Foreign accounts for Russians under stricter control

Russian tax authorities continue working on revealing income in foreign accounts that Russian tax residents hold. The campaign seems to have intensified, and now the authorities are scrutinizing taxpayers even with relatively low income.

Russia has been a party to automatic financial information exchange (Common Reporting Standard, CRS) with other states since 2018, but now the Russian tax service is using the information received from it on a mass scale, thanks to AI, machine learning and big data capability.

Thanks to modern IT, today, the Russian Federal Tax Service is able to receive data from the automatic financial information exchange and swiftly juxtapose it with an individual’s tax return. The Tax Service automatically analyzes income gained in the course of a foreign bank, broker or other financial institution providing services. Such income includes interest on deposits, dividends from securities and profit from sale of financial assets deposited on a Russian tax resident’s foreign account.

Logically, if the Tax Service sees a discrepancy, it requests clarifications from the taxpayer and additional tax is levied on them.

Up until recently, only individuals with major income were subjected to this process. However, today, technology and automation allow the Tax Service to cover more and more ground. According to some experts, with automation at today’s level, hardly any income will be left behind and untaxed.

There are 80 countries and territories with which Russia has an automatic exchange system in place as of today and the list continues to grow. Among them are Australia, Israel, Indonesia, Hong Kong, Japan and, recently included, Thailand. Some other territories used to be on the list, but were recently excluded, for example, BVI. The US was never involved in the CRS, and Britain ceased exchanging information with Russia back in 2019.

The full current list of the relevant countries and territories is available here (in Russian).

So the system and its participants are in constant motion and development. The trend, in Russia at least, is obvious – the authorities are making maximum use of the system to bring in taxes from sources previously unreported, no matter how great or small. According to the media, a Russian tax official has stated that by now only about 6% of income from sources abroad is in the gray area at this point, and the work continues.