The Russian Federal Tax Service (FTS) has ramped up its scrutiny of Russian nationals holding accounts in the United Arab Emirates, following the effective implementation of automatic tax information exchange between the two countries, The Bell reported.

Previously inquiries were rare. Now they are becoming routine. The FTS is making dozens of requests to the authorities in Dubai every quarter, according to sources cited by RBC.

The FTS is focusing on the critical period starting in 2022 when Russia crossed the border into Ukraine, sparking an exodus of Russians who objected to the war. Many of them made their way to Dubai which has a visa-free regime with Russia and convenient drive flights as the UAE has refused to participate in the sanctions regime on Russia.

Many of the refuseniks opened bank accounts in the UAE while still legally classified as Russian tax residents. These individuals are now facing potential penalties for tax non-compliance by the FTS.

The investigation process begins with a formal letter under Article 31 of Russia’s Tax Code, requesting explanations about the origin of funds, proof of tax residency, and documentation regarding the business activity of UAE-registered companies, The Bell reports. Some individuals have progressed to a second stage, involving interrogation by FTS officials and demands for further supporting documents.

Lawyers interviewed by The Bell warn that the most exposed are those who failed to report foreign assets properly—particularly individuals who neglected to file notifications for Controlled Foreign Companies (CFCs), the opening of foreign accounts, or annual cash flow disclosures. Up to one-third of clients reportedly do not comply with CFC reporting obligations, while up to half fail to report personal accounts.

A growing concern among expatriates is that Emirati banks are cooperating with the FTS, even in cases where clients hold Emirates IDs or UAE residence visas. Several Russians discovered that, despite formal residency and more than 183 days spent in the country, making them a legal tax-resident, their banking records still list them as Russian residents.

According to legal and tax consultants, banks in the UAE may consider a combination of factors—such as a Russian passport, income originating from Russia, Russia-linked transactions, or even geolocation data—as sufficient grounds for including a client in the automatic tax exchange.

While the fine for not reporting a foreign account is modest—RUB5,000 ($52)—the implications of undeclared income are significantly more serious. The FTS may apply personal income tax, along with a 30% penalty for failing to file the relevant 3-NDFL tax return and an additional 20% for non-payment, The Bell reports. Moreover, prohibited currency transactions could lead to fines of 20–40% of the transaction value, particularly when funds are transferred from countries outside Russia’s tax information network.