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The procedure for dividend payments to members of the company from unfriendly countries

Publication date/update: 08.05.2023
Dividends are profits that are paid annually to holders of securities. Any participants of a joint-stock company, regardless of their citizenship and tax residency, can own shares and receive dividends. However, in the past year, with the introduction of new financial restrictions regarding unfriendly countries, the issue of dividend payments to citizens of these countries has become relevant. Let's delve into it in more detail.

Payments to participants of a limited liability company (LLC) from unfriendly countries

The procedure for distributing net profits to participants of limited liability companies from unfriendly countries depends on the amount of net profit being paid to them.

1

If the amount of net profit to be paid by the LLC does not exceed 10 million rubles per calendar month, it is paid without any limitations.

2

If the amount of net profit to be paid exceeds 10 million rubles per calendar month, it is paid according to a special procedure.
According to Government Decree No. 254, this procedure provides for two methods:

1

Transferring the net profit to an account of type "C" in a Russian bank.

2

Transferring the net profit to any other account of a foreign participant, but with the permission of the Ministry of Finance of Russia, and for financial institutions, with the permission of the Central Bank of Russia.

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When using the first method, the company opens an account of type "C" in a Russian credit organization in the name of its foreign participant from a non-friendly country. The company transfers the corresponding portion of distributed net profit in rubles to this account, equivalent to the amount in foreign currency calculated at the official exchange rate of the Central Bank of Russia on the day of the payment.

When using the second method, the LLC (Limited Liability Company) needs to obtain permission from the Ministry of Finance of Russia for the transfer of net profit abroad. The application to the Ministry of Finance of Russia for obtaining permission is submitted in a free form, providing information that allows identifying the company, its foreign participant(s), and the related foreign country. The application can be sent by mail or submitted electronically using an electronic digital signature (EDS).

The limitation on the amount of profit applies in cases where permission is required

When using the second method of distributing net profit to foreign participants from unfriendly countries, the Ministry of Finance of Russia has the right to refuse permission if the amount of the distributed profit exceeds 50% of the net profit of the previous year.

Official documents stipulate a coordinated approach between the Ministry of Finance of Russia and the Central Bank of Russia in making decisions regarding the issuance of permissions for the distribution of profit (dividends) to foreign participants (shareholders) in cases specified by the Decrees of the President of the Russian Federation:

1

The amount of distributed profit (dividends) does not exceed 50% of the net profit of the previous year;

2

Accounting for the results of retrospective analysis of profit distribution (dividends) for previous periods;

3

Willingness of foreign participants (shareholders) of the organization to continue commercial activities in the territory of the Russian Federation;

4

Taking into account the positions of federal executive authorities and the Bank of Russia regarding the assessment of the significance of the organization's activities and the impact of its activities on the technological and production sovereignty of the Russian Federation, as well as the socio-economic development of the Russian Federation (its constituent entities);

5

The establishment of quarterly key performance indicators by federal executive authorities for organizations;

6

The possibility of paying dividends on a quarterly basis, provided that the organization meets the established key performance indicators.

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It is important to note that the information relates only to the payment of net profit and not its distribution.
Form

Application for issuing a permit for the execution of obligations by a resident, as stipulated in paragraph 1 of the Decree of the President of the Russian Federation dated 04.05.2022 No. 254 "On the temporary procedure for the execution of financial obligations in the field of corporate relations to certain foreign creditors."

(to be filled out separately for each obligation)

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