The essence and main goals of foreign economic activity
Foreign economic activity is built in accordance with the chosen foreign economic strategy, as well as with the established methods and forms of work in the foreign counterparty’s market.
Banking institutions, in order to carry out foreign economic activities, enter into agreements (contracts) on correspondent relations with foreign banks, opening correspondent accounts with the latter. Large banking institutions offer a wide range of services to their clients participating in foreign trade activities and, at the same time, themselves become a very significant link in the process of international exchange of goods, services and capital. To organize the work of this mechanism, banks, as a rule, create special departments for foreign economic relations.
Banking institutions for carrying out foreign economic activity:
- open branches and branches in foreign countries
- enter into agreements on correspondent relations with foreign banking institutions, opening correspondent accounts with them
- buy ownership shares in foreign banks
- leasing and factoring companies are opened.
The main goals of foreign economic activity of banks:
- providing services to exporting and importing clients
- minimizing risks when carrying out foreign economic transactions
- making a profit from foreign exchange transactions.
Payment methods used in international practice
Documentary letter of credit– a payment method that provides the exporter with maximum reliability of the transaction. This is a unilateral, conditional monetary obligation of the bank, which is issued by it on behalf of the client-applicant of the letter of credit.
Documentary collection is a transaction in which a banking institution acts as an intermediary between an exporter and an importer. The bank receives the collection along with instructions from the seller and provides documents that are proof of the actual delivery of the goods to the buyer in exchange for acceptance of the bill or payment.
Advance payment represents the amount of money that is transferred or issued towards future expenses or payments.
Payment after shipment– If the foreign buyer and the exporter have agreed that the buyer will pay for the product immediately after it has been shipped, the exporter will notify him of the shipment, specifying all necessary details, and expect the buyer to make payment promptly.
Factoring and forfaiting
Not quite “traditional” and relatively new forms of export financing can be considered forfaiting and factoring, which may also include additional services of information, insurance, sales, and legal nature.
Today, companies doing export-oriented business are doing especially well. The ruble exchange rate fell, and domestically produced goods became competitive abroad. Moreover, we are not necessarily talking about large manufacturers; the doors to foreign economic activity are open to small and medium-sized players. The main thing is to offer a product that is in demand. Do you want to try yourself in foreign trade? Go for it. But first, you need to choose a financial partner to support foreign trade transactions.
Portrait of the VED company
The Ministry of Economic Development has set a course to increase the volume of non-resource exports by 6% per year, and, as experts say, Russia has every chance of becoming one of the world's leading exporters by 2030. The number of companies, including from the sphere of small and medium-sized businesses, focusing on the export opportunities of the market has increased. With imports, the situation is more complicated due to the devaluation of the ruble, but many importers are still developing their business, reorienting the business model, for example, by country of purchase, customers, etc.
Exports to Russia significantly exceed imports. According to the Federal Customs Service (FCS), the trade surplus, or the difference between exports and imports of goods, amounted to $57.8 billion in January-July 2016. The share of exports in the country’s GDP is about 30% of GDP.
True, due to geopolitical trends, exports and imports tend to decline. Thus, exports from the country for seven months of 2016 amounted to $153.4 billion, which is 27.1% lower than in the same period last year.
Key export directions are:
- fuel and energy products (share in the export structure - 62.2%);
- metals and metallurgical products (10.1%);
- machinery and equipment (6.5%);
- chemical industry products (6.4%);
- food products (4.7%).
Exporters, therefore, are mainly large fuel and energy corporations, metallurgists, and manufacturing conglomerates.
At the same time, despite the high share of raw material exports, there is a tendency to increase the importance of other areas. So, let’s say, the share of equipment exports over the specified period increased by 1.5 percentage points, the share of metallurgical products increased by 0.7 percentage points, and the share of the fuel and energy complex decreased by 6.6 percentage points. By the way, back in January 2016, the head of the Central Bank, Elvira Nabiullina, noted that the growth in the share of oil exports in total Russian commodity exports decreased from 67% in December 2013 to 48% in December 2015.
Quite a few smaller firms have emerged that export some of their products, for example, in the food, paper, equipment, tobacco, pharmaceuticals, etc.
The value of Russia's exports in 2015 amounted to $344 billion.
