9Annex 1. An overview of important alterations in the sphere of tax regulation and civil legislation introduced in 20081
In 2008, as before, the reforming of tax legislation with the aim of its further improvement and better coordination was continued. Over the year, some alterations and amendments were introduced into nearly all the chapters of Part Two of the Tax Code of the Russian Federation. The most significant changes were as follows: the lowered rate of the profits tax; the altered procedure for the payment of the value added tax; the granting to RF subjects the right to establish differentiated tax rates for the taxpayers applying the simplified taxation system, as well as the subsequent switchover from the payment of single social tax to the payment of insurance contributions. Most of these changes have indeed improved the taxpayers' situation, while some others are directly detrimental to their situation.
Besides, some relevant alterations introduced in civil, antimonopoly, and labor legislation should also be mentioned.
1. The main alterations introduced in the RF Tax Code (Part Two and Part One) Profits tax
From 1 January 2009, the rate of the tax on profit of organizations was lowered from 24% to 20% at the expense of that part of the tax which is to be transferred to the federal budget (the sum of the tax transferred to the federal budget is diminished from 6.5% to 2.5%), which on the whole is compatible with the current global trends in taxation reforming . The sum of profit tax is defined as the percent share of the tax base corresponding to the tax rate (Item 1 Article 286 of the RF Tax Code), while the tax base is calculated by the results of a tax period (Item 1 of Article 54 of the RF Tax Code). Therefore, when paying profit tax in 2009 for the year 2008, organizations must apply the previously established rate of 24%.
The newly introduced alterations envisage a special procedure for the payment of the monthly advance payments of the tax on profit of organizations (from Q IV 2008). The calculation of the sum of the tax on profit of organizations may be based on the actual amount of
1 This section has been prepared with the aid of the legal system KonsultantPlus.
2 See the following Federal Laws: of 1.December 2008, No 225-FZ, "On introducing alterations into the Federal Law "On the Fund for promoting reforming of the housing and utilities sector" and some legislative acts of the Russian Federation"; of 26 November 2008, No 224-FZ, "On introducing alterations into Part One, Part Two of the Tax Code of the Russian Federation and some legislative acts of the Russian Federation"; of 22 July 2008, No 158-FZ, "On introducing alterations to Chapters 21, 23, 24, 25 and 26 of Part Two of the Tax Code of the Russian Federation and some other acts of the Russian Federation's legislation on taxes and levies"; of 22 July 2008, No 135-FZ, "On introducing alterations into Article 256 of Part Two of the Tax Code of the Russian Federation and on deeming to be null and void some of the provisions of the legislative acts of the Russian Federation on taxes and levies"; of 30 June 2008, No 108-FZ, "On the introduction of alterations into the Federal Law "On concession agreements" and into some legislative acts of the RussianFederation"; and of 30 April 2008, No 55-FZ, "On introducing alterations into some legislative acts of the Russian Federation in connection with the adoption of the Federal Law "On the additional insurance contributions to the funded part of labor pension and government support of the formation of pension savings".
3 See Kommentarii IEPP, T. A. Malinina, "Izmeneniia v poriadke ischisleniia naloga na pribyl' organizatsii" [Commentary of the IET, T. A. Malinina, "Alterations in the procedure of calculating the tax on profit of organizations"], http://www.iet.ru/ru/kommentarii/izmeneniya-v-poryadke-ischisleniya-naloga-na-pribyl-organizacii.html
profit4 (as a growing grand total for the period from the beginning of a tax period to the end of the month preceding the month during which the advance payment is made). If an organization decides to apply the aforesaid norm, the corresponding alteration in the procedure of calculating the advance payments of profit tax must be reflected in its accounting policy for the purposes of taxation. This innovation helps to avoid situations when advance payments of profit tax exceed the size of the ultimate tax obligation, which results in crediting the budget and withdrawal of money from a taxpayer's turnover (however, with a later set-off against the excess payment).
New wordings have been adopted for the provisions concerning the procedure for including depreciable property into specific depreciation groups, as well as for the method and procedure for charging the depreciation sums. The procedure for charging depreciation by applying non-linear method has been fundamentally changed. Depreciation is charged not to a separate fixed or intangible asset, but to an entire depreciation group (Item 1 of Article 259 of the RF Tax Code). The value of all the objects included in a given depreciation group creates its summary balance (Item 2 Article 259.2 of the RF Tax Code), which is then diminished, on a monthly basis, by the sums charged to that depreciation group (Item 4 Article 259.2 of the RF Tax Code). In this connection, for each of the depreciation groups listed in Item 5 Article 259.2 of the RF Tax Code RF its own monthly depreciation norm is established: for Group I -14.3, for Group II - 8.8, for Group III - 5.6, and so on. If the summary balance of a depreciation group becomes less than 20,000 rubles, in the next month the organization is granted the right to liquidate that depreciation group, and the amount of the summary balance is then charged to non-realization expenditures (Item 12 of Article 259.2 of the RF Tax Code). After expiration of the useful life of the property it should be excluded from the depreciation group, while the group's summary balance remains unchanged (Item 13 Article 259.2 of the RF Tax Code).
While previously it was possible to arbitrarily apply one or other method of charging depreciation for each object of depreciable property, now this possibility has been eliminated. Either linear or non-linear method should be applied to all depreciable property (paragraph 2 of Item 3 of Article 259 of the RF Tax Code); and the taxpayer must consolidate its choice in its accounting policy.
The only exception is represented by buildings, structures, transmission devices and intangible assets, which are included into Depreciation Groups VII - X (that is, items whose useful life exceeds 20 years). Depreciation for these groups is charged only by applying linear method (paragraph 1 of Item 3 of Article 259 of the RF Tax Code).
From January 2009 onwards, the size of the depreciation premium for the fixed assets with the period of use of 3 to 20 years is increased from 10 to 30%.
