Earlier this month the Russian President signed a law which ratifies Russia’s accession to the OECD Convention on Administrative Assistance; the Convention already having been signed by Russia in November 2011.
Under the provisions of the Convention, Russia is now able to simultaneously exchange tax information with other signatory states, including states that it has not concluded double taxation agreements. The Convention has been signed by 64 jurisdictions and it is already in force in 39 of those jurisdictions.
Ratification by Russia is subject to certain reservation, including the exemption of local and regional taxes from the scope of the Convention. Russia also reserves the right to refuse assistance in response to requests for information in relation to tax claims that pre-date the Convention coming into effect. Also excluded is the enforcement of cross border tax claims and penalties, where there is no procedure under Russian law for the recovery of such claims.
The effect of the Convention is to commit each signatory to exchange information with any other signatory, on receipt of a formal request from the other country. The request must meet certain conditions, in common with existing bilateral treaties:
• An adequate enquiry must have already been made by the requesting country that has found reasonable evidence to support an assumption of tax irregularities, ie ‘fishing expeditions’ are not permitted.
• The request must relate to an identified individual, reference to a group or class of individuals are not permitted.
• Every effort must have first been made within the requesting country’s jurisdiction to uncover the information required, before concluding a request be made to the competent jurisdiction of the other country.
There is a duty of confidentiality on the receiving state to maintain the confidentiality of any information provided by the supplying state. Confidentiality is a fundamental principal of the Convention and any state that fails to respect this obligation may find its future requests for information declined by other states, in accordance with the Convention rules.
In separate developments, the Russian Finance Ministry expects in the coming years to receive significant additional revenues as a result of new offshore taxation rules that will compel Russian tax residents to pay tax on their global revenue in Russia. The aim is to encourage payment and to limit the continuing investment of revenue by Russian tax residents in offshore jurisdictions.
Earlier this year the Russian Upper House approved legislation that enabled Russian banks to comply with FATCA. On receipt of requests from the US the banks are required to inform the Russian authorities, including the Federal Financial Monitoring Service which can block the provision of information to the US. The legislation also provides that non-Russian banks outside of Russia will be required to provide information on accounts opened with them by Russian nationals.