Expense reporting in foreign currencies in Russia
According to the regulations of the Russian Federation all corporate expenses which were incurred in foreign currency have to be compensated in Russian ruble. And this shall be used at rate of the exchange rate of the Central Bank (and also to be used in the tax and accounting documentations) at the date of the confirmation /payment date of the expense.
The exchange rate of the Ruble is not stable. Thus often an employee who paid for expenses in a foreign currency faces the issue that at the date the accountant prepares the expense report and organizes the payment the exchange rate is substantially different. At times of high fluctiontions of the currency exchange rate these differences can be substantial and below it will be discussed how to reduce these differences.
A company can give its employees a cash advance before a business trip. The employee by accounting regulation shall hand in his expense reports and all supporting documents within three days after return from business trip. Travel and other expenses can only be refunded to full time employees and not to workers in other work relationships e.g. freelancers. Freelancers can receive a refund for their expenses through other means but not through the expense report.
Payment of travel and other expenses and the reflection of it in the expense reports
1. Employee took a cash advance for an international business trip in rubles
The employee shall provide an offical documument confirming the exchange of the rubles in a foreign currency and the applied exchange rate.
An employee is issued before the business trip with a cash advance of 70,000 rubles. He then exchanged this amount from rubles into euros. The bank provides him a confirmation of the exchange which states that the exchange rate applied was 70 ruble for one euro. The employee is thus obliged to provide a documentation for incurred expenses of 1000 Euro. If the employee fails to provide such a confirmation he has to prove the expense of 70 000 rubles. If he then provides for example two bills, one over 700 EUR and one over 300 EUR, these amounts are then used by the accountant with the offical exchange rate at the date the documents are processed. If at that date the central bank exchange rate is e.g. 60 rubles, then (700+300)*60 = 60 000 rubles is the official spending of the employee. Accordingly the employee owns the company 10 000 rubles. If the exchange rate at the data is e.g. 80 rubles for 1 Euro (700 + 300)*80 = 80 000 rubles the company owes the employee 10 000 rubles.
2. Employee takes cash advance for a foreign trip but the cash advance is paid to his personal bank account
The employee can pay the expenses by using a credit card tied to the bank account, where the cash advance was transferred to by the company, or withdraw cash from it.
If the employee provides the bank statemenst with the exchange rate applied by the bank, the accountant will take the exchange rate of the bank into account when performing expense reporting calculations. This though should be spelled out in the accounting policy. If an employee does not provide the bank information with the applied exchange rates the Central Bank of Russia exchange rate will be used when the expenses report is prepared.
Due to above explained, if no documentation on the exchange rate of the bank is provided this might result in a debt of the employee to the company or in extra payments of the company to the employee.
3. The same logic applies if no cash cash advances are done and the expenses are paid after the return from a business trip. Expenses incurred in foreign currency shall be paid at the official exchange rate of the Central Bank of Russia at the date of the approval of the expense report. And if there are any other documents confirming another exchange rate then the accountant can use the other exchange rate.
4. If an employee uses a corporate debit card and provides the expense report and all the underlying documentation as well as confirmation of potential withdrawal from an ATM (if cash is withdrawn) the expenses will be not be reimbursed, as they have been already paid by the company
Corporate debit cards simplify the accountants’ work. If an employee often generates expenses (e.g. a CEO for frequent restaurant visits) the accountant does not need to continously send money to his private account or cash advance either compensation which makes it easier for the accountant. If an employee often generates expenses (eg, CEO frequents restaurants’ visits for meetings with clients), the accountant does not need to constantly send money to his personal card. For a corporate debit card only a single transfer for the expenses of the foreseeable future is needed to be done.
But using a corporate debit card in Russia also has its downsides
An employee may withdraw a large sum in cash and not properly report how it was spend. To reduce issues from such situations to a minimum each card should have its limits for cash withdraws.
Example: If there is no limit an employee could take 150 000 rubles from a standard Russian debit card and not provide any closing documents. When the employee is leaving the company the employee owes the company 150 000 rubles, the sum is to be deducted from his salary. But if his remaining salary or other compensation to be paid is lower the company might lose the difference. All cash withdrawals of employees through a corporate debit card result in a debt of the employee towards the company. Each employee withdrawing cash has to bring supporting documents on the way he spend the withdrawn sum. Therefore tight control by the accountants or others is needed. And with this the expense reporting mobile application Avansovka will help. E.g. at the restaurant when a bill is paid the employee can send to the accountant all information about the payment with a picture and also comments with whom he met and for what purpose as these recquired in case of tax inspection.
In order to avoid unnecessary payments due to exchange rate fluctuations, it can be prescribed in the accounting regualtions that all expenses on a business trip shall be only paid by a corporate debit card or by withdrawing cash from the corporate debit card. Thus the accountant will always see all expense data in the corporate debit card report.
Or, if an employee does not have such a card the accounting policy should prescribe which documents have to be supplied after returning from a business trip abroad.