Localization.

The points system will be used to assess the extent of localization of production in Russia, in particular for welding, body painting (cab), internal combustion engine cylinder block processing  and the use of billet blocks of Russian-made cylinder blocks, and assembling / conducting control tests of automatic gearboxes, amongst others.

The cumulative points awarded for each automobile production unit will be calculated based on the actual performance of listed operations and for meeting investor / other stakeholder obligations specified in special investment contracts (SPIC). In order to obtain state support and public procurement of the specified products the total number of points for producers must steadily increase.

It is envisaged that companies in the automotive industry concluding SPICs after July 1, 2019,  should receive at least 7,000 points during any calendar year of the SPIC’s duration. This applies to the production of around 90 percent of wheeled vehicles (cars, light commercial vehicles, trucks, buses).

Source: Resolution of the Government of the Russian Federation of 05.05.2019 N 661

“On Amendments to the Annex to the Resolution of July 17, 2015 N 719”.

The Government of the Russian Federation’s Decree No. 832 of August 22, 2016 approved a list of certain types of food products originating from foreign countries, in respect to which restrictions have been established for the purposes of procurement for state and municipal needs. This Regulation applies to products such as wines, sparkling wines, liqueurs and fruit wines. The decree came into force on July 1, 2019.

Source: Resolution of the Government of the Russian Federation of 08/22/2016 N 832 “On restrictions on certain types of food products originating from foreign countries for the purposes of procurement to meet state and municipal needs.”

Law.

In May 2019, changes were made to the Federal Law “On Communications” and the Federal Law “On Information, Information Technologies and Information Protection”, under which:

  •  telecom operators are obliged to install state equipment at Internet Exchange Points within the country and communication lines crossing the border of the Russian Federation;
  • the ability to perform “centralized control” of the RUnet has been implemented;
  • traffic exchange between telecom operators is to be carried out only via Internet exchange points that have been recorded in a special register. The government are yet to inform operators on how to register the exchange points;
  • restriction of access to Internet resources prohibited in the Russian Federation has been implemented;
  • a “national domain name system” has been created.

The law comes into force on November 1, 2019.

According to official sources, the bill provides for the creation of an independent infrastructure for the smooth functioning of the Internet in Russia. It will ensure the operation of websites in the event that Russian telecom operators lose the ability to connect to foreign root servers. The bill empowers Roskomnadzor to monitor the functioning of the Internet and public communication networks in order to identify threats to its sustainability. Telecom operators who provide access to the internet are also responsible for the installation of technical means in their networks to counter such threats.

Source: Federal law of 01.05.2019 N 90-FZ “On Amendments to the Federal Law “On Communications” and the Federal Law “On Information, Information Technologies and Information Protection”.

It will now be possible to determine the share of each right holder in relation to joint exclusive rights to intellectual property and brand identities. The new bill is currently undergoing independent anti-corruption related review.

 The share of rights can be considered as equal or allocated between rights holders:

  • on the basis of a transaction (for example by agreement of the right holders);
  • by law (in particular with inheritance);
  • in court in the event of a dispute.

 Income will be distributed in proportion to shares held, although a different approach may be provided for by the agreement of the rights owners. Costs are allocated in the same way, for example, for the payment of patent or other fees.

The rights holder will be able to dispose of their share of rights at their own discretion, for example, by selling them, and other rights holders will have preemptive right to purchase. Accordingly, they will need to report such an intention to sell. If within two months from the date of giving notice other rights holders do not exercise their right to preemptive purchase, the share can be sold to third parties. In the case of transfer of a share as collateral, depositing it in the authorized capital of a legal entity or as a contribution to a simple partnership, it will be necessary to obtain the consent of the other rights holders.

The rights holder can also demand the sale of their share and pay off debt from the sale when it is not prohibited by the Civil Code of the Russian Federation. In this situation, the remaining rights owners receive purchasing priority. If they do not purchase the share, the creditor can initiate a public auction in court. In the event of a dispute, rights holders should try to solve issues between themselves, but if an agreement cannot be reached then the case may be taken to court. Thus, mandatory pre-trial procedures for resolving disputes will become relevant.

Banning exclusive rights to trademarks in cases when consumers may, as a result, be misled about the product or its manufacturer has also been proposed. It should also be noted that rights to a company name can also not be divided amongst multiple shareholders (such rights should be exclusive to one party).

Source: Draft Federal Law “On Amendments to Part Four of the Civil Code of the Russian Federation”

(prepared by the Ministry of Education and Science of Russia)

A draft law has been prepared for the purpose of legal regulation of the allocation of rights to computer programs and databases in the digital economy. The draft law, among other things, fixes the terms used in relation to computer programs and databases, and relates to the creation, processing and use of computer programs and databases, the emergence of exclusive rights thereto, and the regulation of these rights.

Source: Draft Federal Law “On Amendments to Part Four of the Civil Code of the Russian Federation” (prepared by the Ministry of Education and Science of the Russian Federation)

International taxation.

The convention is aimed at countering abuse of international double taxation agreements, as a result of which profits are artificially moved to states where it is not taxed or taxed at a reduced tax rate, which leads to significant budget losses in terms of corporate income tax.

