The Legal 500

In January 2012, the Federal Law ‘On organised trades’ came into force

This law governs the relationships that arise when trades are organised on commodities and financial markets. It establishes requirements on those organising such trades, and on the members, management bodies and employees of the organiser of the trades. It defines the fundamentals for the state regulation of and control over this activity.  

The third set of antimonopoly measures, which comes into force on 6 and 7 January, significantly amends antimonopoly legislation, affecting business across the board. The most important new developments include:

Julia Alexandrova, Senior Associate, Pepeliaev Group

Alongside actively developing cross-border economic, trade and customs law and adjusting to European standards and the WTO principles, Russia is seeing the adoption of rulings actually hampering foreign capital flow into the country.  

5 December 2011 saw the entry into force of Federal Law No. 334-FZ dated 22 November 2011 On amending the Russian Federation Labour Code to improve the regime for resolving collective labour disputes. This Law amends the Russian Labour Code in terms of both the time limits and procedure for examining and resolving collective labour disputes.

Pepeliaev Group advises that on 23 November, the State Duma adopted a Federal Law that amends the rates of insurance contributions payable to the state social security funds.

Pepeliaev Group advises that Federal Law No. 322-FZ dated 16 November 2011 “On amending article 6 of Federal Law ‘On foreign investments into the Russian Federation’ and Federal Law ‘On the procedure for making foreign investments in business entities of strategic importance for national defence and public safety’”  came into force on 18 December 2011. The law lays down measures for easing control over foreign investments in strategic areas of the Russian economy.

Starting from 1 January 2012, amendments to the Russian Civil Procedure Code (CPC) will come into force by virtue of Federal Law No. 358-FZ dated 09 December 2010.

Pepeliaev Group advises that Federal Law No. 103-FZ dated 1 June 2011 has ratified the Agreement on the Rules for Determining the Origin of Goods in the Commonwealth of Independent States, signed in Yalta on 20 November 2009 (the "Agreement"). According to the CIS Executive Committee, the Agreement came into force forussr the Russian Federation on 23 July 2011.

The new Transfer Pricing Law significantly changes the existing TP regulations in Russia. Under the new Law, there is no longer requirement that, to be subject to TP control, the price applied by the taxpayer must deviate by more than 20 % from the fair market price. Now, the tax may be recalculated based on the fair market price even if the actual price deviates from the fair market value by less than 20 %.

Foreign investors doing business in Russia have come to believe that Russian law falls short when it comes to safeguarding their interests properly. More specifically, it does not have enough flexibility to deal with the issues faced by particular businesses. It is small wonder that investors are keen to ensure that their Russian transactions are governed by more flexible foreign law. This is undoubtedly due to the fact that Russian law is underdeveloped in corporate matters and far from being perfect on the protection of investments.

Pepeliaev Group advises that the Russian Government has approved draft Protocols amending the Agreement between the Russian Federation and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, and the Agreement between the Russian Federation and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital.

14 October 2011 saw the entry into force of the Russian Government’s Resolution No. 802 dated 30 September 2011 On approving the Rules for deactivating a capital construction facility (the “Rules”).

This summer, the Russian Supreme Arbitration Court drew a line under a promissory note dispute that had dragged on since 2009. By its Resolution No. 16623/10 dated 21 June 2011  in case No. A40-120754/09-55-921, it corrected the lower courts which had considered the only lawful basis for issuing a promissory note to be, in essence, a loan relationship and which had stated that a promissory note may not be paid if issued to secure a third party’s obligation.

Pepeliaev Group advises that a number of laws and regulations have been adopted that amend labour protection rules. In particular, a new procedure for assessing individual workplaces for compliance with labour safety rules has been adopted and a draft law on increasing the criminal and administrative liability for violating the labour protection requirements has been introduced.

Pepeliaev Group law firm advises that the Presidium of the Supreme Arbitration Court (the “SAC”) will for the first time consider how the non-discrimination provisions of international double tax treaties correlate with Russian thin capitalisation rules, which in certain cases provide for interest accrued on a taxpayer’s debt to be reclassified as dividends.

FOR CURRENCY CONTROL PURPOSES 

Pepeliaev Group advises that court practice has become harsher in cases on filing statements with banks for currency control purposes.

Pepeliaev Group advises that, on 28 July 2011, a Resolution of the Plenum of the Russian Supreme Arbitration Court [1]  (the “SAC”) with direct implications for construction and investment activity was published on the SAC’s website. The Resolution creates substantial tax risks for all those involved in that sector: builders, investors and developers.

NEW LEGISLATION ON INSPECTIONS AND PROVIDING A LEGAL BASIS FOR THE EXTENSION OF AN ADMINISTRATIVE SUSPENSION OF ACTIVITY

Pepeliaev Group advises that the Russian State Duma has passed in its third reading draft law No. 282499-5 On amending the Federal Law 'On personal data'. The legislative body is proposing a fundamentally new, more user-friendly text of the law, which will clarify and simplify many provisions of the current legislation concerning personal data (“PD”).

