RS Law digest Main changes in the Law of the Russian Federation from June 1, 2011 to July 31, 2011

Main changes in the Law of the Russian Federation from June 1, 2011 to July 31, 2011

August 2011

1. The method of calculating time in the Russian Federation has been enshrined in law

Federal law defines the legal basis for the calculation of time and the establishment of time zones. It also governs relationships stemming from the distribution of information about exact meaning of dates and times.

2. The Tax Code of the Russian Federation has been augmented with a new section that regulates matters of transfer pricing and tax oversight of transfer pricing

In particular, the adopted changes establish rules to determine the compatibility between prices used in controlled transactions and market prices. This is required to increase the efficiency of tax oversight for accurate calculation and full payment of taxes. The new section also provides for mechanisms to counteract the use of transfer pricing for the purpose of minimising taxes.

Specifically, the list of reasons for recognising entities as interdependent was significantly expanded (The law contains 11 such reasons).

The law establishes methods used in determining the compatibility of transaction prices with market prices: 1) the comparable uncontrolled price method; 2) the resale minus method; 3) the cost plus method; 4) the comparable profits method; 5) the profit split method.

The list of controlled transactions was clarified by the law.

The law set forth the specifics of conducting tax oversight of the compatibility of prices used in controlled transactions with market prices.

In particular, a tax liability has been introduced for non-payment (incomplete payment) of the taxes resulting from using a price out of line with market prices; for failure to report controlled transactions; or for reporting false information.

3. Regulations were amended that govern the method of paying VAT, corporate income tax, and other taxes

The main change had to do with the method of calculating and paying value added tax.

In particular, regulations were adjusted and supplemented, providing a method for determining the place that labour or services were realised for the purpose of collecting VAT.

The list of tax-exempt operations (including labour and services related to preserving properties of cultural heritage, insurance services to protect export credit and investments from entrepreneurial and political risks) was expanded.

The new revision sets forth regulations governing the application of VAT deductions, including:

  • with respect to real estate during construction and modernisation (reconstruction);
  • when there are changes in the value of shipped goods (labour, services, property rights);
  • in cases when a payment obligation is stipulated in roubles only, an equivalent sum in foreign currency, or conventional monetary units.

A deadline has been established for presenting a banker's guarantee to the tax authority in order to apply the declared order for VAT refunds (no later than five days from the tax return filing date).

Additionally, the following changes concerning the calculation of corporate income tax were introduced, in particular:

  • expenses for voluntarily insuring export credit and investments against entrepreneurial and (or) political risks are considered when determining the tax base for income tax;
  • a tax accounting method has been established for declaring state support for filmmaking organisations and Russian educational institutions.

Separate regulations in legislation on taxes and duties were acknowledged as having lost their force.

4. Research and development gets tax advantages

Specifically, Article 262 of the new revision of the Tax Code of the Russian Federation provides for a detailed list of R&D expenses to be considered when calculating corporate income tax, among other expenses. The bulk of them are entered in accounting records in the (tax) reporting period in which the research or development was conducted. As contributions to funds supporting scientific, technical, and innovation, these expenses can be declared for tax purposes in the (tax) reporting period in which they were made.

The taxpayer must submit a statement of R&D expenses per the list established by the Government of the Russian Federation. The reported expenses must be affirmed as being within 1.5 times the actual expenses. The tax authority has the right to audit the submitted statement.

Additionally, the Tax Code of the Russian Federation was augmented with regulations that govern the formation, in tax accounting, of an R&D equalisation reserve. The taxpayer has the right to independently choose to create such a reserve. The adopted decision must be reflected in accounting policies.

The specifics of tax accounting for R&D expenses were also set forth.

The adopted law provides corporate property tax relief for assets being brought back into operation with high energy efficiency within three years from the day the asset is recorded.

5. A method for generating and receiving electronic invoices was adopted

An electronic invoice workflow between sellers and buyers is being implemented by specialised electronic workflow operators.

Use of the electronic invoice workflow is permitted with use of required cryptographic information protection systems that are certified in accordance with the legislation of the Russian Federation; are compatible with the protection adopted by the Federal Tax Service of the Russian Federation; allow identification of the owner of a signature key certificate; and also allow verification that information has not been tampered with.

Procedures for generating and receiving electronic invoices using an electronic digital signature are detailed in the adopted procedure.