It is established that those organizations that applied special coefficient 0.5 to the basic depreciation norm established in respect of passenger cars and passenger vans whose initial value had been in excess of 600 000 rubles and 800 000 rubles respectively, from 1 January 2009 shall no more apply the aforesaid coefficient.
From January 2009 onwards the lessor who under a contract is obliged to compensate to the lessee the latter's capital expenditures in leased fixed assets may begin to depreciate these assets from the 1st day of the month following the month in which the property was put into
4 At present, monthly advance payments are calculated on the bssis of the results of previous periods" (Article
286 of the RF Tax Code).
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service. Now the beginning of the depreciation period is not linked to the actual payment of the compensation for such expenditures to the lessee (Item 3 of Article 259.1; Item 6 of Article 259.2 of the RF Tax Code).
The amendments to the RF Tax Code have consolidated the right of organizations to charge depreciation for fixed assets revealed during an inventory. Thus, the initial value of fixed assets revealed during an inventory is determined in accordance with Item 20 of Article 250 of the RF Tax Code, that is, as the value of excessive material and product stock and other property revealed during an inventory. In accordance with paragraph 2 of Item 2, Article 254 of the RF Tax Code, the value of both material and product stock and other property revealed during an inventory should be determined as the sum of the amount of tax paid on the income generated as a result of that property having been revealed. Consequently, the fixed assets revealed as a result of an inventory will be depreciated, and their initial value will be made up by the amount of income tax paid at the moment of their discovery.
From 2009, organization enjoy the right to charge to costs the full amount of the per diem and field allowances paid to their employees dispatched on business trips, in accordance with their actual expenses. The norms restricting these expenses have been abolished (paragraph 4, Subitem 12 of Item 1 of Article 264 of the RF Tax Code).
Taxpayers now can recognize not only their expenses incurred in connection with the training or retraining of their staff, but also those associated with their employees' education -their studies under main and supplementary professional education programs (Subitem 23, Item 1 of Article 264 of the RF Tax Code).
In accordance with the newly introduced paragraph 5 of Item 2 of Article 262 of the RF Tax Code, some types of their expenditures on research and research-and-development work, including those that yielded no results, can be recognized by organizations on a lumpsum basis, instead of being evenly distributed throughout the whole year; besides, they may apply 1.5 upward coefficient (that is, their costs will include the sum 1.5 times larger than their actually incurred expenditures). The exact list of the types of research and research-and-development work to which the new rule is going to be applied must be established by the RF Government.
When exercising their property rights (or shares, or stakes), organizations now enjoy the right to diminish their incomes from such transactions by the price paid for the acquisition of such property rights, as well as by the sum of expenditures associated with their acquisition and realization (Subitem 2.1 of Item 1 of Article 268 of the RF Tax Code). If the incomes from the realization of property rights are less than the acquisition price and related expenditures, then loss is generated. Now a reference to Subitem 2.1 of Item 1 of Article 268 of the RF Tax Code has been added, and so the loss from the realization of property rights can be recorded in the accounting documentation.
In accordance with the new amendments, the contributions paid by the employer are to be charged to labor costs, and in the aggregate sum of contributions paid for their employees under long-term life insurance contracts, voluntary pension insurance plans or private pension savings plans these are to be taken into account for the purposes of taxation in the amount of
no less that 12% of the sum of labor costs (paragraphs 1 and 7 of Item of 16 Article 255 of the RF Tax Code)5.
Lower rates of profit tax are established for those agricultural producers which have abstained from the switchover to the payment of the single agricultural tax, and remained instead subject to the general taxation regime. These rates are applied to activities associated with the sale of produced (as well as produced and processed on their own) agricultural goods. By the newly introduced alterations, the zero rate of the tax (which was to be abolished in 2008) is now extended until 2012.
Value Added Tax (VAT)6
A positive development for the organizations applying the general taxation system has become the recently introduced amendment in accordance with which, beginning from October 2008, they have the right to pay VAT in equal installments distributed over a quarter. Thus taxpayers have been granted a kind of an installment plan with regard to VAT.
Once again exempt from VAT has become the realization of scrap and waste ferrous metals (Subitem 25 of Item 2 of Article 149), as well as the import into the RF of technological equipment that has no analogues produced in the RF (Article 150 of the RF Tax Code RF).
Now VAT is no longer levied on the transactions involving the transfer of the rights to use, in the territory of Russia, inventions, practical models, industrial samples, software, databases, topologies of integral circuits, and know-how (Subitem 26 of Item 2 Article 149 of the RF Tax Code RF) Besides, the following operations have been made exempt from VAT:
- research and development works, on condition that they include the construction development of an engineering object;
- development of new technologies or creation of industrial samples for an organization's own needs;
- cession (or acquisition) of rights (or liabilities) under loan or credit agreements.
The expenditures of a taxpayer on scientific research and (or) research and development work executed in the form of deductions charged to the formation of the Russian Technological Development Fund, or to other branch-based or inter-branch funds for the financing of research and development work, registered in the procedure envisaged by the Federal Law "On science and state policy in the sphere of science and technology", are now recognized as costs for the purposes taxation within the limit of 1.5% (previously - 0.5%) of the taxpayer's income (or gross proceeds).
From 2009 onwards, a new procedure for calculating the tax base for VAT is established in respect of the realization of automobiles purchased from physical persons (who are not payers of this tax) for their subsequent resale (Articles 154 and 164 of the RF Tax Code). The
5 See also the introduction of alterations to SST and PIT. Such contributions are not levied by SST and PIT within the limit of 12,000 rubles per annum per employee (those employees for whom the contributions were paid).
