1 In order to open an bank account in Russia, even for the purpose of passive investment in Russian enterprises or debt instruments, it is necessary to produce evidence of registration with the tax authorities. Prior to 15 November 1996, this was achieved for a foreign entity through registration of a representation, since this was the only form of registration available, notwithstanding that no physical representation was maintained in Russia.
2 From 15 November 1996, an alternative registration procedure has been available to foreign investors with no presence in Russia seeking to invest through type 'I' or 'S' rouble bank accounts, involving only notification to the tax authorities (although this procedure has produced its own difficulties in practice).
3 Letter of the Moscow State Tax Inspectorate ü 16-10/1067 of 20 January 1997, clarifying annual filing requirements for 1996 for foreign entities, appeared to require annual tax declarations to be filed by all entities with tax registration for the purpose of maintaining bank accounts.
4 In subsequent discussions with Moscow Inspectorate officials, we have been advised that the filing requirement was intended to apply only to those with "full registration", rather than those registered on or after 15 November 1996, under the simplified notification procedure. However, officials have recognized that, in many cases, filings will be a mere formality, with nil entries, since there will be no transactions associated with a representation, notwithstanding the fact that transactions may have passed through a Russian bank account. Failure to file an annual tax declaration may result in the tax authorities blocking the investor's bank accounts.
5 Although we have not succeeded in obtaining formal written confirmation of the position summarized in the preceding paragraph, we advise our clients with rouble bank accounts which are registered under the "full" procedure to file tax declarations for the year 1996. The statutory deadline for such filing will generally be 15 April 1997. However, under standard regulations, where activity in Russia commenced after 30 September 1996, the first declaration may cover the period to 31 December 1997 with an expected filing deadline of 15 April 1998. If you are in the situation of needing to file a declaration, you may consider whether it would be desirable with a view to future filing periods to close the full registration and substitute the notification basis. This is not a straightforward decision and should be considered together with your Coopers & Lybrand tax adviser.
6 Should you require any further information in relation to these matters, or assistance in the preparation and filing of a tax declaration, please get in touch with your usual contact in the tax department of Coopers & Lybrand Russia.
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.
For further information contact Alla Shaulina on tel: +7 503 232 5511 fax: +7 503 232 5522 or e-mail directly: Alla_Shaulina@ru.coopers.com or enter a text search 'Coopers & Lybrand' and 'Business Monitor'.
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