currency Resident?
A currency resident in Russia is a person or entity that falls under Russian currency legislation. This concept differs fundamentally from tax residency and has its own unique criteria and obligations.
Legal Framework
Currency legislation in Russia is primarily regulated by the following legal texts:
Main Law:
- Federal Law “On Currency Regulation and Currency Control” No. 173-FZ of December 10, 2003 – This is the core law that defines the concept of currency residency and establishes fundamental rules for currency transactions.
Important Amendments:
- Federal Law No. 427-FZ of December 28, 2017 – This law made significant changes to the definition of currency residency for natural persons, particularly introducing the 183-day rule for certain exemptions.
Recent Presidential Decrees (since 2022):
- Presidential Decree No. 81 of March 1, 2022 – Restricts transactions with persons from “unfriendly countries”
- Presidential Decree No. 126 of March 18, 2022 – “On Additional Temporary Economic Measures to Ensure Financial Stability of the Russian Federation in the Field of Currency Control”
Implementing Regulations:
- Instructions and clarifications from the Central Bank of Russia (CBR)
- Regulations from the Federal Tax Service (FTS) regarding reporting obligations
These laws and decrees together form the complex legal framework within which currency residents must operate. It’s important to note that this regulation is frequently adjusted, especially since 2022.
The Underlying Logic of Currency Control in Russia
To understand why Russian currency legislation is so strict, we must look at the historical context and the objectives of the Russian state.
Why Currency Control?
Economic Sovereignty: Russia views currency control as essential for maintaining economic independence. Through strict control over currency flows, the state can:
- Limit capital flight
- Stabilize the ruble
- Protect strategic sectors against foreign takeover
Fiscal Considerations: Currency control helps the state to:
- Combat tax evasion
- Gain complete visibility into residents’ financial transactions
- Ensure fair distribution of tax burden
Historical Development of Currency Control
Soviet Era (until 1991): Under the Soviet system, there was complete state control over all currencies. Private trade in foreign currency was completely prohibited and considered a serious crime.
The Chaotic 1990s: After the fall of the Soviet Union in 1991, Boris Yeltsin led a radical “shock therapy” liberalization of the economy. In January 1992, most prices were freed, leading to hyperinflation of 2,520% in the first year.
The liberalization period resulted in an economic contraction of nearly 50% between 1991-1997 and led to the emergence of oligarchs who accumulated enormous wealth through dubious privatizations.
Capital flight was massive – oil companies, for example, sold oil for $1 to “independent trading companies” in Switzerland, which then sold it on the market for $100.
Period 2000-2020: Consolidation and Reform: From 2000, the government systematically began exerting more control over strategic sectors of the economy. A new balance was sought between private interests and state objectives. Various large enterprises came under increased government control.
Around 2003-2004, an economic model was introduced where the state played a more central role in the economy. Economic growth of the first decade of the 21st century began to decline around 2010-2012.
At the same time, the period 2010-2020 paradoxically witnessed a gradual liberalization of currency control. In January 2020, a law came into effect that largely lifted restrictions on currency transactions by residents with foreign accounts.
Since 2022: Geopolitical Pressure and Tightening: In response to international sanctions and geopolitical tensions, Russia returned to strict currency control in February 2022. Exporters were again required to sell their foreign currency earnings – a measure that had been abolished since 2006.
The Pattern: Economic Sovereignty
History shows a clear pattern: in times of international tension or economic challenges, currency control is tightened to ensure economic stability. Current measures are designed to stabilize the ruble and limit capital flight during a period of heightened geopolitical uncertainty.
For individual currency residents, this means their financial freedom depends on the overarching economic objectives of the state – an approach that differs from more liberally oriented market economies.
The Difference Between Currency and Tax Residency
Many people confuse these two concepts, but they are fundamentally different:
Currency Residency:
- Based on citizenship or residence status
- Applies regardless of where you actually live
- Determines your obligations under currency legislation
Tax Residency:
- Based on physical presence (183-day rule)
- Determines your tax obligations
- Can change annually
How Do Foreigners Become Currency Residents of Russia?
For Natural Persons
Foreigners can become Russian currency residents in two ways:
1. Acquisition of Russian Citizenship
As soon as a foreigner acquires Russian nationality, they automatically become a currency resident, regardless of where they live.
2. Permanent Residence Permit (Вид на жительство)
Foreigners who obtain a permanent residence permit in Russia are also considered currency residents.
