It has recently been reported that Russian tax authorities have begun to actively contact individuals who have bank accounts in the UAE, in particular with Wio Bank. It is assumed that information about such accounts was received as a result of the automatic exchange of financial information (AEOI) between the UAE and the Russian Federation. If this practice spreads to other banks (such as FAB, which owns Wio), a wider range of Russians may be subject to reporting requirements.

FAB's customers are particularly vulnerable as it is the largest bank in the UAE and the only one that handles ruble transfers. Therefore, it is important to pay special attention to compliance with currency control regulations and risk assessment when opening or using foreign accounts.

RF currency control: why the list of countries with auto-exchange is important

For currency residents of the Russian Federation there is a List of states (territories) with which the Russian Federation has an automatic exchange of financial information (approved by Order of the Federal Tax Service of the Russian Federation No. ED-7-17/986@ dated 28.10.2022). If a country is included in this list, Russian residents may credit certain types of income to their accounts in that country:

• Income on securities (sale, redemption, dividends, coupons, bond payments);
• Income from the sale or rental of real estate;
• Funds from loans and borrowings.

In addition, permitted countries also include the Eurasian Economic Union states (Kazakhstan, Belarus, Armenia, Kyrgyzstan). The published list includes more than 90 jurisdictions, including the UAE, Israel, China, Cyprus, Luxembourg, Mauritius, Monaco and others.

Violations and fines

If a country is not included in the list, currency residents of the Russian Federation are prohibited from crediting the above-mentioned categories of income to accounts in such banks. For example, in the USA, Canada, the UK, Switzerland, Georgia and Uzbekistan, Russian legislation prohibits the crediting of any income from securities, real estate, loans and credits. A violation is punishable by a substantial fine of 20-40% of the amount of the illegal transaction.

Why Georgia is becoming attractive to expats after all

At first glance, it may seem that Georgia, which is not on the list of jurisdictions with auto-exchange, should scare off currency residents of the Russian Federation. However, for many expats (programmers, freelancers, entrepreneurs), Georgia remains the optimal choice:

• Low taxes. Georgia offers preferential tax regimes for individual entrepreneurs (1% or 3%) and special conditions for IT-companies (status of a virtual zone with zero rate on profit from export services).
• Ease of registration.
  • Registration of a sole proprietorship or company can be carried out remotely - by power of attorney.
  • Quickly complete all documents and open an account with local banks or payment systems.
• Loyal banking system.
  • Despite the fact that Georgia does not participate in auto-exchange, Georgian banks and payment operators make it convenient to work with foreign clients.
  • Many expats, especially those from CIS countries, appreciate the lack of rigid bureaucratic barriers.
• Opportunities for global operations.
  • Georgian legal entities and entrepreneurs have no problem concluding contracts with clients from the USA, EU, Turkey and other regions.
  • If you comply with currency control regulations in the Russian Federation (or other countries whose residents you are), you can minimize risks by building a business scheme in a competent and transparent manner.

It is important to understand that there are certain restrictions for Russian residents in terms of crediting income from securities, real estate and loans/loans to accounts in Georgia. However, many expats who earn income from services (IT, consulting, freelancing, online sales, etc.) choose Georgia as a convenient and inexpensive jurisdiction for doing business.

Practical tips for expats

• Analyze the source of income. If you are planning to deposit income from the sale of securities or the rental of real estate into an account in Georgia, be sure to consult specialists: such transactions may contravene the currency legislation of the Russian Federation.
• Regularly check for changes in legislation. The lists of countries participating in auto-exchange and the relevant rules may change. Always consult primary sources (in particular, current orders of the Federal Tax Service).
• Use the help of professionals. Any doubts are better resolved at the level of legal advice. A competent structure of business or asset ownership will save you from fines and inspections.

How ESPERO can help you in Georgia

Our company ESPERO specializes in legal support for expats from CIS countries, Europe and the USA. We offer:

• Registration of companies and sole proprietorships in Georgia, including obtaining small business status (1% or 3% tax rate) and virtual zone status (0% for IT services).
• Comprehensive accounting and tax support: we will help to build a transparent scheme and avoid unnecessary risks.
• Assistance in account opening and selection of optimal payment instruments taking into account your business goals.
• Advice on currency control issues, taking into account the legislation of the Russian Federation and other countries where you are a tax resident.

If you are facing an inquiry from the Russian tax authorities on foreign accounts or simply want to legally and safely develop your business outside Russia, contact the ESPERO team. Leave a request at espero.ge or write to us in messengers. We will help you find the best solution for your situation!

Take a step towards a comfortable and transparent business in Georgia today!