Please kindly find below answers to frequently asked questions regarding the restrictions imposed on the Russian Federation in 2022.
Is it permitted to pay dividends abroad?
Payment of dividends by LLC in rubles or foreign currency is not restricted*. Restrictions apply to JSC dividends (payments will be 'frozen').
Is it possible to make payments for goods, work or services located/received abroad?
Payment for goods, works, services in rubles or foreign currency is not restricted*.
Is it possible for a Russian company to obtain a loan from a foreign company?
Borrowing from entities located abroad in rubles or foreign currency is not restricted*.
Is it possible for a Russian company to lend to a foreign company?
No loans/new tranches in currency or rubles shall be given to non-residents.
- special authorisation by the Government Commission
- Ruble loans to foreign companies which are independent of (i.e. not controlled by) persons from 'unfriendly' countries. The feasibility of such loan should be investigated further.
Is it possible for a Russian company to receive interest on a previously issued loan from a foreign company?
Receipt of interest or loan principal by Russian residents is not restricted*. Foreign companies are also not restricted from fulfilling their obligations under loans previously received from Russian entities.
Is it possible for a Russian company to pay the loan received from a foreign company?
- To lenders from countries that have not joined the sanctions as well as Russian creditors the debt can be paid in rubles (including foreign currency debt at the exchange rate of the Central Bank of Russia on the date of payment) or in foreign if a special permission is granted.
- In relation to borrowers from 'unfriendly' countries, obligations could be fulfilled in rubles using special 'C' bank accounts.
How do special measures affect transactions between Russian entities?
- The imposed legislation does not prohibit any transactions between Russian legal persons, including subsidiaries of foreign entities (controlled persons).
- Transactions between Russian persons may be subject to the general rules and restrictions of the Russian Civil Code, currency control legislation and other applicable legislation.
How does the increase in the key rate of the Central Bank of Russia affect interest on loans from taxation perspective?
- For loans between related parties, changes to the rate will depend on the interest calculation procedure stated in the loan agreement (see Article 269 of the Russian Tax Code):
- in relation to debt obligations for which the rate is fixed and does not change throughout the term of the debt obligation, the key rate of the Central Bank of the Russian Federation is the relevant rate in effect on the date of raising funds or other property in the form of the debt obligation. The date on which the funds were raised is determined for each tranche/loan separately;
- in relation to debt obligations not specified above (i.e. a floating rate), the key rate of the Central Bank of the Russian Federation is the relevant rate in effect on the date of recognition of interest income (expense). Income (expenses) should be recognised in tax accounting on a monthly basis.
- For loans with independent parties, the actually applied rate is recognised as a market rate.
Are there any restrictions on transactions involving real estate and shares of joint stock companies (JSCs) and limited liability companies (LLCs) owned by foreign entities?
- Orders of foreign legal entities and individuals to sell securities are suspended in accordance with the Order of the Central Bank of the Russian Federation from 28.02.2022 7-00 and until this Order is revoked;
- Decree of the President of 01.03.2022 restricts (allowing only under a special procedure) transactions (operations) with participation of foreign entities - residents of 'unfriendly' states which entail rights to securities and real estate.
- In relation to transactions involving shares in Russian LLC’s no restrictions are currently applied.
Does the requirement to sell 80% of proceeds in foreign currency apply to companies providing services (export of services, including to foreign group companies)?
- Decree of the President of the Russian Federation N 79 of 28.02.2022 establishes the requirement for mandatory sale of part of the foreign currency proceeds by residents under contracts with non-residents, including service, work and licensing contracts.
- The term 'resident' is defined according to the currency control legislation.
*Restrictions related to the sanctions imposed on Russian banks should be taken into account.