6. The contract for a commercial concession has been updated

Changes to the Civil Code of the Russian Federation have been made relating to the contract for a commercial concession. The contract authorises obligating the user (of a trademark, service mark, trade secret, and similar exclusive rights transferred to him by the right holder) to sell the product, labour, or services at prices established by the right holder. It was also established that restrictive contract terms may be nullified by an anti-monopoly authority or other interested party, if the terms violate anti-monopoly legislation given the condition of the corresponding market and the economic position of the parties.

It was established that a contract for a commercial concession, concluded for a specific period or without any indication of the effective period, may include terms to terminate the contract at any time, by either party, given 30 days notice and the payment of a termination fee.

The grounds (including breach of contract by the user with respect to the quality of goods, labour, or services) and procedure for a right holder to unilaterally refuse to execute a contract were set forth.

Changes were also made to the regulation of a user's preferential right to conclude a contract for a new period, establishing a new procedure for renewing contracts (specifically, the parties have the opportunity to change the terms of the contract) and clarifying the consequences for failing to observe the user's preferential right to conclude a new contract.

7. The date of administrative suspension and other changes to the Code of Administrative Offences of the Russian Federation

Changes were introduced to the Code of Administrative Offences of the Russian Federation. Rules were put in place for calculating the date of administrative suspension. The date is determined from the moment of actual cessation of activity by persons engaged in unauthorised business, by legal entities, their affiliates, representative offices, organisation departments, production areas; and also the cessation of the use of machines, assets, buildings and structures; and the cessation of performing particular types of labour or rendering services.

A list was established of officials who try cases of administrative violations on behalf of the federal executive body that is authorised to enforce court orders and ensure established court procedures: the leader of the federal executive body authorised to enforce court orders and ensure established court procedures and his deputies; the leaders of territorial offices of said federal executive body and their deputies; and the leaders of organisation departments of territorial offices of said federal executive body and their deputies.

Further, senior officers of the court bailiff service have the right to nullify or alter decisions made by court enforcement officers or other officers of the court, if those decisions do not comply with the requirements of the law.

8. Outstanding fines have become more expensive...

It has been established in the Code of Administrative Offences of the Russian Federation that non-payment of an administrative fine will result in an administrative fine twice the size of the unpaid administrative fine, but not less than 1,000 roubles ($36).

If the administrative fine has not been paid in 30 days, the judgement that imposed the administrative fine, with a note about its non-payment, is sent within three days to a court enforcement officer to execute the procedure provided for by federal legislation. In the process, the court enforcement officer composes a record of the administrative violation with respect to the person who has not paid the fine for an administrative violation which has been tried by the court.

It has been stipulated that a note about the debtor's non-payment of said fine must be made in the statement from the body imposing fines for administrative violations.

...and the price of violating technical regulations has also gone up...

Violating by officials of technical regulations, project documentation requirements, requirements for mandatory documentation in the areas of standardisation or special technical conditions will cost 20,000 to 30,000 roubles ($718-1,077); between 100,000 and 300,000 roubles ($3,592-$10,776) for legal entities; or administrative suspension for a period of 90 days. Previously, the penalty for officials had been between 5,000 and 10,000 roubles ($180-$359); and for legal entities, between 30,000 and 100,000 roubles ($1,077-3,592).

The sales of goods, performance of labour, or rendering of services that are of improper quality will incur a fine between 3,000 and 10,000 roubles ($108-$359) for officials and between 20,000 and 30,000 roubles ($718-$1,077) for legal entities. In the previous revision, officials were penalised between 2,000 and 3,000 roubles ($72-$108); legal entities were fined between 20,000 to 30,000 roubles ($718-$1,077).

Additionally, the Code of Administrative Violations of the Russian Federation has been supplemented with articles that provide for liability, including for: violation of technical regulations by a manufacturer, executive, or seller; false declaration of product compliance; violation of the procedure for selling (labelling) a product that has a mandatory compliance declaration; violation of the rules for certification; presentation of false results of investigations (trials); violation of mandatory requirements related to defence products (labour, services); failure to meet the requirements for presenting product samples, documentation, or information, which are necessary for state monitoring of technical regulations.

...and bribery of officials

Criminal liability for commercial bribery, and the giving and receiving of a bribe, has been established in the form of a fine up to 100 times the size of the commercial bribery or the bribe–from 25,000 roubles to 500 million roubles ($897-$17,959,770).

The fine, which is calculated based on a multiple of the size of the commercial bribery or bribe, was established as an alternative punishment to restricted freedom and imprisonment.

Criminal liability is differentiated depending on the size of the bribe into various sizes: small, medium, large, and very large. At present, the maximum fine for commercial bribery, and giving and receiving a bribe, is 1 million roubles ($35,920) (wages and other income are garnished for a period of up to 5 years).