For Legal Entities
Companies become currency residents if they are:
- Registered under Russian law
- Have their headquarters in Russia
- Branches or representative offices of Russian companies, even if these branches are located abroad
The Consequences of Currency Residency
Main Obligations
1. Foreign Account Reporting Requirements
Legal Basis: Article 28 of Federal Law No. 173-FZ “On Currency Regulation and Currency Control” requires Russian residents to inform tax authorities about opening (or closing) accounts with banks and other financial market organizations abroad.
What Must You Report?
- Opening and closing of foreign bank accounts within 30 days of the opening/closing date
- Changes in account details
- Annual reporting on money movements in these accounts
Annual Report Deadline and Procedure:
- When: Before June 1 of the year following the reporting year
- How to Submit:
- Electronically via personal account with the tax service, or
- On paper (2 copies) directly to the tax authority or by registered mail
- Supporting Documents: Bank statements and other documents from financial institutions must be attached
- Translations: Documents in foreign languages must be accompanied by certified translation into Russian
Expanded Scope Since 2020: From January 1, 2020, Russian residents must report not only bank accounts, but also accounts with “other financial organizations” such as brokers and investment institutions.
Who is Exempt? Currency residents who spend more than 183 days per year abroad are exempt from reporting requirements for accounts in OECD/FATF countries where the annual turnover or balance does not exceed 600,000 rubles (approximately €6,000).
Legal Basis for Exemption: Article 12, Part 7 of Federal Law No. 173-FZ and amendments introduced by Federal Law No. 265-FZ of August 2, 2019.
What are OECD/FATF Countries?
- OECD (Organization for Economic Cooperation and Development): An international organization of 38 developed countries that cooperate on economic policy
- FATF (Financial Action Task Force): An international organization that sets standards for combating money laundering and terrorism financing. Has 39 member states
- Crucial Condition: The country must participate in automatic exchange of financial information with Russia under the OECD Common Reporting Standard (CRS) or a comparable agreement
Current Situation (2025): ⚠️ Important Warning: Many Western countries have suspended automatic information exchange with Russia since 2022 due to the war in Ukraine. Examples:
- Switzerland suspended all CRS exchange with Russia on September 22, 2022
- December 2024: The Russian tax service published Order No. ED-7-17/916@ that drastically reduced the list to 63 countries
- All EU member states were removed from the list on December 31, 2024
Where to Find the Current List? The official list is published by the Russian tax service in public Orders. The most recent is Order No. ED-7-17/916@ of October 30, 2024, which came into effect on December 31, 2024.
Access to the List:
- Official Link (Russian):
Current List of Countries and Territories (as of December 31, 2024)
LIST OF COUNTRIES (AND TERRITORIES) WITH WHICH AUTOMATIC EXCHANGE OF FINANCIAL INFORMATION TAKES PLACE
Countries:
- Australia
- Andorra
- Albania
- Antigua and Barbuda
- Azerbaijan
- Argentina
- Armenia
- Aruba
- Bahamas
- Barbados
- Bahrain
- Belize
- Brazil
- Brunei
- Vanuatu
- Ghana
- Grenada
- Dominica
- Israel
- India
- Indonesia
- Iceland
- Kazakhstan
- Cameroon
- Qatar
- China
- Colombia
- South Korea
- Costa Rica
- Kuwait
- Lebanon
- Liechtenstein
- Mauritius
- Marshall Islands
- Malaysia
- Maldives
- Mexico
- Monaco
- Nauru
- Nigeria
- New Zealand
- Norway
- United Arab Emirates
- Oman
- Pakistan
- Panama
- Peru
- Rwanda
- Samoa
- San Marino
- Saudi Arabia
- Seychelles
- Saint Vincent and the Grenadines
- Saint Lucia
- Saint Kitts and Nevis
- Singapore
- Turkey
- Uruguay
- Chile
- Ecuador
- South Africa
- Jamaica
- Japan
Territories:
- Bermuda
- British Virgin Islands
- Gibraltar
- Hong Kong
- Greenland
- Curaçao
- Macau
- Montserrat
- Niue
- Cook Islands
- Turks and Caicos Islands
- Faroe Islands
⚠️ Important Observations About This List:
- No EU Countries: All 27 EU member states have been removed since December 31, 2024
- No US or UK: The United States and United Kingdom are not on the list
- Mainly Non-Western Countries: The list consists mainly of countries that maintain neutral or friendly relations with Russia
- Offshore Jurisdictions: Many traditional offshore financial centers remain on the list
Consequence of the Changes: For most popular jurisdictions (including all EU countries), transactions involving money transfers to accounts have now become illegal. Violations can result in fines of 20-40% of the transferred amount.