6 See the following Federal Laws: of 13 October 2008, No 172-FZ, "On introducing alterations into Article 174 of Part Two of the Tax Code of the Russian Federation"; of 19 July 2007, No 195-FZ, "On introducing alterations into some legislative acts of the Russian Federation in the part of creating favorable tax conditions for the financing of innovative activity"; of 26.November 2008, No 224-FZ, "On introducing alterations into Part One, Part Two of the Tax Code of the Russian Federation and some legislative acts of the Russian Federation"; and of 4 December 2008, No 251-FZ, "On introducing alterations into Articles 154 and 164 of Part Two of the Tax Code of the Russian Federation".
tax base in such cases is to be determined as the difference between the sale price of an automobile (including tax) and the price of its acquisition for its subsequent resale. Prior to the introduction of these alterations the tax base for VAT was determined as the value of these automobiles calculated on the basis of their market prices less VAT.
One significant alteration with regard to VAT is that the buyer, after having transferred to the seller an advance payment, now enjoys the right to accept for deduction the amount of VAT charged to this advance payment, without waiting for the actual delivery of goods (or performance of works, or provision of services, or transfer of ownership rights). Relevant alterations have been introduced into Articles 168, 169, 170, 171, and 172 of the RF Tax Code.
It is no longer necessary to transfer to the seller the amount of VAT by a separate payment order when settling mutual setoffs, exchanging goods or using securities by way of settling a transaction. By Paragraph 2 of Item 4 of Article 168 of the RF Tax Code this obligation is abolished.
The amounts of VAT charged to the construction and installation works carried out for an organization's own use will be accepted by a taxpayer for deduction as of the moment of determining the tax base those construction and installation works, that is, as of the last day of each tax period or the last day of each quarter (paragraph 2 of Item 5 of Article 172; Item 10 of Article 167 of the RF Tax Code). As a result, the VAT will be charged to the payment the construction and installation works carried out for an organization's own use and these amount will be accepted for deduction during one and the same tax period, and not in different tax periods as it was previously.
Organizations and individual entrepreneurs will be deemed to be tax agents not only when leasing state and municipal property, but also in the instances of the sale (or transfer) to them of state (or municipal) property which is not consolidated to any state (or municipal) enterprises or institutions and instead belongs to the RF Sate Treasury, or to the treasury of a RF subject or a municipal formation (paragraph 2 of Item 3 of Article 161 of the RF Tax Code). In the capacity of a tax agent they will now be obliged to determine the amount of tax by an accounting method, deduct it from the sum of income and transfer the corresponding payment to the budget.
Taxpayers are now allowed to submit to tax agencies, in order to confirm their right for a VAT refund when exporting goods, special registers of customs declarations instead of customs declarations proper (Article 165 of the RF Tax Code).
If during an in-house audit of VAT declarations with sums of the tax earmarked for refund the tax inspectorate reveals certain violations of tax legislation, but without identifying any misdeeds in regard of part of the sum to be refunded, it must issue two decisions: the first one concerning the granting of a partial refund of the tax amount, and the second one - concerning the refusal to refund the remaining amount of the tax (Item 3 of Article 176 of the RF Tax Code). Thus, the taxpayer now has an opportunity for an immediate refund of the amount of VAT which is not disputed by the tax inspectorate.
Single social tax (SST)7
In accordance with of Item 1 of Article 8 of Federal Law of 30 April 2008, No 56-FZ, "On the additional insurance contributions to the funded part of labor pension and state support of the formation of pension savings", an employer is now empowered to make the decision concerning the payment of contributions from his own means for the benefit of those employees who pay additional insurance contributions. This employer's decision concerning the payment of such contributions is formalized either as a separately issued order, or is entered as a clause into a collective labor agreement or into a labor contract. In accordance with the new alterations introduced into the RF Tax Code, the contributions paid by the employer for an insured person within the limit of 12,000 rubles per annum per employee are not subject to SST (Subitem 7.1 of Item 1 of Article 238 of the RF Tax Code)
From the year 2009 the list of payments exempt from SST will be expanded. This list contains the following types of payments:
- the sums paid as fees for core and supplementary professional training programs, as well as for the professional training and retraining of employees (Item 16 of Article 238 of the RF Tax Code);
- the sums paid by organizations (or individual entrepreneurs) to their employees for the purpose of compensating for their payment of interest on the loans (or credits) taken in order to make possible the acquisition or construction of a dwelling (Item 17 of Article 238 of the RF Tax Code).
These sums will not be subject to SST if they are recorded as costs for the purposes of profits tax. These will not be taken into account, either, when calculating the amount of PIT (Items 21 and 40 of Article 217 of the RF Tax Code).
As far as the compensation of interest payments is concerned, the exemption from SST will be in effect until 1 January 2012.
It should also be noted that by Order of the RF Government of 17 November 2008, No 1663-r, the document "On main directions of the activity of the Government of the Russian Federation in the period until 2012" was approved, whereby the priority medium-term socioeconomic goals are determined. During these years, it is intended to introduce certain measures designed to further improve the tax system, in particular to achieve the switchover from SST to insurance contributions paid by type of mandatory social insurance from 1 January 2010 onwards. As a result, the burden imposed on taxpayers will be increased, because the aggregate rate of insurance contributions will amount to 34% against the currently existing SST rate of 26%.
7 See the following Federal Laws: of 22 July 2008, No 158-FZ, "On introducing alterations into Chapters 21, 23, 24, 25 and 26 of Part Two of the Tax Code of the Russian Federation and some other acts of the Russian Federation's legislation on taxes and levies"; and of 30 April 2008, No 55-FZ, "On introducing alterations into some legislative acts of the Russian Federation in connection with the adoption of the Federal Law "On the additional insurance contributions to the funded part of labor pension and government support of the formation of pension savings".
