There is a strictly enforced network of laws and regulations covering currency and related issues, with substantial penalties for transgression. The extension of and receipt of foreign currency credit for a period in excess of 180 days - `capital' transactions - are more closely regulated than `current' transactions.
EXPORTING OUT OF RUSSIA
Resident legal entities, including companies with foreign participation, are required to convert 50% of their hard currency earnings into Roubles through the domestic foreign exchange market. This must be arranged through a bank authorised to undertake such activity and will be concluded at the current market exchange rate.
The sale and purchase can normally be completed instantaneously, thereby eliminating the exchange risk, but complete processing of the transaction may take between one day and several weeks depending on the bank. Generally, US dollars are the easiest foreign currency for Russian banks to handle, and the bank's access to the SWIFT system is very important where international fund transfers are involved.
TRADING IN RUSSIA
Hard currency sales in Russia can only be made by a resident legal entity where it is the first importer of goods, although there is some doubt over how long this facility will be available. Other sales must be made in roubles, although no restrictions are placed on the exchange of roubles for hard currency. This can be performed by major banks within a day (depending on the bank) and it is an advantage to hold both rouble and hard currency accounts at the same bank and branch for this purpose.
There are however documentary requirements to fulfil. The reason for each currency conversion must be clearly stated in an agreement and supported by a signed order, and a further order, accompanied by a copy of the invoice, contract or other evidence of liability being settled, is required to transfer funds overseas. Compliance with the requirements is regulated by the banks, which face significant penalties for wrongly processing transactions.
With regard to foreign legal entities with a trading presence in Russia, sales can be made in either roubles or hard currency, but until recently, rouble receipts could not generally be converted into hard currency - they could only be used to fund local expenses. Now proceeds from sales in roubles can be converted into another currency and repatriated, as well as used to fund local expenses.
Many transactions which involve the movement of capital in hard currency across the frontier require a licence from the Central Bank of Russia, an often onerous and time-consuming exercise. One important exemption from this requirement is the provision of supplier credit in excess of 180 days.
For further information contact Bauke van der Meer on tel: +7 503 232 5511 fax: +7 503 232 5522 or e-mail directly: Click Contact Link or enter a text search 'Coopers & Lybrand' and 'Business Monitor'
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
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