Criminal liability has been introduced for mediating bribery, e.g. indirectly transferring a bribe by order of the briber or briber-taker; or rendering other assistance to them in coming to an agreement about receiving or giving a bribe of a medium (large, very large) size; or promising or offering to mediate bribery.

A regulation has been removed from the Criminal Code of the Russian Federation according to which foreign officials and officials for public international agencies, which commit crimes against the state authorities; the interests of the state service; and the interests of local, autonomous bodies, bear criminal liability in cases provided for by Russia's international agreements. Provision has been made for the mentioned foreign officials and officials from public international agencies to bear criminal liability on a general basis for giving and receiving a bribe and mediating bribery.

The measures are directed at strengthening the fight against corruption in Russia.

9. New rules for transporting freight

A procedure has been established for organising the road-based transportation of various kinds of freight; providing for the safety of the freight, the vehicles, and the containers; and also for organising the conditions of freight transportation and the allocation of vehicles for this transportation.

The new rules contain regulations that specifically deal with concluding contracts for transportation of freight; contracts for chartering vehicles for transportation of freight; the allocation of transportation vehicles and containers; delivery and receiving of freight; loading of freight into transportation vehicles and containers; determination of the freight tonnage; sealing of the transportation vehicles and containers; delivery dates; freight delivery; cleaning of the transportation vehicles and containers; the features of various types of freight; and a procedure for creating certificates and claims. The rules also establish the maximum permissible weight of transportation vehicles.

10. A new law on electronic signatures has been adopted

The law focuses on improving previous enacted legislation regarding digital signatures and also on expanding the usage and number of available types of electronic signatures. The previously enacted law has expired.

In particular, the new law governs the following related to the use of electronic signatures:

  • the use of various types of electronic signatures;
  • the issuance and use of signature key certificates;
  • the verification of electronic signatures;
  • certificate authority services;
  • accreditation of certificate authorities.

Two types of electronic signatures are identified based on criteria established by the law: simple and enhanced. The latter can be qualified or non-qualified.

Information that has been signed with a qualified electronic signature is treated as an electronic document, equivalent to a paper document that had been signed by hand, except in cases when legislation requires a document to be created on paper. Electronic documents that have been signed with a simple or unqualified signature are treated as equivalent to signed paper documents as established by law.

The law also established the rights and obligations of those using electronic signatures, and the requirements for certificate authorities.

The requirements for certificate authorities were given in compliance with the Russian legislation on technical regulation.

A list of information to be stored by the certificate authority was defined.

Establishing a new procedure for regulating the use of electronic signatures will serve to develop and improve the Russian and international circulation of electronic documents.

11. The federal law "On the National Payment System" has been adopted

The law sets forth rights, obligations, and a procedure for communication between the various parties of the "national payment system" that are involved in money transfers.

Besides money transfer service providers (Bank of Russia, lending organisations, and Vnesheconombank), including electronic funds operators, the following have been determined to be parties of the national payment system: bank paying agents and subagents (legal entities and sole proprietors involved with lending organisations); paying agents authorised by law to accept payment from individuals; operators of payment systems (lending organisations and other organisations that determine the terms of a special contract–"the rules of the payment system"); payment infrastructure service providers (clearing houses and settlement centres); and the organisations of the federal postal service, when they render payment services.

The law has established requirements for these parties; detailed technical regulations for carrying out money transfers, in particular, limiting transactions using the electronic payment system to specific amounts; requirements for payment systems, including a procedure for recognising a specific payment system as "systemically significant" or "socially significant" and the implications of this designation, and requirements for risk management systems; and also a procedure for oversight and monitoring of the national payment system by the Bank of Russia.

The law takes effect on 29.09.2011, except for certain regulations that take effect at different times.

12. Debtors will be part of a public database

Changes have been introduced to the federal laws "On Enforcement Proceedings" and "On Court Bailiffs", which govern the creation of a database of enforcement proceedings.

Court bailiffs will create a database of debtors. Information about a debtor and the size of his debt, information about notification of searches for debtors or their property will be publicly available. Access to this information will be available until the conclusion or cessation of the enforcement proceedings or the day the debtor (his property) has been found.

The changes went into effect on 15.07.2011.

The law provisions concerning the creation of a database of enforcement proceedings take effect January 1, 2012.