Personal Income Tax (PIT)8
Some alterations have also been introduced in Article 218 of the RF Tax Code, which is concerned with standard per child deductions from the amount of tax. Thus, the amount of this deduction has been increased from 600 to 1,000 rubles, while the upper margin of a taxpayer's annual income for the granting of such a deduction has been raised from 40,000 to 280,000 rubles. The list of persons entitled to this standard deduction from tax now included the spouse of a foster parent.
It is envisaged that under an agreement concluded between the parents (or foster parents), for one of them the amount of this standard deduction from tax can be doubled, while to the other no such deduction will be granted. To do this, one of the parents must submit an application concerning his or her refusal to be granted the deduction from tax.
The deduction in the amount of 400 rubles per month is granted to employees from the beginning of year 2009 and until their annual income exceeds the sum of 40,000 rubles, instead of the previously established upper margin of 20,000 rubles (Subitem 3 of Item 1 of Article 218 of the RF Tax Code).
The size of the property-linked deduction from PIT in an event of purchase (or construction) of a dwelling is increased from 1 million rubles to 2 million rubles (Article 220 of the RF Tax Code). This alteration applies to those citizens who purchase (or construct) a dwelling after 1 January 2008.
The maximum deduction from tax for education and medical care has also been changed (Article 219 of the RF Tax Code). Its amount has been increased to 100,000 rubles. The same margin is envisaged for the new type of social deduction, which is equal to the sum of pension contributions paid under agreements of private pension provision and voluntary pension insurance.
A separate note should be made of the contributions to co-finance pension savings, as well as the contributions paid by employers for the benefit of their insured employees. Additional insurance contributions can be paid by a physical person either independently or through his or her employer9. The employer, on receiving an application concerning the payment of additional contributions from an employee, must send this application, within three workdays, to the territorial agency of the RF Pension Fund at the place of its registration as an insurer, and then from the first day of the month following the month in which the application was received it must withhold and transfer these additional contributions. The citizens paying these additional contributions are entitled to state support for 10 years in the form of addi-
8 See the following Federal Laws: of 26 November 2008, No 224-FZ, "On introducing alterations into Part One, Part Two of the Tax Code of the Russian Federation and some legislative acts of the Russian Federation"; of 1 December 2008, No 225-FZ, "On introducing alterations into the Federal Law "On the Fund for Promoting Reforming of the Housing and Utilities Sector" and some legislative acts of the Russian Federation"; of 22 July 2008, No 121-FZ, "On introducing alterations into Article 218 of Part Two of the Tax Code of the Russian Federation"; of 22 July 2008, No 158-FZ, "On introducing alterations into Chapters 21, 23, 24, 25 and 26 of Part Two of the Tax Code of the Russian Federation and some other acts of the Russian Federation's legislation on taxes and levies"; and of 30 April 2008, No 55-FZ, "On introducing alterations into some legislative acts of the Russian Federation in connection with the adoption of the Federal Law "On the additional insurance contributions to the funded part of labor pension and government support of the formation of pension savings".
9 See Federal Law of 30 April 2008, No 56-FZ, "On the additional insurance contributions to the funded part of labor pension and government support of the formation of pension savings".
tional payments from the federal budget to cover their amount, but not in excess of 12,000 rubles per annum.
For the purpose of PIT, the following sums will not be deemed to be part of an employee's income:
- those paid within the framework of state support for the contributions to co-finance the formation of pension savings (Item 38 of Article 217 of the RF Tax Code);
- the contributions paid by the employer in amounts not exceeding 12,000 rubles per annum per employee, estimated by the number of employees for whom such contribution have been paid (Item 39 of Article 217 of the RF Tax Code).
The sum of the additional insurance contributions paid by a physical person in the amount of the actually incurred expenditures on the funded part of labor pension is included in the deduction of social tax charged to PIT (Subitem 5 of Item 1 of Article 219 of the RF Tax Code). In this connection, the upper margin for the social tax deduction is increased from 100,000 to 120,000 rubles (Item 2 of Article 219 of the RF Tax Code). In order to be granted the right to deduction, a physical person has to submit either the documents confirming the actual payment of the additional contributions, or a statement issued by a tax agent concerning the withheld and transferred contributions.
Besides, PIT will not be levied on:
- the sums paid as fees for a physical person's core and supplementary universal and professional training programs, as well as for his or her professional training and retraining at Russian educational establishments holding corresponding licenses or at foreign educational establishments of corresponding status (Item 21 of Article 217 of the RF Tax Code);
- the sums paid by organizations (or individual entrepreneurs) to their employees in order to compensate for their payment of interest on the loans (or credits) taken in order to make possible the acquisition or construction of a dwelling, which are included in costs for the purposes of profits tax (Item 40 of Article 217 of the RF Tax Code).
It should be noted that, as far as training fees are concerned, for the purposes of PIT it is irrelevant whether the amount of these fees is recorded as part of costs with regard to profits tax or not.
TT • 10 Excises
From January 2008, Chapter 22 of the RF Tax Code was effective in the wording as established by Law of 16 May 2007, No 75-FZ, whereby a new procedure has been introduced for establishing the rates of excises, which were to be approved for the next three years, and Article 193 of the RF Tax Code was supplemented by a corresponding table of excise rates.
The rates for the year 2009 have been changed as follows. The rates of excise on beverages containing ethyl alcohol have been raised, by comparison with their planned level, for all products with per cent volume of ethyl alcohol over 9% and with per cent volume of ethyl alcohol up to 9% inclusive. The rates of excises on natural wines and beers were increased; however, the newly established rates for champagnes and sparkling, carbonated and prickling wines are slightly lower than planned (10.5% - in 2009, and 11.5% - in 2010).
The rates of excises on tobacco products have also been changed: thus, for cigarillos, filter-tipped cigarettes, filter - tipless cigarettes, and cigarettes with cardboard mouthpieces the
10 See Federal Law of 22 July 2008, No 142-FZ, "On introducing alterations into Chapter 22 of Part Two of the
Tax Code of the Russian Federation".