Companies that operate in Sakhalin Region and a number of other regions are entitled to use accelerated depreciation of fixed assets and deduct larger amounts as expenses for tax purposes

On 5 July 2011, the Federal arbitration Court for the Far Eastern Circuit issued its precedent forming resolution No. F03-2566/2011 which states that companies operating in Sakhalin Region are entitled to apply a special coefficient for their fixed assets depreciation (but not more than 2). The court’s conclusions may also apply to companies operating in other regions of the Far North and areas equivalent to the Far North.

Pepeliaev Group advises that, on 22 July 2011, Federal Law №227-FZ was officially published. This Law makes extensive amendments to the Russian Tax Code with regard to transfer pricing rules. Such amendments are due to come into force on 1 January 2012, so the Russian Federal Tax Authority has already created a new department of transfer pricing and international cooperation. Staff of this department will be drawn not only from public officials, but also from private businesses.

On 8 July 2011 the Russian State Duma adopted in the third reading the law On amending certain legislative items of the Russian Federation in connection with improving the pricing rules for tax purposes.

Pepeliaev Group advises of the official publication of federal laws creating the legal basis on which a national payment system to function [1].

These laws introduce the legal regulation of contemporary non-bank payment instruments, such as electronic funds. They clarify the legal regulation of payment using terminals (the activity of payment agents engaged by banks and suppliers).

Pepeliaev Group advises that, on 1 June 2011, the Russian Government introduced three draft laws in the State Duma which provide for amendments to the currency control procedure and also to liability for infringing legislation on currency regulation and currency control.

Pepeliaev Group advises that on 07.06.2011 were forced some regulations of Federal law №132-FZ "On Amendments to article 95 of the first part and to the second part of Russian Tax Code regarding creating favorable tax conditions for innovation activity and article 5 Federal law "On Amendments to the second part of Russian Tax Code and some laws of Russian Federation".

Federal Law No. 385-FZ “On amending certain laws of the Russian Federation” entered into force on 15 February 2011. The law introduced amendments to the procedure for the registration of foreign citizens for migration purposes. We also noted that the State Duma was considering a draft law that would restore some of the previous procedures of migration registration, albeit modified to some extent.

Pepeliaev Group notes: On 26 January 2011, the Russian State Duma passed the first reading of the Draft Law “On amending article 19 of the Federal Law ‘On telecommunications’” (the “Draft Law”). The Draft Law clarifies the procedural requirements for connecting communications networks and for them to cooperate with an operator which occupies a significant position in a general use telecommunications network. 

Pepeliaev Group advises that 22 February 2011 saw the publication on the website of the Federal Service for Supervision over Telecommunications, Information Technology and Mass Media (“Roskomnadzor”) of its Order No. 048 dated 31 December 2010 On temporary rules for administrative procedures performed by the Federal Service for Supervision over Telecommunications, Information Technology and Mass Media to grant, renew, extend and cancel licences at the licensee’s request, to issue additional copies of licences, and to provide information contained in the licence register on specific licensees while rendering the state service of licensing radio and television broadcasting (the “Order”).

Pepeliaev Group notes that 2 March 2011 saw the publication on the official website of Russia’s Federal Financial Markets Service (the “FFMS”) of the FFMS’s Order “On approving the Regulations on the procedure and timeframes for a joint stock company to keep documents”, which stipulates changes to the list of documents which must be kept and the time periods for which they must be kept.

Yelena Ovcharova, PhD in Law, Attorney,

Head of the Administrative Defence of Business Group, Pepeliaev Group, Senior Lecturer in the Law Faculty of Lomonosov Moscow State University

Pepeliaev Group advises that on 4 May 2011 the President of the Russian Federation signed Federal Law No. 99-FZ “On licensing specific operations” (the “Law”) that will replace the current licensing law.

Sergey Pepeliaev, managing partner of Pepeliaev Group, took part in a meeting hosted by the Russian President to discuss the new version of the Russian Civil Code drafted by the Russian President’s Council for the Codification of Civil Law.

Property tax is levied on property treated as fixed assets for accounting purposes. However, the Russian accounting regulations (PBU 6/01) do not specify when property should be classified as fixed assets.

Pepeliaev Group advises that on 24 April 2011, the Russian Supreme Arbitration Court published on its official website Resolution No. 14233/10 of the Court’s Presidium dated 17 March 2011. The Resolution considered the issue of the payment of interest on a late refund of VAT (clause 10, article 176 of the Russian Tax Code) in cases in which a taxpayer who has submitted a tax return declaring an amount of VAT to be refunded has not applied to the tax authority for the tax in question to be refunded.