- Mineral fuels and oil
$216.10 - Black metals
$15.22 - Fertilizers
$8.85 - Nuclear and mechanical reactors
$8.68 - Pearls, precious stones and metals
$7.87 - Aluminum and products made from it
$7.06 - Wood and wood products
$6.31 - Cereals
$5.65 - Copper and products made from it
$4.46 - Inorganic chemical products
$3.84 - Electrical machines and equipment
$3.46 - Boundary chemical compounds
$2.96 - Fish, crustaceans and molluscs
$2.79 - Ground transportation means
$2.73 - Prepared products from meat, fish or crustaceans
$0.12
Demanded by business
Currency legislation is constantly changing. Therefore, companies working in the field of foreign trade often need consulting in the field of currency control and documentation preparation. Also, consulting services are relevant due to the fact that more and more new companies are opening up export (or import) opportunities.
There are many consulting and advisory companies providing such services. However, the level of reliability of these companies sometimes raises questions. Banks are a completely different matter. Firstly, credit institutions have a fairly high level of professionalism of employees, and secondly, banks that actively work with foreign trade transactions have relevant experience and expertise.
In addition, it is simply convenient to receive the consultations you are interested in on foreign economic activity in a one-window format - in the credit institution where the company has an account, conducts its operations, payments, places funds on deposits, receives financing, etc.
Accounting for foreign trade activitiesis distinguished by a number of features related both to the specifics of foreign economic activity itself and to the special rules for accounting for individual transactions during it. Let's look at them.
Aspects affected by foreign trade activities
Foreign economic activity (FEA) is an economic activity in which an economic entity registered in the Russian Federation interacts with foreign partners. Possible with it, as with relationships that take place only within the Russian Federation, are any business transactions: purchase and sale (and not only goods, but also works/services), receipt and provision of borrowed funds, contributions to a management company or property, rent , receipt/payment of dividends, business trips, settlements of claims. Because of this, any of the accounting accounts provided for in the chart of accounts approved by Order of the Ministry of Finance of the Russian Federation dated October 31, 2000 No. 94n may be involved in accounting operations.
For what a working chart of accounts might look like, see.
However, the accounting process in foreign economic activity acquires its own characteristics due to the emergence of:
- a sufficiently large number of additional documents;
- settlements carried out in foreign currency;
- additional rules related to foreign business trips;
- special procedure for VAT accounting and reporting;
- discrepancies in the accounting periods for income from exports for profit and for VAT related to it;
- the need for taxation of income paid to foreign partners and additional reporting on them.
Read more about the taxation of payments to foreign partners in the article .
What has changed in the field of foreign trade activities in 2018?
It is necessary to note 2 important regulations affecting the exchange control procedure in 2018:
- Instruction of the Bank of Russia “On the procedure for residents and non-residents to submit supporting documents to authorized banks...” dated August 16, 2017 No. 181-I.
- Law dated November 14, 2017 No. 325-FZ, which amended the Law “On Currency Regulation and Currency Control” dated December 10, 2003 No. 173-FZ.
Since 2018, the Bank of Russia Instruction “On the procedure for residents and non-residents to submit documents to authorized banks...” dated 06/04/2012 No. 138-I ceases to be in effect - it was replaced by Instruction No. 181-I, from the content of which it follows that:
- transaction passports are canceled (a contract is used instead of a transaction passport);
- the bank's refusal to register the contract is excluded;
- under contracts with an amount of obligations less than RUB 200,000. there is no need to submit documents related to currency transactions (only information about the transaction type code is provided);
- certificates on currency transactions are cancelled;
- other innovations and amendments are being introduced.
As of May 14, 2018, Law No. 173-FZ also changes - the amendments made to it by Law No. 325-FZ imply:
- tightening requirements for foreign trade contracts;
- expansion of the grounds for refusal to conduct a foreign exchange transaction by the bank;
- increasing the amount of liability for violation of currency legislation.
What is the essence of currency control in the customs authorities, see this.
