1 十一月 2024 Evgeniya Rakhmanina ForeignInvestmentLinks

Leaving Russia: Here’s Your 5%, Leave the Rest

The Russian government continues to make foreign exits from Russia more difficult and continues to extract as much value as possible for its own budget needs from those exits that it will allow. 

Our ongoing monitoring and analysis of foreign exits from Russia since 2022 (see our earlier posts here and here) illustrates a clear trend: these exits are becoming progressively costlier, more burdensome and more complex to achieve.

A refreshed set of rules for foreign exits was adopted in October 2024 by the Sub-Commission of the Governmental Commission for Control over Foreign Investments – the commission specifically formed to review transactions restricted by the Russian ‘countersanctions’ – and the official extract from the Sub-Commission’s Protocol No. 268/1 dated 15 October 2024 has finally been released to the public.

Updated rules for foreign exits from Russia:

  • The Russian entity/assets must be sold at a mandatory discount of at least 60% (instead of 50%).

This mandatory discount is calculated, as before, from the appraised market value of the Russian entity/assets, which valuation must be obtained from an independent Russian appraiser from a list of pre-approved appraising companies recommended by the Sub-Commission, and be verified by a self-regulating organisation of appraisers (SROs) from another pre-approved list.

  • The ‘voluntary’ exit tax paid to the Russian budget is now 35% (instead of 15%).

This increased exit tax is also, and as before, calculated from the appraised market value of the Russian entity/assets as per the above valuation.

However, the new rules stipulate that the exit tax is paid in installments:

  • 25% (of the appraised market value of the Russian entity/assets) to be paid within one month after closing;
  • 5% to be paid within one year after closing; and
  • 5% to be paid within two years after closing.
  • If the market value of assets being sold exceeds 50 billion roubles (currently approx. EUR 470 million / USD 510 million), the transaction must be personally approved by the President of the Russian Federation.

While it is not clear from the official public version of the Protocol whether this relates to the Russian entity/assets only (or if the total deal value would be taken into account if non- Russian entities/assets were within the perimeter of the transaction) and if the 50-billion-rouble threshold refers to the appraised value in the appraisal report, but an earlier announcement of the updated rules from the Ministry of Finance of Russia to other Russian authorities specifically referred to the appraisal report and the value of the Russian assets therein. 

The protocol does not specify, whether separate clearance of the Sub-Commission would still be required in addition to this consent of the President. 

As a result, the new rules imply that foreign investors may still exit Russia but will not recover more than 5% of their Russian assets’ value, unless the Sub-Commission allows more or the buyer of the asset agrees to bear the full burden of the exit tax. Uncertainty regarding the process persists: there are still no timelines for the regulatory process, no restrictions on the Sub-Commission’s ability to impose additional conditions on the parties, and no express exemptions for intra-group restructurings which are caught by the exit rules. 

Helpfully, however, the rules still do not regulate which party must make the exit tax payment (leaving the parties to agree between themselves), and the current wording still suggests that the Sub-Commission is able to deviate from these rules at its own discretion (for example, deciding not to impose an exit tax at all).

Future transactions and those awaiting clearance from the Sub-Commission will be subject to these rules. We continue to monitor the development of these rules and observe their application in practice.