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previously established have already been raised from 2009 onwards, while the rates for tobacco and cigars are still applied as established by the wording of Law of 16 May 2007, No 75-FZ, but from the year 2011 these will also be raised.
The rates of excise established for the years 2009 and 2010 for passenger cars with engine capacity of above 67.5 kW have been raised, as well as the rates for straight-run petrol; the rates of excise on motor oils will remain unchanged only until the year 2010 inclusive - in 2011 it will also be raised.
Significant alterations can be expected by the taxpayers engaged in the sale of car petrol and diesel fuel. These excisable goods are separated in the list of rates into a separate table. The rates currently established for the years 2009 and 2010 will remain unchanged, whilst from the year 2011 onwards a new system for levying excises on these types of fuel will be introduced - the rates of excises on petrol as well as on diesel fuel will be directly dependent on their belonging to a certain class. The classes of fuels will be determined in accordance with a technical regulation to be established by the RF Government.
The rule has been established that, if as a result of mixing excisable products an item is obtained for which a lower rate of excise is established, the excise is not paid altogether. In accordance with the alterations introduced into Item 3 of Article 182 of the RF Tax Code and coming into force from the year 2009 onwards, the production of excisable goods by mixing products at the place of their storage and sale is recognized as production process only if as a result of this mixing an item is obtained for which in accordance with Article 193 of the RF Tax Code a higher rate of excise is established than that for the products used as raw materials. That is, if such mixing yields excisable goods, the rate of excise for which is lower than the rate established for the products used as raw materials, the organization in question is deemed not to be the producer of excisable goods, and therefore it is not obliged to charge and pay excise to the state budget.
The notion of 'brand of tobacco product' has been defined more precisely (Article 187.1 of the RF Tax Code). Now brand (or brand name) is understood as the position of a tobacco product in the assortment of other products which is different from other brands by one or several of the following features: an individual mark (or name) given to it by its manufacturer or license-holder; recipe; size; presence or absence of a filter tip; and packaging. That is, if any such item has at least one of the afore-listed distinctive features, it can be deemed to be a separate brand of tobacco products. This alteration now makes it possible for a manufacturer to establish different upper margins of retail prices of cigarettes ( or cigars, or cigarettes with cardboard mouthpieces) bearing one and the same name and characteristics, but displaying slight distinctions (for example, in their packaging).
Special tax regimes11
Under the general rule, the taxpayers who apply the simplified system of taxation (SST) enjoy the right of making choice between two objects of taxation: total income (with the rate of tax being 6%), or income less expenditures (with the rate of tax being 15%). Previously, the object taxation could not be changed by a taxpayer for 3 years from the beginning of using SST (Article 346.14 of the RF Tax Code RF). Now the payers of tax under the SST are granted the right to switchover, on an annual basis and from the beginning of a new tax period, from their previously chosen object of taxation - on condition that they duly notify thereof tax agencies before 20 December of the year preceding the year in which this switchover is to take place. No switchover from one object of taxation to another is allowed during a tax period. Since it is established that this norm is to be applied to the legal relations that have arisen from 1 January 2008, the taxpayers who operate under the SST and are willing to switchover from their former object of taxation for the year 2009 may inform thereof their tax inspectorate as early as 2008. If an organization applying general taxation regime decides to switchover to SST from the next year onwards, it must submit an application to this effect to its tax inspectorate prior to 30 November of a current year.
In order to decrease the tax burden in the existing economic situation, Article 346.20 of the RF Tax Code RF, whereby the tax rate is established at 15%, in an event of the object of taxation being incomes less costs, is augmented by a clause that the laws adopted by subjects of the Russian Federation may introduce differential tax rates within the range of 5 to 15%, depending on taxpayer category. On the one hand, this decision may be regarded as favorable for taxpayers, since such a measure on the part of a RF subject will mean real support in terms of relieving tax burden. On the other, it raises the issue of fair play, since if the lowering of the rate of tax (or the introduction of differential rates) is made to be dependent on taxpayer category, this enables RF subjects to lower it only for some specific categories of taxpayers (which may, for example, be affiliated to regional authorities, or the authorities may have a vested interest in their activity). We believe that it would be necessary, if such a decision is indeed to be taken, that RF subjects should lower the rate of tax simultaneously for all the categories of taxpayers operating under the SST applying as the object of taxation their incomes less costs.
From the new year onwards, the taxpayers operating under the SST and applying "incomes less costs" as their object of taxation are allowed to increase their costs when estimating their taxable base, that is, to write off their per diem allowances on the basis of their actual expenses, without any limits (the norms having been abolished, Article 346.16 of the RF Tax Code); to recognize as costs their mandatory insurance of responsibility (Article 346.16 of the RF Tax Code); to charge to costs their raw materials on the basis of their actual payments for them (the requirement of writing them off to production has been abolished, Article 346.17 of the RF Tax Code); and to diminish the tax base when carrying forward the losses of previous
11 See the following Federal Laws: of 26 November 2008, No 224-FZ "On introducing alterations into Part One, Part Two of the Tax Code of the Russian Federation and some legislative acts of the Russian Federation"; of 24 November 2008, No 208-FZ, "On introducing alterations into Article 346.14 of Part Two of the Tax Code of the Russian Federation"; of 22 July 2008, No 155-FZ, "On introducing alterations into Part Two of the Tax Code of the Russian Federation"; No 158-FZ "On introducing alterations into Chapters 21, 23, 24, 25 and 26 of Part Two of the Tax Code of the Russian Federation and some other acts of the Russian Federation's legislation on taxes and levies". 562
tax periods without any limitations (the 30% limit having been abolished, Article 346.18 of the RF Tax Code). The procedure for carrying forward losses by taxpayers operating under the SST is approximated to a similar procedure applied by the payers of the tax on profit of organizations: now the losses incurred in previous periods can be applied in full in order to diminish the tax base.