Practical Advice: Always consult the most current Order from the Russian tax service before relying on exemptions, as the list is regularly updated in response to geopolitical developments.
2. Restrictions on Currency Transactions
Prohibited Transactions:
- Currency transactions between Russian currency residents with each other (Article 9, Part 1 of Federal Law No. 173-FZ “On Currency Regulation and Currency Control”)
- Certain payments to “unfriendly countries” (Presidential Decree No. 81 of March 1, 2022 “On the Application of Special Economic Measures in the Field of Foreign Economic Activity” and subsequent decrees)
- Real estate transactions with specific restrictions (Article 14 of Federal Law No. 173-FZ in combination with Presidential Decree No. 430 of July 1, 2022 “On the Application of Special Economic Measures in the Field of Real Estate”)
Transactions Between Currency Residents Abroad
The prohibition on currency transactions between currency residents raises questions for Russian citizens living abroad. While the law provides various exceptions (such as family transfers and daily limits), certain situations remain legally unclear.
Complex Cases:
- Business transactions between currency residents that do not fall under specific exceptions
- Transactions that take place entirely within foreign banking systems without involvement of Russian banks
Practical Considerations: For currency residents living abroad, it is essential to:
- Understand the specific exceptions in Article 9 well
- Seek legal advice when in doubt
- Maintain documentation justifying transactions
- Consider possible future audits
The complexity of these regulations illustrates why professional legal advice is indispensable for currency residents considering international financial transactions.
Permitted Exceptions:
- Transfers for specific purposes (education, medical treatment) (Article 14, Part 4 of Federal Law No. 173-FZ “On Currency Regulation and Currency Control” and Central Bank of Russia Instruction No. 181-I of August 16, 2017)
- Family transfers between close relatives (Article 9, Part 1, Point 17 of Federal Law No. 173-FZ: transfers between currency residents who are each other’s spouses or close family members – parents, children, brothers, sisters, grandparents, grandchildren)
- Transfers up to $5,000 per day per bank (Article 9, Part 1, Point 12 of Federal Law No. 173-FZ: natural person residents may transfer up to $5,000 equivalent per operational day per authorized bank to other residents on foreign accounts)
- Certain business operations with prior approval (Article 21 of Federal Law No. 173-FZ “On Currency Regulation and Currency Control” regarding approval procedures and CBR Regulation No. 550-P of June 15, 2018)
The “Soft Currency Resident” – An Important Exception Since 2018
Since the legislative amendment of 2018-2019, a crucial exception has been added that is of great importance for Russian currency residents who stay abroad for extended periods.
Article 9, Paragraph 1, Point 25 introduces the concept of the so-called “special” or “soft” currency resident. This regulation states that currency transactions between natural person residents outside the territory of the Russian Federation are permitted under specific conditions.
Conditions for Soft Currency Residency: To use this exception, both parties involved must:
- Spend more than 183 days per calendar year outside the Russian Federation
- Thereby automatically qualify for “soft/special” currency resident status
Practical Implications: This exception means that Russians who actually live abroad (and are often no longer Russian tax residents) have significantly more freedom in their mutual financial dealings. They can, for example:
- Conduct business transactions with each other
- Provide personal loans
- Make normal financial settlements
Important Limitations:
- Both parties must meet the 183-day rule
- Transactions must take place outside Russia
- This exception does not apply to regular currency residents who spend less than 183 days outside Russia
This regulation recognizes the reality that Russians who live permanently or semi-permanently abroad have different financial needs than residents of Russia itself.
Note: Article 9 of the currency law contains 35 different exceptions to the prohibition on currency transactions between residents. For a complete list of all permitted transactions, reference is made to the full text of the law.
