Currency regulation for companies: 173-FZ, residents, non-residents

Companies’ currency transactions are governed by Federal Law No. 173-FZ of December 10, 2003 “On Currency Regulation and Currency Control”. The procedure for working with the bank is set out in detail in Bank of Russia instructions, above all in Bank of Russia Instruction No. 181-I. Since 2022, presidential decrees on special economic measures have applied on top of the law. Below are the basic concepts without which it is hard to talk to the bank and plan a foreign trade deal.

Residents and non-residents

Federal Law No. 173-FZ divides all participants into residents and non-residents. Status determines which transactions are permitted and which obligations arise.

Residents, as far as business is concerned:

• companies incorporated under Russian law, including their branches and representative offices abroad;
• Russian citizens, including sole proprietors;
• foreign nationals who live permanently in Russia on a residence permit.

Non-residents:

• foreign companies;
• their branches and representative offices in Russia;
• foreign nationals without a Russian residence permit.

Two examples that often cause confusion. A Russian subsidiary of a foreign holding company: resident. A branch of a foreign company in Russia: non-resident, even though it operates in Moscow.

A third common case: partners from EAEU countries. A supplier from Kazakhstan or Belarus is a non-resident under Russian law, even if the settlement is in roubles and through a Russian bank. So currency control rules apply to such a contract.

What a currency transaction is

The law gives an exhaustive list of currency transactions. Three groups matter for a company:

• settlements with non-residents, in foreign currency and in roubles: import payments, receipt of export proceeds, loans;
• buying and selling foreign currency;
• foreign currency settlements between residents.

Note two things. A payment to a non-resident in roubles is also a currency transaction: the same registration rules apply to it. And foreign currency settlements between two Russian companies are generally prohibited. The law allows them only in expressly listed cases.

Who supervises

The currency control authorities: the Bank of Russia, the tax service and customs. Currency control agents: above all, the authorized banks through which payments pass.

In practice, a company deals with the currency control officer at its bank. The bank accepts documents, registers contracts, keeps a statement for each contract and reports violations to the tax service. The tax service checks and imposes fines. Customs sees the deliveries and matches them against the settlements.

The bank has broad powers. It may request any documents related to a transaction and refuse the transaction if the documents are missing or do not match. Disputing such a refusal takes a long time, so it is easier to collect the documents before the payment.

Financial monitoring under Federal Law No. 115-FZ works separately. It is not currency control, but the bank uses it to check the same payments: whether the transaction makes economic sense, who the counterparty is, whether the transaction fits the client’s profile. For the company, a refusal under 115-FZ and a refusal under currency control look the same: the payment did not go out.

A company’s obligations under a foreign trade deal

1. Documents. Submit to the bank documents on each transaction and on the performance of the contract: deliveries, services, changes in terms.
2. Contract registration. Register with the bank any contract whose amount exceeds the threshold set by the Bank of Russia.
3. Repatriation. The exporter ensures that proceeds arrive in its account with an authorized bank within the term set by the contract. The importer ensures that an advance comes back if the goods are not delivered. More in the article on repatriation of export proceeds.
4. Accounts abroad. Notify the tax service of accounts opened with foreign banks and report on the movement of funds in them.
5. Special measures. Since 2022, some transactions with persons from unfriendly states require separate permission. During certain periods, some exporters were required to sell part of their foreign currency proceeds. The lists and conditions change, so they are checked as of the deal date.

What changes when settling through an agent

When the direct route through the bank does not work, companies pay through a payment agent. Currency regulation does not go away. Your contract with the foreign supplier remains yours, and your bank carries out currency control on it. The agent only executes the payment under your payment order.

This means the agent’s documents must match your contract: beneficiary, amount, currency, purpose. This is where the approach of “find someone who will pay” most often breaks down. If the agent does not provide documents or pays with a different purpose, you are left with an unclosed contract at your bank.

The status of the agent itself also matters. The agent may be a Russian company or a foreign one. This determines what your payment to the agent will be for currency control purposes and which documents the bank will ask for. This question is settled before the first payment, not after the bank’s request.

The key points

• Resident status determines which rules apply to you.
• Any settlement with a non-resident, in foreign currency or in roubles, is a currency transaction.
• A partner from the EAEU is also a non-resident.
• The main supervisor in day-to-day work: your bank.
• Payment documents must match the contract, even if an agent pays.
• Special measures in force since 2022 are checked as of the deal date.

VEDmost works as a broker: we select an agent from our pool for the payment, fix the terms before the roubles are debited and collect the documents your bank needs. How a broker differs from a bank and a single agent is explained on the Broker, agent or bank page. The package we put together for currency control is described on the Currency control page. This is a general overview, not advice. We will give you an answer on your deal after reviewing the documents and before the roubles are transferred.