Certain alterations have been introduced into Item 2 of Article 346.11 and Item 1.1 of Article 346.15 of the RF Tax Code: the organizations operating under the SST are recognized as payers of profits tax in respect of their received dividends.
The submitting of reports has been made much simpler (Article 346.23 of the RF Tax Code). From January 2009, it is no longer necessary to submit on a quarterly basis the tax declarations for the tax paid under the SST. From now on, the taxpayers under the SST will sub-
12
mit only one tax declaration by the results of a tax period (a year)12. In this connection, it should be noted that advance payments are paid by the results of reporting period in the same procedure as before.
Significant alterations were introduced to Article 346.25.1 of the RF Tax Code which regulates the procedure for applying the SST by individual entrepreneurs on the basis of a patent, whereby the sphere of its application has been made much broader.
Taxpayers are now allowed to simultaneously engage in several types of entrepreneurial activity instead of only one type, as it used to be previously, and to involve their employees in such activities. Thus, one can point to the emergence on the market of independent subjects of small entrepreneurship (with no more than 5 fully occupied employees during each tax period). Besides, the already listed 61 types of patented activities are augmented by the following ones:
- public catering services;
- services associated with the processing of agricultural produce, including the manufacturing of meat, fish and dairy products, bakery, vegetable, fruit and berry products, finished and half-finished products made of linen, cotton, hemp and timber (with the exception of shaped timber);
- services associated with sales of agricultural products (storage, grading, drying, packing and transportation);
- the rendering of services associated with the servicing of agricultural production (mechanical, agrochemical, amelioration, and transport works);
- grazing of cattle;
- running hunting businesses and hunting;
- private medical practice or pharmaceutical activity carried out by holders of licensees to these types of activity;
- private detective services rendered by persons - holders of corresponding licenses.
From 2009 onwards a patent can be taken for any number of months in a year (from 1 to
12, instead of the previously established periods of 3, 6, 9 and 12 months). Besides, from 1 January 2009, the legislative bodies of RF subjects have been excluded from the. list of subjects vested with the right to regulate the application of this special tax regime. Item 12 of Article 346.25.1 of the RF Tax Code has been augmented by a clause to the effect that the tax-
12 This alteration is concerned not only with the single tax payable in accordance with the application of the simplified taxation regime (Article 346.23 of the RF Tax Code), but also the transport tax (Article 363.1 of the RF Tax Code) and the land tax (Article 398 of the RF Tax Code).
payers operating under the SST on the basis of a patent are obliged only to keep tax records of their incomes.
It is also worthwhile to note the alterations introduced into the chapter on the single tax on presumptive income (STPI).
Organizations and individual entrepreneurs alike are not allowed. from the year 2009 onwards, to apply STPI if the number of their staff over the preceding calendar year has exceeded 100 (Subitem 1 of Item 2.2 of Article 346.26 of the RF Tax Code); an organization cannot apply STPI if the share in its charter capital belonging to other juridical persons is more than 25% (Subitem 2 of Item 2.2 Article 346.26 of the RF Tax Code RF). It should be noted that the restriction imposed on the participation in the charter capital of an organization does not apply to those taxpayers whose charter capital is composed entirely of the contributions of non-governmental associations of the disabled, consumer co-op organizations, and those enterprises whose sole founder is a consumer co-op organization.
The list of the types of activity for which a switchover to STPI is allowed has been shortened (Subitems 4 and 5 of Item 2.2 Article 346.26, paragraph 7 of Article 346.27 of the RF Tax Code). No switchover to STPI is allowed for the following entities:
- the organizations belonging to the spheres of public education, health care and social security - in the part of their entrepreneurial activity relating to the rendering of public catering services (Subitem 8 of Item 2 Article 346.26 of the RF Tax Code). In this connection it is stipulated that these public catering services must constitute an unalienable component of their operation and to be rendered directly by those organizations (Subitem 4 of Item 2.2 of Article 346.26 of the RF Tax Code);
- organizations and individual entrepreneurs providing services relating to leasing- out petrol filling stations and compressed natural gas filling stations (Subitem 5 of Item 2.2 Article 346.26 of the RF Tax Code RF);
- services relating to the manufacturing of furniture and construction of private houses (paragraph 7 of Article 346.27 of the RF Tax Code).
Some alterations have been introduced in the dominions of the types of activity that could previously be switched over to the STPI regime. Thus, for example, the rendering of public catering services in premises with the size of the customer area less than 150 sq m by educational establishments, health care and social security organizations will become subject to STPI - however, on one condition: that such. services cannot constitute an unalienable component of their operation.
STPI will be applied by taxpayers engaged in the distribution of outdoor advertising involving the use of special installations and the placement of advertising media on transport vehicles u (Subitem 10 u 11 of Item 2 Article 346.26 of the RF Tax Code RF).
From 1 January 2009 the norm previously stipulated in paragraph 3 of Item 6 of Article 346.29 of the RF Tax Code, whereby taxpayers were granted the right to adjust on their own, for purposes of keeping their accounting records, the value of the coefficient K2 applied to the actual period of their entrepreneurial activity, has been abolished. Thus, the payers of STPI, when determining the tax base, can no more enter in their records the actual period during which they engage in their entrepreneurial activity over a given tax period.
It has been specified that the annually established value of the deflator coefficient K1 must be calculated by multiplying the coefficient applied in a previous year by the coefficient describing the fluctuations of the consumer prices of goods (or works, or services) recorded in
the Russian Federation over a previous calendar year (paragraph 5 of Article 346.27 of the RF Tax Code). Presently the deflator coefficient reflects only the fluctuations of the consumer prices of goods (or works, or services) over a previous year.
