In 2022-2024, the dividends in an amount exceeding 10 million rubles/month. are paid by Russian companies to participants from “unfriendly” jurisdictions in a special (temporary) manner, taking into account the restrictions established by the Decrees of the President of the Russian Federation No. 95 of 5 March 2022 and No. 254 of 4 May 2022.
This temporary procedure, applicable from 5 May 2022, involves using of type “C” accounts opened for non-residents in authorized banks in rubles, to deposit dividends in an amount exceeding 10 million rubles into these accounts per calendar month.
From the beginning of 2023, the authorities have been discussing options for liberalizing dividend payments to non-residents who continue to invest in Russia. “If foreigners invest, they could be able to withdraw this money from Russia,” said Finance Minister Anton Siluanov. The Central Bank adhered to the same position.
In August 2023, the Russian Ministry of Finance and the Bank of Russia softened previously established restrictions on the payment of dividends to foreigners – but subject to investment of funds in the Russian economy.
According to the Extract from the Minutes of the meeting of the Sub-Commission of the Government Commission on the Control of Foreign Investments in the Russian Federation (the Government Commission) dated 9 August 2023 No. 182/5,
payment of dividends (profits) to foreign persons can now be made without restrictions, if its volume does not exceed the amount of their investment in Russia.
Permission to pay dividends (profits) without having to comply with previously established requirements may be issued subject to the following conditions:
• “unfriendly” shareholders (participants), after April 1, 2023, make investments in the Russian economy, including the expansion of production in the Russian Federation and the development of new technologies;
• the amount of dividends (profits) does not exceed the volume of such investments.
An extract from Protocol No. 182/5 however does not represent a direct permission to carry out transactions (operations) and payments that comply with the conditions established therein. In order to obtain permission to pay dividends in accordance with the new procedure, permission is also required from the Government Commission), where the application shall be sent along with the necessary documents.
Official compliance with the necessary procedures and obtaining the appropriate permits ensures that there are no risks in completing the assigned tasks. There are cases when, in conditions of restrictions and complicated procedures for paying dividends, Russian companies were faced with demands from foreign owners to withdraw dividends to an unfriendly jurisdiction without the consent of the Government commission by circumventing the established restrictions: either by withdrawing dividends divided into several companies of 10 million rub. per month (dividend splitting), or by issuing a loan with an offset in the form of purchasing shares of a foreign company or returning funds for a previously received loan from a foreign company from an unfriendly jurisdiction. Such actions can be qualified as violating tax and currency legislation.
Moscow Law Firm Avista has is experienced in supporting projects related to obtaining permission from the Government Commission for the distribution of profits (payment of dividends) and making other transactions, including with counterparties from “unfriendly countries.” We permanently monitor changes in the legislation, provide advice on the implementation of corporate procedures taking into account the norms of corporate, sanction law and other areas of legislation, and provide full legal support for the procedure for obtaining permission from the Government Commission for transactions requiring such permission. We are ready to prepare the necessary documents, organize support in the procedure for obtaining permission and performing necessary registration steps.
Contacts for scheduling a preliminary consultation are listed on the website.