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Russian Legal Update 12/2012

17 January 2013

1. PUBLIC ADMINISTRATION

Now Possible to Change Providers and Keep Number

Starting on 01 December 2013, mobile phone users may now keep their numbers when switching mobile phone carriers. Such transfers will be subject to payment.

Federal Law No. 253-FZ on Making Amendments to the Federal Law on Communications and Articles 333.33 and 333.34 of Part 2 of the Tax Code of the Russian Federation dated 25.12.2012

Liability for Fires for Legal Entities Introduced

Legal entities are now liable for damages caused due to breaches of fire safety resulting in fire and personal injury or death and may be fined RUB 60,000 - RUB 1,000,000 or suspended for up to 90 days.

Federal Law No. 212-FZ on Making Amendments to the Code of Administrative Offenses dated 01.12.2012

2. TAXATION

Profit Tax of Income from Use of Shareholder Property

Income received by a company through the temporary use of its shareholder's/member's property is now considered to be non-sale income and is subject to the profit tax. Under a non-paid (gratuitous) agreement, the title to such property does not transfer to the borrower. The property received does not increase the borrower company's net assets and is not reflected on its balance sheet, but rather on an off-balance sheet account.

Therefore, the company's income from the temporary use of its shareholder's/member's property which, for profit tax purposes is non-sale income may not be exempted from taxation under the grounds in article 251.1.3.4 of the Tax Code of the Russian Federation.

Letter dated 20.12.2012 No. ЕД-4-3/21753@ from the Federal Tax Service of Russia

Amendments to Articles 30 and 31 of Tax Code Take Effect

The Federal Tax Service of Russia has pointed out the amendments taking effect as of 01.01.2013 to chapters 30 and 31 of the Tax Code of the Russian Federation, according to which movable property recorded after 01 January 2013 as fixed assets is not subject to commercial property tax.

Public railroads, main pipelines, electricity lines, and structures which are an essential technical component of such properties recorded on an organization's balance sheet as fixed assets are subject to commercial property tax at the rates set in regional laws.

Restricted land plots used for defense, safety, or customs purposes are now subject to the land tax.

Information from the Federal Tax Service of Russia on Making Amendments to Articles 30 and 31 of the Tax Code of the Russian Federation

Supreme State Commercial Court Rules on Dividends Paid as Past Undistributed Profits

The Supreme State Commercial (Arbitrazh) Court of the Russian Federation has invalidated a letter from the Ministry of Finances against the use of a 0% tax rate on income from dividends paid as past undistributed profits.

Economically, net profits and undistributed profits are the same, and this means that there cannot be different tax rules depending on the reporting period in which the company decides to pay out the profits as dividends.

Supreme State Commercial (Arbitrazh) Court of the Russian Federation Decision dated 29.11.2012 No. ВАС-13840/12

3. EMPLOYMENT

New Minimum Wage

A new minimum monthly wage has been set as of 01 January 2013 as RUB 5,205. Previously, this amount was RUB 4,611.

Federal Law dated 03.12.2012 No. 232-ФЗ on Amending Article 1 of the Federal Law on the Minimum Wage

“Worker Qualifications” and “Professional Standards” Defined in Labor Code of the Russian Federation

“Worker Qualifications” have been defined as the level of knowledge, abilities, and professional skills and work experience of an employee.

“Professional Standards” have been defined as the feature of a qualification required for an employee to perform a certain type of professional activities.

The Federal Law on Technical Regulation will not apply to professional standards. In addition, certain articles in the Labor Code of the Russian Federation (e.g., on determining job duties and salary payment systems) have been added with references to provisions in professional standards.

Federal Law dated 03.12.2012 No. 236-ФЗ on Making Amendments to the Labor Code of the Russian Federation and article 1 of the Federal Law on Technical Regulation

4. BANKING

New reporting forms for lending institutions have been introduced and others have been amended.

Bank of Russia Instructions dated 03.12.2012 No. 2926-У on Making Amendments to Bank of Russia Instructions dated 12 November 2009 No. 2332-У on the Transfer, Forms, and Method for Making and Submitting Reports for Lending Institutions to the Central Bank of the Russian Federation

5. ACCOUNTING

Ministry of Finances Gives Clarifications Related to Federal Law No. 402-FZ on Accounting dated 06 December 2001 (Taking Effect on 01 January 2013)

  • The previous rules for accounting continue until new federal and industry standards are implemented
  • Primary accounting document forms in albums of unified primary document forms are not mandatory (those in federal laws remain mandatory)
  • Documents cannot be used which are false or are regarding fraudulent transactions
  • Requirements on signing by director and chief accounting of business operations with cash no longer apply
  • There are no restrictions against adding information to primary documents in addition to the information required by law
  • Register forms approved by federal executive authorities before the commencement of Federal Law No. 402-FZ are not mandatory
  • Etc.

Information from Ministry of Finances of Russia No. ПЗ-10/2012 on Commencement of Federal Law No. 402-FZ on Accounting as of 01 January 2013

6. MIGRATION

New changes to immigration and visa laws took effect as of 31 December 2012.

As a general rule, foreign citizens must have a valid work permit in order to be employed in Russia. An exception to this rule has always been those foreign citizens with permanent residence in Russia. Now, in addition, citizens with temporary residence (i.e., with a temporary residence permit) are also excluded from this rule and have the right to work in Russia without a work permit.

The regional departments of the Federal Migration Service of Russia are now also authorized to issue work permits to highly-qualified specialists, extend temporary stays in Russia for these purposes, and issue invitations for such specialists to enter Russia. Previously, only the Federal Migration Service of Russia in Moscow had such authorities.

Federal Law No. 320-FZ on Making Amendments to the Federal Law on the Legal Status of Foreign Citizens in the Russian Federation

7. COURT PRACTICE

Court Rules on Provision of Land Plot Occupied by Buildings Owned by Different Owners

Land plots on which there are buildings, structures, etc. owned by several owners cannot be provided for sole ownership to only one of the owners of such real estate. If there is an owner of real estate whose rights were not considered during the privatization of a land plot, and that owner wishes to exercise its rights given in article 36 of the Land Code of the Russian Federation to buy out a land plot, it may submit a claim to establish/recognize its right to tenancy in common of the plot regardless of whether or not the plot may be divided. The period of limitations does not apply to such claims.

Ruling No. 5361/12 by the Presidium of the Supreme State Commercial (Arbitrazh) State Court of the Russian Federation dated 02.10.2012 in Case No. А46-3074/2011

Law on Public Procurement Does Not Apply to the Sale of Real Estate

The provisions in Federal Law No. 94-FZ on Placing Orders for the Supply of Goods, Provision of Work, and/or Provision of Services for State or Municipal Needs dated 21.07.2005 does not apply to the sale and purchase of real estate. This law governs relations connected with public procurement (state, municipal, and publically-funded entities). The sale of real estate (as a type of obligation) is not given a category for state or municipal needs on which the law would have effect.

Ruling No. 5128/12 by the Presidium of the Supreme State Commercial (Arbitrazh) State Court of the Russian Federation dated 25.09.2012 in Case No. А40-8156/11-2-72