The realization of goods or products through vending machines belongs to the sphere of retail trade (paragraph 12 of Article 346.27 of the RF Tax Code).
For the purposes of applying STPI, the values of physical indices are to be rounded off, and the values of price indices are to be expressed in full rubles. The values of price indices which are less than 50 kopecks (0.5 unit) are to be rounded down, and those amounting to 50 kopecks (0,5 unit) or more are to be rounded up to a full ruble (or whole unit) (Item 11 of Article 346.29 of the RF Tax Code).
With regard to certain specific types of activity a taxpayer must register not at the place of actual operation but at the place of an organization's location or the place of residence of an individual entrepreneur (paragraph 3 of Item 2 of Article 346.28 of the RF Tax Code).
Some alterations aimed at further improving tax administration13
The procedure for conducting in-house tax audits. In accordance with Item 2 of Article 88 of the RF Tax Code (in the wording existing prior to 1 January 2009), an in-house tax audit was to be conducted within 3 months from the date of submitting a declaration and the u documents attached to it. Such a definition made it impossible to determine precisely as to which moment was to be applied as the starting point for auditing - the date of submitting the declaration or the date of submitting the attached documents. From 2009 this problem had been removed: now, an in-house audit is to be conducted within 3 months from the date of submitting, by a taxpayer, a tax declaration (or a tax estimation).
It has also been specified that, if during an audit a taxpayer submits an adjusted declaration, the auditing of the previously submitted declaration is terminated, and a new in-house audit of the adjusted version of the declaration is started instead (Item 9.1 of Article 88 of the RF Tax Code). Thus, in such a situation the three-month period established for conducting an in-house audit starts from the moment of submitting an adjusted declaration (Item 2 of Article 88 of the RF Tax Code).
Prior to the year 2009, Article 100 of the RF Tax Code contained no indication of the period during which the act of a act tax audit was to be delivered to a taxpayer. The addition introduced into Item 5 of Article 100 of the RF Tax Code explains that this act should be delivered to the person in respect of whom an audit has been conducted - or to that person's attorney - within 5 days from the date of it being drawn up. These rules are applied when formalizing the results of both on-site and in-house tax audits. A 5-day period (from the date of it being drawn up) is also established for the delivery of a tax inspectorate's decision concerning the bringing of a taxpayer to tax responsibility (or a refusal to resort to this measure) (an alteration to this effect is introduced into Item 9 of Article 101 of the RF Tax Code).
A procedure for pre-judicial settling of disputes has been introduced. At present a taxpayer, if it disagrees with the decision of a tax agency concerning the results of an audit, is
13 See the following Federal Law: of 27.July 2006, No 137-FZ, "On introducing alterations into Part One, Part Two of the Tax Code of the Russian Federation and some legislative acts of the Russian Federation in connection with the implementation of measures designed to improve tax administration"; of 26 November 2008, No 224-FZ, "On introducing alterations into Part One, Part Two of the Tax Code of the Russian Federation and some legislative acts of the Russian Federation".
endowed with the right to choose on its own the procedure in accordance with which such a decision can be disputed (that is, the decision to bring the taxpayer to responsibility for having committed a tax violation, or the decision concerning a refusal to resort to this measure). In accordance with Article 138 of the RF Tax Code, a taxpayer has the right either to apply to the tax agency of a higher level, or directly to a court of justice. From the beginning of the year 2009, the amendment to Article 101.2 of the RF Tax Code came into force, whereby it is established that an appeal to a court of justice against the decision made by a tax agency must necessarily be preceded by an appeal to the tax agency of a higher levels. Thus, taxpayers can no longer enjoy the right to settle their disputes with tax inspectorates directly through judicial agencies - instead, they must first undergo the procedure of pre-judicial regulation of a dispute. This means that, from January 2009 onwards, the procedure of a taxpayer's defending its interests will take al least as long as one month, due to the pre-judicial procedure14. We believe that this norm will worsen the position of a taxpayer, because it eliminates the possibility of choice, increases the volume of documentation and envisaged a longer period of time.
Some alterations and additions were introduced into Articles 63 and 64 of the RF Tax Cod; besides, the Code was augmented by new Article 64.1, which envisages a special procedure for delayed payment (payment in installments) of federal taxes. The essential meaning of these alterations is that now the RF Minister of Finance is endowed with the right to make a decision concerning the granting of delays of up to 5 years with regard to the payment of federal taxes, penalties and fines, as well as concerning the alterations in the timelines for the payment of federal taxes by organizations whose outstanding debt is over 10 billion rubles. The organizations applying for a delayed payment or an installment plan, must submit a number of documents: a statement by a tax agency concerning the situation with the settling of tax, penalty and fine payments; the suggested schedule for the payment of the outstanding debt; the documents and other information necessary to prove the existence of a threat of unfavorable socioeconomic consequences in an event of the outstanding debt being settled as a lump-sum payment; and the written consent of the organization to the disclosure of the information classified as a tax secret in connection with the consideration of the application submitted by the organization. In this connection, interest in charged to the sum of outstanding debt in respect of which it has been decided that the payment should be delayed or an installment plan should be applied - at a rate amounting to half of the rate of refinancing established by the RF Central Bank for the period over which the payment is to be delayed or installment plan applied. The delayed payment or installment plan can be granted without providing the methods for their backing. .
