The Ministry of Finance of the Russian Federation is considering a significant shift in how banks and other financial institutions determine a client’s tax residence. At the core of the proposed changes is the use of geolocation data from customers’ mobile devices to assess where they primarily reside for tax purposes. This development comes from an Interfax report, citing a source familiar with the draft decision. The move reflects a broader push to modernize tax administration and strengthen international information exchange obligations.
Under the proposal, financial institutions would begin by monitoring where customers access remote services such as mobile banking apps and online personal accounts. If it appears that a customer’s activity is predominantly from foreign territories for a period of six months, the bank would be obliged to request information to determine the customer’s tax status. This would translate into a proactive step by banks to verify tax residency during ongoing relationships rather than relying solely on initial disclosures during account opening or contract signing.
The stated purpose behind this mechanism is to ensure that the Federal Tax Service receives up-to-date data on taxpayers in a timely fashion. The information would support the automatic exchange of financial information with competent authorities in other countries, aligning with global trends toward greater fiscal transparency and cross-border cooperation. In practice, this could reduce the likelihood of residence misclassification and improve accuracy in tax reporting for both individuals and institutions.
Present rules already permit financial institutions to deny service if a customer refuses to provide tax residence information or provides false information when signing a contract. The draft decision would allow such data requests to be made during the ongoing service process, grounded in the observed geographic location of the customer’s mobile device. In effect, the approach aims to integrate tax residency checks into routine customer interactions rather than relying solely on self-disclosure at onboarding, thereby enhancing data completeness and reducing compliance risk.
Officials familiar with the plan emphasize that residency assessments would rely on geolocation data as a basis for requesting additional tax information from customers. The implementation would likely involve careful handling of privacy considerations, consent requirements, and data security measures, given the sensitive nature of location information and tax data. Stakeholders may expect a phased rollout, with pilots in select institutions before broader application, and ongoing regulatory guidance to clarify scope and enforcement expectations.
For residents outside Russia, including audiences in Canada and the United States, these developments illustrate how national tax authorities are increasingly coordinating with financial intermediaries to obtain accurate residency information. While the specific legal framework may differ by jurisdiction, the underlying objective remains consistent: to support transparent tax compliance and improve the reliability of cross-border information exchange. Observers note that such measures could influence international banking practices, including how banks collect and verify client data, assess risk, and respond to requests from tax authorities across borders.
Commentators caution that the use of geolocation data raises important questions about privacy, data ownership, and consent. They stress the need for clear disclosure to customers about what data is collected, how it is used, how long it is retained, and under what circumstances it may be shared with tax authorities. The balance between robust tax enforcement and individual privacy will likely shape final regulatory language, with amendments to protect consumer rights while supporting compliance obligations for financial institutions. In this evolving landscape, banks in Russia and abroad are watching closely as policy makers refine the rules that govern tax residency identification and cross-border data sharing. Accurate residency data remains a cornerstone of international tax cooperation, helping governments align tax purposes with actual economic activity and residence patterns. The ongoing discussion reflects a broader trend toward more proactive data-driven enforcement and closer collaboration between financial service providers and tax authorities. The broader implications for multinational clients are expected to become clearer as consultations proceed and regulatory texts take shape, potentially affecting how financial institutions approach compliance in cross-border contexts.