What is repatriation
The term "repatriation" in literal translation from Latin means "returning to the motherland". In the world of finance, this concept is used to refer to the return of capital that was previously used abroad, with the aim of investing it in your country. Repatriation of capital exists in several forms, including the transfer home of funds invested outside it, the return of profits from such investments or foreign currency, which is obtained from the sale of goods (services).
Repatriation of capital is directly related to its export. In a period of worsening of their economic situation, the countries that exported capital, introduce measures to ensure the return of invested funds. For these purposes, a special tax and credit policy, providing guarantees and benefits.
An example is France after the end of the Second World War, where state authorities in charge of currency control allowed returning capital to the country through the precious metals market on preferential terms.This step of the government can be viewed as an amnesty for national capital, which left France the day before and during the war. With the onset of worse times, importing capital states often impose restrictions on the repatriation of capital invested in their economies.
The repatriation of capital enables the country to declare an amnesty to those who had illegally withdrawn funds earlier. A similar problem is characteristic of present-day Russia, where the monthly export of capital reaches $ 2.5 billion. This situation will continue, apparently, until the debate on the legislation on amnesty of capital ends.
In countries with fully developed economies, foreign currency gained from the sale of an economic product is returned to the country in accordance with the norms and terms of settlements established in international practice. In anticipation of the appreciation of the national currency, the transfer of funds to their homeland is usually accelerated. Under the conditions of the upcoming devaluation, the opposite happens: the return of revenue slows down. This adversely affects the country's economy.
Repatriation of loans
Repatriation of loans also takes place in the country's economy. So called homecoming bonds that were previously placed among borrowers in other states. Such an operation is carried out through the redemption of these obligations by the state and individuals. The state usually resorts to repatriating loans if it is necessary to improve the financial situation of the country and increase foreign exchange reserves.
In the current economy, the repatriation of loans is gradually losing its value. The relocation of bonds of private and state loans takes place almost daily and is determined by the policy in the field of investment resources management, as well as the peculiarities of regulation of securities rates. In these processes, a special role is given to institutional and private investors. The processes of circulation of bonds are influenced by various factors, including changes in currency exchange rates, fluctuations in interest rates and credit ratings of issuers.
Repatriation of foreign currency
Fulfillment of state requirements on repatriation of foreign currency is carried out with the participation of special bodies that are called upon to exercise export-import control.The return of currency is carried out by crediting to the bank accounts the proceeds from the export of goods, works, services, as well as in other cases, which are reflected in the legislation. The purpose of state control is to guarantee the supply of currency in the domestic market of the country and to prevent the illegal transfer of resources abroad through the channels that serve to carry out foreign trade operations.
As part of the repatriation of foreign currency, export-import controls are carried out:
- Central bank;
- second-tier banks;
- tax authorities;
- customs authorities.
There are states that specialize in financial exports. For them, repatriation is becoming an integral part of working with capitals, allowing to improve the indicators of the balance of payments and currency exchange processes. The process of moving money across the border includes not only the states that are home to the owner of capital, but also those countries from which funds are withdrawn. As part of the repatriation, there are a large number of legal subtleties.Financial flows may be subject to various types of taxation.
Any cash flow between states is a tool within a given economic development strategy. The policy directions, the choice between the import or the export of financial resources most often depend on the real state of affairs in the country's economy. With relatively stable development, restrictions on the movement of capital are removed or weakened. When a crisis comes, as a rule, strict limits are imposed on the import and export of capital.
The management of capital movements to the homeland can be carried out in the interests of large national monopolies. But most often, regulation becomes a way to adjust macroeconomic indicators.
Prerequisites for capital repatriation:
- stabilization in economics and politics;
- creating a favorable investment climate;
- improvement of the tax regime;
- reduction of commercial risks;
- increased confidence in the government and national currency.
A special case of repatriation can be considered the return to the country of the profits that are received from investments outside the country.In the modern world, most often these processes are somehow connected with the securities market. Repatriation of profits, as a rule, is carried out at the time of the sale of shares on the market. An investor exchanges securities for money, which he can then cash in his homeland, after which he leaves the market where the trading takes place. Under the conditions of the exchange, such operations with shares leading to the return of funds to their homeland can be carried out several times a day. From a formal point of view, the withdrawal of profits received by foreigners on Russian stock exchanges, is a full-fledged repatriation.
Capital associated with criminal activity cannot be transferred to the legal economy of a state. The owners of funds obtained by criminal means are not subject to amnesty applicable to capital, and cannot qualify for participation in government programs for the repatriation of income. However, the list of compositions involving the amnesty of capital may include moderate economic crimes.
Features of settlement and taxation during repatriation
In the conditions of the domestic economy, the repatriation of funds concerns residents of the Russian Federation who take part in foreign trade activities. In relation to these persons, there is an obligation in the law to ensure receipt of money for goods and services from foreign entities. Residents' funds should be returned to Russia when their foreign partner took advantage of the right to prepay, but did not deliver their goods or services. The exception that does not entail the requirement for the repatriation of money are certain types of debt obligations.
In some countries, a special tax on the return of income of non-residents. It is collected from the source when the money is actually withdrawn outside the country. Typically, this type of tax applies exclusively to passive income. In case of repatriation taxes, legislation often provides for tax deductions and compensation.
International law does not provide for any general rules that would regulate the procedure for paying taxes and fees for the repatriation of income, or at least determine the amount of such tax.Each country independently establishes rules for calculating the amounts that go to the treasury on the basis of repatriation. In some countries, such fees are nil. An example is Cyprus.
The value of repatriating cash
Repatriation performs a number of important functions in the country's economy. Managing your return to your homeland helps the government:
- control inflation;
- control the rate of national currency;
- ensure the quality of financial calculations.
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