13. In defence of the rights of those involved in equity construction...

The federal law "On Insolvency (Bankruptcy)" introduced changes that strengthen the rights of those involved in equity construction. The law set forth the specifics of bankruptcy for developers who attract money or other property from citizens and legal entities in order to finance construction of blocks of flats.

In order to prevent developers from abandoning their responsibility with respect to contracts concluded with construction partners, the text of which does not directly mention participation in equity construction, a provisional list has been created of transactions completed by construction partners for which an arbitration court has the power to recognise the claim of a construction partner for the transfer of a residence or a monetary claim.

As a safety measure during develop bankruptcy proceedings, arbitration courts have been given the power to prohibit the landlord from concluding a lease agreement for the land with any person other than the developer; to prohibit registering such a lease agreement with the state; and also to prohibit the landlord from otherwise disposing of the land.

The changes take effect 15.08.2011 with the exception of a point concerning the the specifics of determining the amount of liability in a developer bankruptcy, which takes effect on January 1, 2012.

14. The federal law dated 25.07.2011 that clarified the fundamental principles and conditions of handling personal information has taken effect

The changes concern the obligations of an operator when handling personal information and transferring personal information across the border, and the rights of people to access their own personal information, and more.

It was established that regulatory acts regarding certain matters of personal information handling may be adopted not only by state bodies, but also by local, autonomous bodies, and also by the Central Bank of the Russian Federation.

Operator obligations were clarified regarding the marketing of personal information and requests from a person about their own personal information. Operator obligations were also established regarding updating, blocking, and deleting this information, and safeguarding against violations of the law that are possible when handling personal information.

The law was augmented with regulations that provide for the security of personal information and the enforcement of the operator obligations set forth in the law.

15. Constant state monitoring

The federal law dated 18.07.2011, No. 242-FZ, "On the introduction of changes to certain legislative acts of the Russian Federation regarding matters of state monitoring (oversight) and municipal monitoring" has been in effect since August 1, 2011. Now legal entities and sole proprietors that operate hazardous industrial assets may be placed in a condition of constant state monitoring (oversight). This condition stipulates the constant presence of authorised officials from state agencies for monitoring (oversight) of assets with elevated hazards. It stipulates that these officials implement measures to monitor the state of safety at these assets and take measures to ensure their safety.

16. Permission will not be needed to work in the Russian Federation

Foreign nationals invited to the Russian Federation for business or humanitarian purposes to work and those who have come to teach in state universities (with the exception of religious educational institutions) do not need to obtain permission to work.

This amendment was introduced by Article 13 ("Conditions of Participation by Foreign Nationals in Labour Relations") of the federal law dated 25.07.2002, No. 115-FZ "On the Legal Status of Foreign Nationals in the Russian Federation".

According to the changes made to the federal law dated 15.08.1996, No 114-FZ "On the Method of Leaving the Russian Federation and Entering the Russian Federation", issuance of an ordinary business or humanitarian visa is provided for, for the named categories of foreign nationals.

17. Authorised capital is equated to net asset value

Changes have been made as part of an overhaul of the ways to protect the rights of creditors during a reduction in the authorised capital. Changes were also introduced in the requirements for business entities in the event that there is a disparity between the authorised capital and the net asset value.

It has been established that if the company's net asset value becomes less than its authorised capital at the end of a financial year following its second financial year (Previously, it was at the end of the second financial year) or each subsequent financial year that ends with the net asset value less than the authorised capital, then no later than six months after the end of the corresponding financial year, the company must decide to either reduce its authorised capital such that it does not exceed its net asset value or liquidate the business.

Procedures were established for publishing notifications regarding a reduction in authorised capital and for the presentation in such situations of a demand by creditors for early fulfilment of the corresponding obligations. With this, the grounds by which courts may dismiss such a demand have been defined.

Companies must include indicators in their annual reports which characterise the changes in the net asset value and the authorised capital. Also to be included are the results of an analysis of the reasons for a reduction in net asset value and a list of measures for bringing the company's net asset value back into line with its authorised capital.

A single procedure for corporations and limited liability companies has been established to evaluate net asset value and provide any interested person with information about the company's net asset value.

The changes take effect January 1, 2012.

Other regulations related to matters of information about the operations of legal entities were also established by the law. An article regulating the authority of a new federal information resource, the United Federal Registry for Information about the Operations of Legal Entities, was added to the federal law "On State Registration of Legal Entities and Sole Proprietors".

They take effect January 1, 2013.

18. The Federal Service for Financial Markets (FSFM) of the Russian Federation recommends a volatility indicator.

The criterion of a substantial deviation in the price of liquid securities was recommended for detecting signs of potential manipulation of the securities market.