Application of the convention has been extended to include 71 existing international agreements on the avoidance of double taxation concluded by Russia, without the need for bilateral negotiations on each agreement. 

  • it is envisaged that, from January 1, 2020, the requirement for residents to repatriate the currency of the Russian Federation regarding non-commodity exports will be abolished, as well as the phased abolition of the requirement for residents to repatriate the currency of the Russian Federation regarding commodity exports;
  • Residents (with the exception of certain categories of persons) also receive the right to open accounts, without restrictions, at banks and other financial market organizations located outside the territory of the Russian Federation;
  • it is envisaged that funds from non-residents may be credited without restriction to the accounts of resident individuals opened with banks located outside the territory of the Russian Federation, provided that such banks are located in the territory of a foreign OECD or FATF member state, and that the foreign state exercises the free exchange of financial information;
  • The requirement to submit a report on the movement of funds from an account opened with foreign banks in OECD or FATF member states participating in the exchange of financial information will be cancelled if the total amount of credited (written off) funds for such an account does not exceed 600,000 rubles in the reporting year, or an amount in foreign currency equivalent to 600,000 rubles.

Source: https://sozd.duma.gov.ru/bill/733447-7

Finance and accounting.

On 07/01/2019, changes were made to Art. 171 of the Tax Code of the Russian Federation (tax deductions). This clause is supplemented with a paragraph, according to which “input VAT” paid is deductible when purchasing goods ( or works / services) for carrying out operations realized in a location not recognized by the Russian Federation in accordance with art. 148, and, accordingly, to which VAT is not applicable. At the same time, paragraph 2 of clause 2 of article 170 of the Tax Code, which previously allowed for the inclusion of VAT in expenses, and thus reduced taxable income for operations involving the sale of works and services outside the territory of the Russian Federation, has also been edited to deprive the taxpayer of that right.

Moreover, if the goods (works, services) were acquired for both taxable and non-taxable activities, the amount of input VAT was previously subject to a proportional distribution between the taxable and non-VAT activities. Such a distribution could not be done if the share of expenses for non-taxable transactions in the organization’s total expenses did not exceed 5%. When calculating such a share from 01.07.2019, expenses related to the performance of work and services realized in locations not recognized by the Russian Federation are equal to expenses related to VAT-taxable activity. From 01.07.2019, such an allocation will need to be done only if the organization carries out operations which are exempt from VAT under art. 149 of the Tax Code of the Russian Federation.

New articles are to be added to the Tax Code of the Russian Federation on:

  • environmental tax (this tax will replace the existent fee for causing negative impacts on the environment);
  • recycling tax (introduced instead of the existing environmental and recycling fees);
  • tax for the use of federal highways (which will replace the fee for the compensation of damage caused to federal public roads by vehicles having an authorized maximum mass exceeding 12 tons);
  • tax on public network operators (new payments);
  • hotel tax (new payments).

Source: Draft Federal Law “On Amendments to Parts One and Two of the Tax Code of the Russian Federation (regarding the inclusion of certain non-tax payments to the Tax Code of the Russian Federation)” 02/04/10-18/00084496

The RF Tax Code has been amended by Federal Law of April 15, 2019 N 63-FZ.

From 2021, the tax inspectorates will inform organizations owning vehicles and land plots about calculated taxes for the past periods on the basis of information from the registering authorities (Rosreestr, traffic police, etc.).

Also, taxpayers with real estate registered with several tax authorities in different regions will be able to submit a tax return for property tax on all real estate objects to one inspection of their choice. The notification form has been approved by the Federal Tax Service of Russia.

Under the program, individuals can voluntarily declare their property, assets, as well as foreign accounts and controlled foreign companies.

At the same time, all the guarantees established earlier by the Federal Law of June 8, 2015 No. 140-FZ “On the voluntary declaration by individuals of assets and accounts (deposits) in banks and on amendments to certain legislative acts of the Russian Federation”, are retained. In particular, declarants are exempt from tax, administrative and criminal liability (in terms of responsibility for evasion of tax and customs duties, non-fulfillment of the requirements of currency regulation and currency control legislation) for property, accounts and controlled foreign companies, as well as income received in relation to them, and for transactions and deals, including those related to the formation of the property of controlled foreign companies.

Source: Federal law of 29.05.2019 N 110-FZ.

Other.

According to the draft law No. 736455-7, an employment contract will be considered concluded in the event of an exchange between the parties using electronic or other technical equipment with documents or other information that contains the terms of the employment contract agreed by the parties, so long as those terms meet the requirements of the Labor Code of the Russian Federation.

In addition, new articles will be added to the Labor Code of the Russian Federation which will contain provisions determining what constitutes a legally significant message and the moment at which the messages entail legally significant consequences, amongst others.

Estimated entry date of the law – October 1, 2019.

The draft Federal Law “On Amendments to the Labor Code of the Russian Federation (in terms of generating information about the employee’s work activities in electronic form)” proposes that the employer will create and transmit information about the employee’s work activities to the information system of the Pension Fund of the Russian Federation in electronic form starting January 1, 2020.

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