Pepeliaev Group advises that on 11.04.2011 panel of judges Supreme Arbitration Court passed rulling in addition regarding to two questions, which can be very important for Companies, making business in Russian with foreign employees. The panel of judges SAC RF has told about social payments (in the Pension found RF for obligatory pension insurance) which should (not) be paid for foreign employee without plans of permanent living in Russia. In addition the panel of judges SAC RF has said about necessity of professional translator in tax authority and foreign taxpayers relations.

Looking back on the year gone by, let me go through the most significant events that have affected taxpayers, the business climate and the tax system in Russia.

Federal Law No. 243-FZ has amended the Russian Tax Code with the aim of promoting and supporting investors’ activity in the Skolkovo innovation centre. The changes provide for benefits on an unprecedented scale for participants in the Skolkovo project.

Employment Disputes and Court Practice    .    Termination Cases - Pitfalls and Preventive Measures    .    New Tool - Mediation

Through Decision No. 19, dated 27 November 2009, of the Inter-State Council of the Eurasian Economic Community (the Customs Union’s supreme authority), from 1 January 2010 the Member States of the Customs Union, Russia, Belarus and Kazakhstan, transferred to a supranational body (the Commission of the Customs Union) the power to adopt measures arising from national interests and concerning the external trading of goods. As a general rule, therefore, such measures may no longer be enacted by way of national legislation.  

Federal Law No. 229-FZ dated 27 July 2010 introduced significant amendments to tax legislation relating to the calculation and collection of taxes, which will affect most taxpayers. The majority of these amendments will enter into force as of 2 September 2010

Russian tax law has applied transfer pricing rules since 1999. Law enforcement practice has, however, demonstrated that these rules are ineffective and that the tax authorities are incapable of applying them and exercising effective control over transfer pricing. The developers of the draft law have to a large extent taken into account the shortcomings and limitations of existing legislation in this area. We analysed the draft law on tax control for transfer pricing purposes to identify the underlying aspects of the proposed innovations.

On 19 February 2010 the State Duma adopted in a first reading draft law No. 305289-5 on transfer pricing. Officials from the Russian Ministry of Finance claim that the draft law will retain the current presumption on the compliance of contractual prices with the market price level. To what extent are these assertions consistent with the draft law?

Although Russia's foreign trade turnover contracted by 40% in 2009 compared with 2008, the Russian customs authorities still managed to meet the target budgeted for the remittance of customs proceeds, which was reduced by the Russian Government only by 20%. According to the Federal Customs Service of Russia, this became possible owing to the increased efficiency of customs administration of imports.

The authors of the article provide a legal assessment of amendments to bankruptcy legislation and analyse the conditions where the persons actually controlling a debtor may be held financially liable.

A number of regulatory acts, which introduced amendments to the rules of antimonopoly regulation and control, were adopted in July 2009. In particular, material amendments were introduced to the Law “On the Protection of Competition”.

The volume of foreign investments in the Russian economy has contracted perceptibly. The global crisis, a decrease in corporate revenues and the uncertainty of macroeconomic forecasts have led investors to scale down large projects and cut existing investment expenses. In this scenario, investors perceive more than ever that they need competent legal support. What issues do Western investors raise with their legal advisers? This was the topic of our conversation with Sergey Sosnovsky, partner and head of the St. Petersburg Practice of the law firm Pepeliaev, Goltsblat & Partners.

Lawyers from the customs and foreign trade regulation practice of Pepeliaev, Goltsblat & Partners, headed by Galina Balandina, are delighted to announce completion of a project entitled “Green Channel” for innovation companies. The assignment was ordered by the Russian Corporation of Nanotechnologies (RUSNANO). The project proposes a “Green Channel” for innovation companies, which will help remove a number of customs barriers and thereby expand the foreign economic activities of Russian hi-tech companies and also enhance the international exchange of research data between scientific and research institutions.

The rules for such buyouts are enshrined in the Law “On Joint-Stock Companies” . The law uses several concepts, including voluntary and mandatory buyout offers and a simple buyout. I would like to stress here that these requirements only apply to open joint-stock companies. Let us now consider each of the categories in more detail.

Until recently, a mortgage over immovable property was in general enforced on the basis of court rulings. This tended to be a fairly time-consuming procedure. Some practising lawyers noted that the process sometimes took 1.5 to 2 years to complete.

When a company operates in a foreign country, it has to comply with local tax obligations. At the same time it can sometimes appear more important to know about the specifics of tax law practice and the modus operandi of the tax authorities than legal norms. In this article we draw the attention of readers to the most typical claims of the Russian tax authorities.

In view of forthcoming amendments to Russian antimonopoly legislation (relating inter alia to agreements and concerted practices that restrict competition), the authors of this article will analyse the practice applied by European antitrust agencies and the Federal Antimonopoly Service of the Russian Federation (FAS Russia) to detect and investigate respective cases.

The International Comparative Legal Guide to: Real Estate 2009