For reporting the market value of securities, the FSFM of the Russian Federation has recommended using a volatility indicator, calculated using formulas given in the order, for securities that have a certain total instrument weight, which in turn is calculated using such indicators as the security's trade volume; the number of transactions with the security; the number of trading days when more than 10 transactions with this security were completed; the number of traders concluding transactions with the security; the number of unique clients of traders in whose interests transactions with the security were concluded; the number of trading days in which bids were made to purchase the security; and the number of trading days in which offers were made to sell the security.

19. The standard for capital adequacy has grown by 20 million roubles ($718K)

Since July 1, 2011, the standard for capital adequacy, which applies to companies, specialised investment funds depositories, unit funds, and private pension funds, was increased from 60 million roubles to 80 million roubles ($2.155M - $2.873M).

The standards for capital adequacy remain unchanged for securities dealers and brokers; depositories, except the previously mentioned specialised investment fund depositories and private investment funds; securities market clearing houses, securities traders, securities registries, and stock market operations.

20. The range of investment funds categories has been expanded

An additional category–long-term direct investment fund–has been added to the statute on the composition and structure of assets in shareholder investment funds and assets of unit funds, established by Order of the FSFM of Russia from December 28, 2011, No. 10-79/pz-n.

Long-term direct investment funds can only be closed unit investment funds, and their shares are intended only for qualified investors. Besides cash and Russian and foreign shares, the assets of long-term direct investment funds may specifically include stakes in the authorised capital of Russian limited liability companies, and participating securities of foreign commercial organisations.

21. Importation for the state needs of the Russian Federation

Conditions have been defined for the availability of certain goods that come from foreign states for the purpose of placing procurement orders for state and municipal needs.

The conditions of availability apply to the following goods that come from foreign states: living animals, textile goods, fur, leather and leather products, footwear, equipment and gear for radio, television, and communications, medical apparatuses, measurement devices, watches, cars, trailers and semi-trailers, and other goods.

It has been established that when placing procurement orders for these goods for state needs through a competitive bidding process that includes comparing applications to participate, which contain offers to supply said goods, the process is conducted based on the "contract price", with the price, proposed in said applications, of a state (municipal) contract or civil-law, budgetary institution contract being increased by 15%.

When placing the procurement orders for these goods for state needs through an auction, if the auction winner submitted an application to participate that offers to supply said goods, then the state (municipal) contract or civil-law, budgetary institution contract is concluded with the winner using the price offered by the auction participant, lowered by 15% of the proposed price of the state (municipal) contract or civil-law, budgetary institution contract.

It is recommended that the documentation for the competitive bidding and auction establish a requirement to indicate the country of origin for the supplied product in the corresponding bid. In the event that a bid does not indicate the country of origin for the offered product, then upon examination of the bids, the participant is not permitted to take part in the competition or auction. The participant in the placing of orders bears the responsibility for the reliability of the information indicated in a bid about the country of origin of a product.

22. Open border between Russia, Belarus, and Kazakhstan

Since July 1, 2011 inspection for customs, transportation, health quarantines, and veterinary and phytosanitary quarantines, have been cancelled at the state borders between the Russian Federation, the Republic of Belarus, and the Republic of Kazakhstan.

23. Veterinary oversight to use new rules

Rules have been established to implement state veterinary oversight at entry points on the border of the Russian Federation.

Each batch of goods included on the Unified List of Products, which appertain to veterinary monitoring (oversight), may be imported to the single customs territory of the Customs Union, given an entry permit from an authorised body or a veterinary certificate.

The adopted rules define the procedure for implementing state veterinary oversight at entry points on the border of the Russian Federation, including the procedure for customs bodies to make decisions based on document inspections at dedicated entry points; and the procedure for determining the types of goods in conformity with the unified product nomenclature of the Customs Union's foreign economic operations.

24. Join the WTO and lower our customs duties

Changes have been made to the Regulation of the Government of the Russian Federation dated December 28, 2004 No. 863, which establishes that from the date the Russian Federation joins the WTO certain customs duties will be lowered for clearing goods and transportation that are entering and leaving the Russian Federation.

It has been determined that from the date Russia joins the World Trade Organisation that the rate of customs duties for clearing goods that have a customs value of 10,000 roubles and 1 kopeck ($359) or more will be applied to an amount of 30,000 roubles ($1,077).

Prepared especially for Russian Survey
by the experts in the legal department at ICLC RS