21.10.2016 — Tax Authorities Toughen Control Over Foreign Bank Accounts Held by Russian Citizens

The Federal Tax Service has been sending notifications to those foreign account holders who failed to declare their accounts by June 1, 2016. Such account holders are invited to come to the tax authorities. Information obtained during such visits may become a cause for a tax inspection and additional charge of taxes.

Under the newly introduced legislative changes, all Russians with foreign bank accounts were obliged to file a declaration to the tax authorities by June 1, 2016. Those who failed to comply with these requirements get invited to the local tax inspectorates for an interview. As a result, the taxpayer may be subject to an extraordinary tax inspection or be obliged to pay additional taxes. In particular, if the tax authorities conclude that the taxpayer permanently resides abroad (spends less than 183 days per year in Russia), an increased income tax rate may be applied (30% instead of 13%).

Please be reminded that the State Duma is currently considering a bill proposed by the Ministry of Finance. Under the bill, Russian citizens permanently living abroad (if they spend less than 3 months per year in Russia) are to be released from the obligation to file declarations in respect of foreign bank accounts and from certain other requirements applicable to the Russian currency residents as a general rule. 

20.10.2016 — Courts Confirm that Sharp Currency Devaluation is not Ground for Contract Revision

A loan agreement was concluded between a borrower and a bank. According to the agreement the borrower was entitled to repay the debt under a fixed exchange rate of 37.5 rubles per US Dollar. The bank attempted to eliminate this contract provision by referring to sharp ruble devaluation in 2014-2015. The Court, however, refused to revise the contract. It noted that the parties had assumed currency risks when they entered into a long-term agreement (case No. A40-31960/2016).

In the case at hand, the parties concluded an additional agreement to the contract, which established that if the exchange rate exceeds 37.5 rubles per dollar, the borrower shall be entitled to purchase USD in the same bank using the reduced exchange rate of 37.5 rubles. This rule was made effective until full repayment of debt.

In response to the bank’s attempt to terminate this contract condition, the Court concluded that the doctrine of fundamental change of circumstances (Art. 451 of the Russian Civil Code) could not be relied upon. Accordingly, the bank’s claim was rejected in full. In the Court’s opinion, the parties are supposed to foresee the possible worsening of the economic situation when they enter into long-term contracts with currency obligations. Therefore, they ought to be aware of the possible changes in the currency exchange rate during the loan agreement’s performance.

This court decision is in line with the prevailing trend in the court practice. Inflation, economic crisis and sharp currency devaluation are not recognized as grounds for terminating or revising contracts.

19.10.2016 — Russia Ranked 92 out of 113 in Rule of Law Rankings

Russia has further worsened its result in the international Rule of Law Rankings compiled by the World Justice Project, an international non-governmental organization. Russia fell from the 75th place in 2015 to the 92nd out of 113 in 2016.

The first place in the overall rankings was awarded to the Denmark, while Norway occupied the runner-up position. Georgia, Macedonia and Bosnia and Herzegovina are the leaders in the Eastern Europe and Central Asia Regional Rankings, which includes Russia.

The Rule of Law rankings are established to assess implementation of fundamental legal principles reflected in most national constitutions. In preparing the rankings, experts analyze such issues as the transparency of public institutions, the existing limits to their powers, corruption, public safety and order, respect for fundamental human rights, observance of legislation as well as the state of civil and criminal procedure.

18.10.2016 — Legality of Employment Contracts Can Now Be Verified Online

The Federal Labor and Employment Service (Rostrud) has launched a new online tool for checking employment contracts. Employees and employers can use this tool to ensure that their employment contracts are consistent with the law. As a result, violations can be revealed and cured before an official inspection by the state authorities is carried out.

It is possible to check employment contracts via two different websites run by Rostrud. Their functions are slightly different. Website “Work in Russia” ( allows to check a draft employment contract before its conclusion. If the employment contract is already concluded, its legality can be verified using “Online inspectorate” website (https://онлайнинспекция.рф/precheck/148).

Both web tools analyze such issues as the employment contract form, the presence of obligatory provisions in the contract and observance of employees’ basic rights guaranteed by the employment legislation. If violations are identified, the employee can immediately send a complaint to the state inspectorate through the “Report a problem” tool (https://онлайнинспекция.рф/problems).

17.10.2016 — Unauthorized Constructions Erected before September 2015 Can Be Demolished without Court Order

According to the legislative amendments entered into force in September 2015 municipalities were granted with powers to demolish unauthorized constructions without obtaining a court order. However, the question arose whether unauthorized constructions erected before the respective amendments entered into force were affected. The issue was resolved by the Constitutional Court in favor of the municipalities.

Starting from September 1, 2015, municipalities are entitled to demolish unauthorized constructions located in public areas (squares, streets, boulevards) without a court order. However, most of such constructions had been erected long before the legislative novelties entered into force. Accordingly, it was not clear whether the municipalities could demolish such constructions.

The Constitutional Court of Russia upheld the municipalities’ position and ruled that municipalities could demolish objects built before the amendments, despite the fact that they did not have such a right at that time. According to the Constitutional Court, the erection date does not alter unauthorized constructions’ nature as a legal wrong and does not legalize them.