Additional documents arising during foreign trade activities
The use of foreign trade activities will require the use of a large number of documents in the work, which are not needed if the activity is carried out only within the Russian Federation. Moreover, their number will include not only those issued by the Russian side, but also those received from foreign partners. In relation to export/import, this will, in particular, be:
- contracts with foreign partners, created taking into account the delivery conditions reflected in Incoterms;
- payment documents of foreign partners;
- instructions to buy or sell currency;
- documents (apostille) confirming the fact of registration of a foreign partner in a foreign country;
- cargo customs declarations (CCD);
- invoices that will become accounting documents for shipment;
- foreign shipping documents and foreign documents (invoices) of suppliers;
- applications for the import of goods and payment of indirect taxes, lists thereof and a special VAT declaration for imports from the countries of the Customs Union;
- additional lines and sections in the regular VAT return;
- declaration of income received from sources outside the Russian Federation;
- tax calculation containing data on income paid to foreign partners;
- documents for payment of taxes paid in connection with the payment of income to foreign partners;
- other documentation.
Most of the documents addressed to or received from a foreign partner will initially be created in 2 languages, and documents issued only in a foreign language must be accompanied by a translation of the text, which will be required by the Federal Tax Service during verification.
At the same time, not only the volume of documents increases, but also the number of inspections requiring the submission of copies by tax authorities (in connection with VAT refunds on exports) and customs (in connection with the declaration of goods).
This one will tell you about the types of currency clauses in contracts.
Accounting: features for foreign economic activity
Features of foreign trade accounting will require:
- accounting for amounts received or expressed in foreign currency (bank, cash desk, settlements with counterparties), in parallel in two currencies: foreign with its conversion into rubles according to the rules of PBU 3/2006, approved by order of the Ministry of Finance of the Russian Federation dated November 27, 2006 No. 154n;
- tracking the dates of transfer of ownership of exported/imported goods according to the Incoterms specified in the contract;
- formation of the value of property acquired abroad with the additional inclusion of customs duties (clause 1 of Article 160 of the Tax Code of the Russian Federation);
- reflecting expenses for foreign business trips in accordance with the rules established for them by Decree of the Government of the Russian Federation of October 13, 2008 No. 749;
- inclusion in the financial results as of the reporting date of the results of revaluation of foreign currency balances of funds and settlements with counterparties expressed in foreign currency;
- organization of separate analytics on accounting accounts and in other registers to obtain information necessary for reporting of all types (accounting, tax, statistical) taking into account the presence of foreign trade activities;
- control over the completeness of receipt of funds in payment under a foreign exchange contract with a foreign buyer;
- reflection of taxes additionally charged in connection with the introduction of foreign economic activity;
- compliance with special rules for deducting VAT on expenses associated with both exports and imports;
- filling out all tax reporting documents correctly and in accordance with accounting records.
VAT and tax accounting for profits in foreign trade
The largest number of additional actions in terms of taxation will be necessary for the most complex tax, which in the Russian Federation is VAT. Special attention will be required here:
- export, which requires the organization of separate accounting of all operations on it, compliance with deadlines for collecting a package of necessary documents, identifying unconfirmed and late confirmed shipments, monitoring the completeness of payment for supplies by the counterparty, filling out additional sections of the declaration, regularly preparing large packages of documents for control by the Federal Tax Service;
- imports from the countries of the Customs Union, in which it is necessary to comply with fairly limited deadlines for submitting tax documents to the Federal Tax Service, paying it in conjunction with payment - submitting for deduction, drawing up an additional declaration;
- the obligation to pay tax when paying for a number of services (clause 1 of Article 148 of the Tax Code of the Russian Federation) provided outside the territory of the Russian Federation, and filling out a special section of the declaration for it;
- the presence of features of taxation of goods that arise in certain situations both during their export and import (Article 151 of the Tax Code of the Russian Federation).
What you need to follow when organizing separate accounting when exporting - read the material .
With regard to income tax, one should not lose sight of the fact that export shipments are taken into account in income at the moment of transfer of ownership (risks) to the goods, i.e. practically at the time of shipment, and the right to deduct VAT on such shipment can be confirmed completely another tax period. That is, the tax bases for profit and VAT when exporting for the same period do not always coincide, and it is impossible for profit to take into account shipments for export in connection with the fact of confirming the right to deduct VAT.
Results
The organization of accounting for foreign economic activity entails not only an increase in the number of accounting documents used, but also a number of features: both in the reflection of accounting transactions and in the preparation of reporting.
