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Putin Signs Counterpart U.S. Tax Law

Published: July 2, 2014 (Issue # 1818)


President Vladimir Putin has signed a law allowing Russian banks to send information about U.S. tax payers to their native government and appease a contentious piece of legislation known as FATCA.

This has come as a relief to Russias largest banks, who will face the equivalent of a 30 percent tax on various key investments in the U.S. including the interest and dividend payments on U.S. securities, stocks and bonds if they fail to comply with the U.S. regulations.

The Foreign Account Tax Compliance Act, or FATCA which came into force on Tuesday was initially devised in 2010 as a way to keep U.S. corporations and individuals from avoiding U.S. taxes by funneling money into accounts abroad. The law requires foreign banks to inform the IRS of any accounts held by U.S. taxpayers, to provide information about these accounts on the treasurys request and even to withhold money from clients suspected of tax evasion.

For over a year, the U.S. has been busily negotiating information-sharing agreements with countries worldwide. Eighty-six have already reached official or preliminary arrangements with the U.S., including China, who joined the list just last week, and known tax havens such as the Cayman Islands.

Russia is not on the list. The two sides were deep in negotiations up until March, but the Treasury Department quietly abandoned the talks after Russias annexation of Crimea and the international condemnation that followed. Russian financiers were left in the lurch and on course to collide with FATCAs rapidly approaching July 1 deadline.

I have not heard of any other countries who were in a similar situation, who were both deeply integrated into the international financial system and did not have an opportunity to finish the negotiations, said Konstantin Kochetkov, international partner and FATCA expert at the Moscow office of international law firm Morgan Lewis.

Fearful of the penalties for violating FATCA, Russias second largest banking group, VTB, even decided to phase out relations with its 2,000 U.S. clients last month. VTB president Mikhail Zadornov told Interfax on Monday that the bank no longer plans on cutting off its U.S. clients.

In its final form, the new law, signed by Putin on June 28 and published Monday on the governments legislation portal, will allow Russian banks to meet FATCAs requirements but only under the constant and empowered scrutiny of domestic authorities.

Within three days of registering with foreign tax authorities, Russian financial organizations including banks, life insurance agencies, stock market traders and more will have to inform state market watchdog Rosfinmonitoring, the Federal Tax Service and the Central Bank that they have done so.

The banks will have to declare any foreign clients subject to foreign account legislation, such as FATCA, to these agencies, as well as announcing any requests for information from a foreign tax authority. Any information sent abroad must first be sent to them 10 days in advance.

Rosfinmonitoring will also have the authority to unilaterally block information transfers abroad.

Banks will only be able to provide a taxpayers information if the foreign citizen consents to it, but if they refuse, the banks will have the option of severing its contract with that client. Companies are considered foreign if more than 10 percent of their charter capital is controlled by entities registered outside Russia and its Customs Union partners Belarus and Kazakhstan.

A total of 515 Russian banks had registered with the IRS by early June, according to the U.S. Treasury.





 


ALL ABOUT TOWN

Wednesday, Sept. 17


AmChams Investment and Legal Committee Meeting convenes this morning in their office in the New St. Isaac Office Center at 9 a.m.


Learn more about the science of teaching English at todays EFL Seminar hosted by the British Book Center. Revolving around the topic of learning styles, the workshop will help attendees better understand the different effective learning methods that can be implemented to learn English more effectively.



Thursday, Sept. 18


Get your nerd on at Boomfest, St. Petersburgs answer to the United States popular ComicCon. Starting today, this international festival of comics will take over venues throughout the city center and includes exhibitions of comics and illustrations, film screenings, competitions and the chance to meet the genres authors, artists and experts.



Friday, Sept. 19


SPIBAs newest addition to their Cultural Discoveries events is Handmade in Germany, an exhibition featuring unique handmade objects of a significantly higher quality than mass-produced items. The work of over 100 German manufacturers will be displayed during the event, which opens today in the Lutheran Church of Saint Peter and Paul on Nevsky Prospekt and runs through Sept. 28.



Saturday, Sept. 20


Starting on Sept. 18 and ending tomorrow is the Extreme Fantasy Wakeboarding Festival in Sunpark by Sredny Suzdalskoye lake in the Ozerki region of the city.


Those after something more laid back can instead head to Jazz and Wine night at TerraVino with legendary jazz guitarist Ildar Kazahanov. 12/14 Admiralteyskaya Emb.



Sunday, Sept. 21


Learn more about African culture and get some exercise during todays Djembe and Vuvuzela, a bike ride starting in Palace Square that includes several stops where riders can listen to the music of Africa or watch short films about the continent. The riders plan to set off at 4 p.m. and all you need to join is a set of wheels.



Monday, Sept. 22


Do you love puppetry? If so, then be sure to go to BTK-Fest, a five-day festival that starts on Sept. 19 celebrating the art. Contemporaries from France, Belgium, the U.K. and other countries will join Russian artists to put on theatrical performances involving a variety of themes, materials and eras. Workshops and meetings are also scheduled for a chance to discuss the artistic medium in further depth.



Tuesday, Sept. 23


Marina Suhih, Director of the External Communications Department at Rostelecom North-West, and Yana Donskaya, HR Director for Northern Capital Gateway are just some of the confirmed participants of todays round table discussion on Interaction with Trade Unions being hosted by SPIBA. Confirm your attendance with SPIBA by Sept. 22.


Kino Expo 2014, an international film industry convention, will be at LenExpo from today until Sept. 26. The third largest exhibition of film equipment in the world, the expo focuses on not only Russia but former Soviet republics as well.



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