Criminal and Administrative Consequences
Fines and Sanctions
For Individuals:
Administrative Violations (Article 15.25 of the Administrative Code):
- Non-compliance with foreign account reporting requirement: 1,000 to 1,500 rubles for first violation (Article 15.25, Part 2 CAO)
- Failure to submit annual report on foreign accounts: 5,000 to 10,000 rubles (Article 15.25, Part 3 CAO)
- Incomplete or incorrect reporting: 15,000 to 25,000 rubles (Article 15.25, Part 1 CAO)
- Non-compliance with reporting requirements through repeat violation: 30,000 to 50,000 rubles (Article 15.25, Part 7 CAO)
Serious Administrative Violations (Article 15.25.1 of the Administrative Code):
- Illegal currency transactions between residents: 20-40% of transaction amount (minimum 40,000 rubles) (Article 15.25.1, Part 1 CAO)
- Hidden foreign assets: 20-30% of unreported amounts (Article 15.25, Part 4 CAO)
- Use of accounts with unauthorized institutions: 10-20% of account balance (Article 15.25, Part 5 CAO)
Criminal Liability (Article 193 of the Criminal Code):
Which violations can lead to criminal prosecution:
- Failure to fulfill obligation to sell foreign currency (Part 1): amounts above 9 million rubles within 3 years
- Failure to fulfill obligation to transfer foreign currency to the state (Part 2): amounts above 6 million rubles within 3 years
- Illegal currency transactions (Part 3): amounts above 9 million rubles within 3 years
- Use of falsified documents in currency transactions (Part 4): regardless of amount
Penalties:
- Fine: up to 1 million rubles or up to 5 years’ salary/income
- Forced labor: up to 5 years
- Imprisonment: 2 to 7 years for particularly serious cases (amounts above 45 million rubles)
Additional Measures:
- Exit ban (Article 15 of Federal Law No. 114-FZ “On the Procedure for Exit from and Entry into the Russian Federation” – applied when a person is suspected of or charged with a crime, including criminal currency violations under Article 193 of the Criminal Code)
- Freezing of domestic assets (Article 77 of the Tax Code – arrest of property by tax service to ensure fulfillment of obligations)
- Prohibition on certain activities (Article 3.11 of the Administrative Code – disqualification of managers and prohibition on exercising certain professions)
For Companies:
Administrative Fines (Article 15.25 of the Administrative Code):
- Non-compliance with reporting obligations: 50,000 to 100,000 rubles
- Illegal currency transactions: 20-40% of transaction amount (minimum 100,000 rubles)
- Systematic violations: up to 1 million rubles
Criminal Liability for Management: The same criminal sanctions as for individuals can be applied to directors and owners of companies.
Practical Considerations for Foreigners
Benefits of Currency Residency
Property Rights and Transactions:
- Freer sale of Russian real estate: Currency residents from “unfriendly countries” can freely sell their property in Russia, while non-residents from these countries face restrictions
- Access to Russian financial markets: Fuller access to banking services, loans, and investment products within Russia
- Fewer restrictions on business activities: Simpler procedures for setting up and running businesses in Russia
Financial Benefits:
- Access to Russian financial markets: Fuller access to banking services, loans, and investment products within Russia
Benefits of Avoiding Currency Residency
More Freedom:
- No foreign account reporting requirement
- Fewer restrictions on international transactions
- Simpler financial planning
Disadvantages of Currency Residency
Complex Compliance:
- Extensive reporting obligations
- Limited transaction possibilities
- Constantly changing regulations
Financial Risks:
- High fines for violations
Strategies for Foreigners
If You Are Already a Currency Resident
- Maintain accurate records of all foreign accounts
- Regularly consult legal advice due to changing legislation
- Consider the 183-day rule to be exempted from certain obligations
- Keep all documentation for potential audits
If You Want to Avoid Currency Residency
- Avoid obtaining permanent residence status if this is not necessary
- Consider alternative residence statuses such as temporary visas
- Evaluate business structures that could trigger currency residency
Conclusion and Recommendations
Russian currency residency brings complex legal and financial obligations that can have significant consequences for your international financial position. The combination of strict reporting requirements, transaction restrictions, and potentially severe sanctions for violations makes careful planning and compliance essential.
For foreigners considering becoming currency residents, or who are already currency residents, we recommend:
- Thorough preliminary research: Evaluate the full scope of obligations before taking steps that lead to currency residency
- Specialist legal advice: Consult experts with in-depth knowledge of Russian currency legislation and international structures
- Compliance monitoring: Establish systems for continuous compliance with changing regulations
- Strategic planning: Develop a structured approach for your specific circumstances
Van Rhijn Legal & Property can support you with legal issues regarding Russian currency residency, cross-border transactions, and real estate matters. Our team combines expertise in Russian currency legislation with practical experience in international structuring and compliance.
It is crucial to understand that many exceptions to the prohibition on currency transactions between residents primarily concern transfers from Russian accounts to foreign accounts. For transactions that take place entirely within foreign banking systems between currency residents, the legal implications remain unclear and require careful legal analysis on a case-by-case basis.
In the current geopolitical climate, caution is warranted. Russian currency legislation evolves rapidly and the consequences of non-compliance can be severe.
Disclaimer
This blog is intended for informational purposes only and does not constitute legal advice. Currency legislation is complex and changes regularly. Always consult qualified legal professionals before making decisions that may affect your currency residency status.
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