The Russian Federal Tax Service (FTS) has intensified scrutiny of Russian nationals holding bank accounts in the UAE. This step follows the effective implementation of automatic tax information exchange between the two countries. Previously, inquiries were rare. However, they are now becoming routine. According to RBC sources cited by The Bell, the FTS sends dozens of requests to Dubai authorities every quarter.
The focus is on the period after 2022, when the Russian Federation invaded Ukraine. Many Russians opposed the war and relocated to Dubai, benefiting from visa-free access and direct flights. Consequently, numerous individuals opened bank accounts in the UAE while still legally classified as Russian tax residents. As a result, these account holders now face potential penalties for tax non-compliance.
The FTS begins investigations with a formal letter under Article 31 of Russia’s Tax Code. The letter requests explanations about fund origins, proof of tax residency, and documentation on UAE-registered businesses. Some cases progress to a second stage, which involves interrogations and demands for additional supporting documents.
Lawyers warn that individuals who failed to report foreign assets properly are most at risk. Many neglected Controlled Foreign Company (CFC) notifications, the opening of foreign accounts, or annual cash flow disclosures. Reports suggest that up to one-third of clients do not comply with CFC reporting obligations, and nearly half fail to report personal accounts.
Additionally, Emirati banks are cooperating with the FTS, even for clients holding Emirates IDs or UAE residence visas. Several Russians discovered that despite spending over 183 days in the UAE and being legal tax residents, their banking records still classify them as Russian residents.
Legal and tax consultants explain that banks may consider multiple factors when reporting clients. These include a Russian passport, income originating from Russia, Russia-linked transactions, or even geolocation data. Such factors can trigger automatic tax reporting under international agreements.
Although the fine for failing to report a foreign account is modest—RUB5,000 ($52)—the consequences of undeclared income are far more serious. The FTS can impose personal income tax, a 30% penalty for not filing the 3-NDFL tax return, and an additional 20% for non-payment. Furthermore, prohibited currency transactions may incur fines of 20–40% of the transaction value, especially when transferring funds from countries outside Russia’s tax information network.
Experts advise Russian expatriates in the UAE to review compliance carefully. They recommend promptly reporting foreign accounts and related transactions. This approach helps avoid heavy penalties and legal complications.
The FTS crackdown highlights the growing importance of transparency in global finance. As automatic tax information exchange expands, Russian nationals with foreign assets face increased scrutiny and accountability.
