The Moscow Times reports that the agreement will allow Russia to be compliant with the US Foreign Account Tax Compliance Act (FATCA) when it is implemented on 1 July.
It comes after the US quit tax negotiations in March, after Russia annexed Crimea from Ukraine, leaving Russian banks at risk of being penalised when FATCA is implemented.
Unlike other intergovermental agreements, Russian authorities will be able to veto the transfer of information as they see fit, with the legislation demanding that the central bank, tax service and market watchdog Rosfinmonitoring receive copies of any information exchanged.
FATCA is part of the US Hiring Incentives to Restore Employment Act. It ensures that US persons, wherever they are located and in whatever investment vehicle they hold their assets, are paying the correct amount of US tax.
Phase out US business
It requires foreign financial institutions to report information to the Internal Revenue Service about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest.
Russia’s legislation also requires that foreign banks located outside Russia will be obliged to provide information about Russian account holders to the Russian tax service by 30 Sept every year.
It also allows banks to drop clients who refuse to disclose the necessary information. This has already been exercised by Russian bank VTB, who decided to phase out business with 2,000 of its US clients earlier this month.
