The Directive 4 under Executive Order (E.O.) 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation,” as amended (Russia-related Sovereign Transactions Directive), prohibits the following activities by U.S. persons: any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities (collectively, “Directive 4 entities”). As noted in FAQ 1002, this includes both direct and indirect transactions.
OFAC issued the Russia-related Sovereign Transactions Directive with the explicit aim of preventing the Government of the Russian Federation from leveraging these institutions and their holdings of international reserves in ways that would undermine the impact of U.S. sanctions. Information currently available to OFAC suggests so-called “exit taxes” imposed by the Government of the Russian Federation involve payments to Directive 4 entities. Consequently, U.S. persons whose divestment from the Russian Federation will involve the payment of such an exit tax require a specific license from OFAC prior to the payment of such tax, unless otherwise authorized by OFAC.
GL 13E authorizes U.S. persons, or entities owned or controlled, directly or indirectly, by a U.S. person, to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, or certifications involving Directive 4 entities that would otherwise be prohibited by the Russia-related Sovereign Transactions Directive, provided such transactions are ordinarily incident and necessary to such persons’ day-to-day operations in the Russian Federation. Payment of exit taxes is not considered ordinarily incident and necessary to day-to-day operations in the Russian Federation and, thus, is not authorized under GL 13E.
Therefore, U.S. persons whose divestment of assets in the Russian Federation will involve a payment of such an “exit tax” should seek a specific license from OFAC. Such persons may submit a request for a specific license with OFAC’s Licensing Division online at https://ofac.treasury.gov/ofac-license-application-page. License applications related to these payments should include information regarding the amount of the exit tax, the amount of ongoing taxes that would otherwise be paid to the Government of the Russian Federation should divestment not occur, the impact of a failure to pay the tax on the employees of the exiting company, the specific economic activity in Russia of the exiting company, and the impact on the Russian Federation of the divestment. OFAC will expedite its review of such requests, which will be evaluated on a case-by-case basis.
While OFAC is aware that the Commission established by the Russian Federation to review such divestments may include individuals from entities subject to the Russia-related Sovereign Transactions Directive or individuals listed on the Specially Designated Nationals and Blocked Persons List, U.S. persons do not need to seek authorization from OFAC for their Russian buyers to submit an application to the Commission regarding a divestment transaction.
Date Updated: May 19, 2023