Large banks offer a number of services to clients participating in foreign economic activities and themselves become an important link in international trade. As a rule, banks create specialized departments for external relations. There are specialized banks (in Russia Vneshtorgbank).
To carry out foreign economic activities, banks:
Conclude agreements on correspondent relations with banks abroad and open correspondent accounts;
Open branches and offices abroad;
Acquire ownership shares in foreign banks;
They open factoring, leasing, etc. companies.
Goals foreign economic activity of banks:
Provide maximum services to exporter/importer clients;
Reduce the risks of international transactions;
Provide the bank with foreign exchange income.
These goals are achieved through the use of various methods and tools that are agreed upon by the exporter and importer at the time of concluding the trade contract.
Payment methods, used in international practice:
Advance payment;
Documentary letter of credit;
Payment after shipment;
Documentary collection;
Trading on an open account. Tools(calculation methods):
Bills of exchange;
Postal, telegraphic, telex payment orders;
International money transfers (S. W. I F. T system) International payments are made on the basis of generally accepted
rules established by the international community.
Let's consider the two most significant payment methods from the point of view of reducing the risk of international trade transactions - documentary in cash and documentary letter of credit.
Documentary collection– payment method (bank settlement operation), in which the bank, on behalf of the exporter client, receives the funds due to it on the basis of the goods settlement documents submitted by the client to the bank (Fig. 38).
1. Signing a contract for the supply of goods;
2. The exporter provides the bank with a collection order and shipping documents;
3. The bank checks the correctness of the documents and transfers them to the collecting correspondent bank;
45. The importer’s bank transfers documents to the importer against payment of the amount indicated in them;
6. The collecting bank transmits a payment notice to the exporter’s bank;
7. The exporter's bank credits funds to the client's current account and notifies him of receipt of payment.
Unified rules for documentary letters of credit were established by the International Chamber of Commerce for the first time in 1933. Currently, version No. 500, adopted in 1993, is in effect. In Russia, this form of payment is regulated by the Civil Code of the Russian Federation, Part II, Art. 867873.
Documentary letter of credit This is the bank's obligation to make the amount agreed upon by the counterparties available to the seller on behalf of the buyer in accordance with strictly defined conditions.
Target reducing the risks of foreign economic transactions.
The essence of the operation:
Exporter receives a guarantee of timely receipt of export proceeds, importer makes payment upon delivery (Fig. 39).
Signs of a letter of credit:
It is a monetary obligation, the fulfillment of which occurs subject to the provision of the documents provided for in the letter of credit;
It is a transaction separate from the foreign economic contract, which provides for a letter of credit form of payment;
The bank makes payment under the letter of credit in its own name, but on behalf of its client;
The bank makes the payment at the expense of its own funds or the client’s funds;
Issuance of a letter of credit and payment from the letter of credit give rise to a chain of transactions between participants in credit settlement relations.
1. Contract.
2. The importer, within the terms agreed with the exporter, instructs his bank to open (issue) a letter of credit (application for open letters of credit).
3. The importer’s bank asks the exporter’s bank to open a letter of credit in favor of the corresponding exporter and immediately or within the stipulated time frame
ki provides coverage, i.e. transfers the amount of the letter of credit (issuance of the letter of credit).
4. The exporter's bank sends a notice to the exporting client.
5. The exporter, having received a notice (advice) from his bank and having checked the terms of the letter of credit, sends the goods to the importer and prepares the documents necessary to receive payment from the letter of credit.
6. The exporter submits to his bank the shipping and other documents specified in the letter of credit.
7. Shipping and other documents are sent by the exporter’s bank to the importer’s bank, which makes the payment.
8. The exporter receives the payment amount due to him.
9. The importer’s bank transfers the received documents to the importer, which give him the right to receive the purchased goods.
Types of documentary letter of credit:
To bearer;
Paid on time;
With deferred payment terms;
Revolving (renewable);
Non-revolving;
Confirmed;
Unconfirmed.
The most important criterion is revocability of letter of credit– involves division into:
Revocable letters of credit are a bank obligation that can be canceled or modified without notice to the exporter;
Irrevocable letters of credit are a firm commitment of the bank, which is beneficial for the exporter and risky for the bank.
All currency transactions of the bank are subject to currency control rules 1 (See Fig. 39 and Fig. 40).
Large banks offer a number of services to clients participating in foreign economic activity and themselves become an important link in international trade. As a rule, banks create specialized departments for external relations. There are specialized banks (in Russia - Vneshtorgbank).
To carry out foreign economic activities, banks:
conclude agreements on correspondent relations with banks abroad and open correspondent accounts;
open branches and offices abroad;
acquire ownership shares in foreign banks;
open factoring, leasing, etc. companies.
Goals of foreign economic activity of banks:
provide maximum services to exporting/importing clients;
reduce the risks of international transactions;
provide the bank with foreign exchange income.
These goals are achieved through the use of various methods and tools that are agreed upon by the exporter and importer at the time of concluding the trade contract.
Payment methods used in international practice:
advance payment;
documentary letter of credit;
payment after shipment;
documentary collection;
trading on an open account.
Tools (calculation methods):
checks;
bills of exchange;
postal, telegraphic, telex payment orders;
international money transfers (S.W.I F.T system).
International payments are made on the basis of rules generally recognized by the international community.
Let's consider the two most significant payment methods from the point of view of reducing the risk of international trade transactions - documentary collection and documentary letter of credit.
Documentary collection is a payment method (bank settlement operation), in which the bank, on behalf of the exporting client, receives the funds due to it based on the goods and settlement documents submitted by the client to the bank (Fig. 38).
1. Signing a contract for the supply of goods;
2. The exporter provides the bank with a collection order and commodity settlement documents;
3. The bank checks the correctness of the documents and transfers them to the collecting correspondent bank;
4-5. The importer's bank transfers documents to the importer against payment of the amount indicated therein;
6. The collecting bank transmits a payment notice to the exporter's bank;
7. The exporter's bank credits funds to the client's current account and notifies him of receipt of payment.
Unified rules for documentary letters of credit were established by the International Chamber of Commerce for the first time in 1933. Currently, version No. 500, adopted in 1993, is in force. In Russia, this form of payment is regulated by the Civil Code of the Russian Federation, Part II, Art. 867-873.
A documentary letter of credit is an obligation of the bank to provide the amount agreed upon by the counterparties to the seller on behalf of the buyer in accordance with strictly defined conditions. The goal is to reduce the risks of a foreign economic transaction.
The essence of the operation:
The exporter receives a guarantee of timely receipt of export proceeds, the importer makes payment upon delivery.
Signs of a letter of credit:
is a monetary obligation, the fulfillment of which occurs subject to the provision of the documents provided for in the letter of credit;
is a transaction separate from the foreign economic contract, which provides for a letter of credit form of payment;
the bank makes payment under the letter of credit on its own behalf, but on behalf of its client;
the bank makes the payment at the expense of its own funds or the client’s funds;
issuance of a letter of credit and payment from a letter of credit give rise to a chain of transactions between participants in credit and settlement relations.
Procedure for carrying out a letter of credit operation
1. Contract.
2. The importer, within the terms agreed with the exporter, instructs his bank to open (issue) a letter of credit (application for open letters of credit).
3. The importer’s bank asks the exporter’s bank to open a letter of credit in favor of the corresponding exporter and immediately or within a specified time period provides coverage, i.e. transfers the amount of the letter of credit (issuance of the letter of credit).
4. The exporter's bank sends a notice to the exporting client.
5. The exporter, having received a notice (advice) from his bank and having checked the terms of the letter of credit, sends the goods to the importer and prepares the documents necessary to receive payment from the letter of credit.
6. The exporter submits to his bank the shipping and other documents specified in the letter of credit.
7. Shipping and other documents are sent by the exporter’s bank to the importer’s bank, which makes the payment.
8. The exporter receives the payment amount due to him.
9. The importer’s bank transfers the received documents to the importer, which give him the right to receive the purchased goods.
Types of documentary letter of credit:
to bearer;
paid on time;
with deferred payment terms;
revolving (renewable);
non-revolving;
confirmed;
unconfirmed.
The most important criterion - the revocability of a letter of credit - involves division into:
revocable letters of credit - a bank obligation that can be canceled or changed without notifying the exporter;
irrevocable letters of credit are a firm commitment of the bank, which is beneficial for the exporter and risky for the bank.
All currency transactions of the bank are subject to currency control rules.