Besides, certain alterations were introduced into the existing procedure of arresting bank accounts, which are also in effect from 1 January 2009. Now tax agencies enjoy the right to arrest a bank account not only in an event of underpaid taxes, but also if there exists an outstanding debt with regard to penalties and fines. In this connection, tax agencies are obliged to
14 The procedure for the consideration, by tax agencies, of taxpayers' complaints is established in the Regulation for the Consideration of Tax Disputes, approved by Order of the RF Ministry of Taxes and Levies of 17 August 2001, No BG-3-14/290. A tax agency must consider a complaint submitted to it within one calendar month from the date of its receipt (Paragraph 2.1 of Article 2 of the Order). However, this period can be extended by the tax agency's decision for another 15 days in order to acquire the documents necessary for considering the complaint, or relevant information from a tax inspectorate (Item 3 of Article 140 of the RF Tax Code). The taxpayer must be notified concerning the adopted decision within 3 days. 566
abolish their decision concerning the suspension of operations on an account during one workday (and not one operating day) from the moment of resolving a conflict situation. In addition, a tax agency will now be charged interest for its failure to lift the arrest of an account in due time, or for its failure to notify its owner concerning this act (this rule will come into force from 2010).
The list of the grounds for granting an investment tax credit is augmented by an instance of an organization fulfilling a government defense order. The procedure for suspending the operations on a taxpayer's bank accounts and for conducting tax audits has been defined more precisely. It is forbidden to use evidence obtained as a result of violation of the RF Tax Code.
2. Some alterations introduced in the sphere of civil, antimonopoly, and labor legislation
Autonomous institutions
From 2007, Federal Law of 3 November 2006, No 174-FZ, "On autonomous institutions" came into force, whereby a new type of a state (or municipal) institution - an autonomous institution - was established.
It should be reminded that an autonomous institution (AI) is to be recognized as a not-for-profit organization created by the Russian Federation, or by its subject, or by a municipal formation15 for the purpose of carrying out works or rendering services in order to execute the powers granted to the bodies of state authority and local self-government in the spheres of science, education, public health care, culture, social security, employment, physical culture and sports. An autonomous institution is a juridical person and may, in its own name, acquire and execute ownership rights and personal non-ownership rights, bear responsibilities, and act as a plaintiff or a defender in a court of justice.
In order to ensure the practical implementation of the Law "On autonomous institutions", it was necessary to adopt a number of subordinate acts, which regulate the following issues:
- the procedure for considering the proposals concerning the creation of federal autonomous institutions through altering the type of an already existing state institution;
- the proposal form relevant for the creation of an autonomous institution through altering the type of an already existing state or municipal institution;
- the procedure for determining the types of especially valuable movable property of autonomous institutions;
- the list of institutions which, in accordance with their type, are not subject to such alteration;
- the terms and procedure for formulating, by the founder, of an assignment for an autonomous institution, and the procedure for providing financial backing to the execution of that assignment by the autonomous institution;
- the procedure for publishing the reports on the activity of an autonomous institution and on the use of property consolidated to it;
15 The joint foundation of autonomous institutions (including by different bodies of authority or local self-government) is not allowed.
- the procedure for performing the functions and executing the powers of the founder of an autonomous institution by bodies of executive authority in respect of autonomous institutions.
These issues are to be regulated by the bodies of federal, regional and municipal authority for the institutions in their jurisdiction.
Nearly all the aforesaid subordinate acts on the federal level were adopted in 2007. Let us consider the only document adopted in order to further develop the provisions of the Law "On autonomous institutions" in 2008, that is the document "On the terms and procedure for formulating a founder's assignment in respect of an autonomous institution created on the basis of property in federal ownership and the procedure for providing financial backing for the fulfillment of that assignment" put into effect by Decree of the RF Government of 18 March 2008, No 182.
The assignment is compulsory for a federal autonomous institution.
The founder establishes in the assignment relevant requirements as to the quality and (or) volume (or content), conditions, procedure and results of the services rendered or works carried out by a federal autonomous institution in order to ensure the execution, by federal bodies of executive authority, as envisaged by legislation of the Russian Federation, of their powers in the spheres of public education, health care, culture, social protection, employment, physical culture, and other spheres, with due regard to the existing demand for such state services; as well as determines the procedure for exercising control over the fulfillment of the assignment, including the terms and procedure for an early termination of the assignment.
The assignment consists of the following documents:
a) an extract from the register of spending obligations concerning those spending obligations the fulfillment of which is necessary for carrying out an assignment;
b) the list of categories of the consumers of services provided within the framework of an assignment, with separation of those consumer categories that enjoy the right to free-of-charge services and (or) partial payment for the services rendered to them, as well as the planned number of the consumers of these services (if the assignment's character envisages the possibility of planning the number of consumers);
c) the indices denoting the quality and (or) volume (or composition) of the services rendered by a federal autonomous institution for the next financial year within the planning period for which a certain assignment is issued (if possible - estimated per capita within each consumer category), the methodology for calculating the values of these indices, the requirements to the qualifications and experience of the personnel providing such services, the requirements to the material and technical backing, and the actual procedure of rendering the services with the reference to the legal act whereby the specific requirements to the quality of services are established (if such an act indeed exists);
d) the procedure for the rendering of services to physical and (or) juridical persons, with the reference to the regulation or another document whereby that procedure is established. In an event of absence of such a regulation or (another document), the following papers should be attached:
the description of main procedures for the rendering of services by a federal autonomous institution;
the procedure for informing of potential consumers as to the rendering of specific services;
the list of the grounds for suspending the rendering of services or for a refusal to render services;
e) the upper threshold for the prices (or tariffs) of specific services established for physical and (or) juridical persons (if by legislation of the Russian Federation it is envisaged that the corresponding works (or services) should be performed on a commercial basis), or the procedure for establishing these prices or tariffs;
f) the procedure for exercising control over the fulfillment of an assignment, as well as the conditions for and the procedure for its early termination;
g) the requirements to the reporting to be submitted by a federal autonomous institution concerning the fulfillment of an assignment (including the form of the report concerning the fulfillment of an assignment and the schedule for submitting such reports);
h) the timelines for the fulfillment of an assignment;
j) the procedure for altering an assignment.
Assignments are issued in accordance with the main activity of a federal autonomous institution as envisaged by its charter, and with due regard for the following circumstances:
a) the proposals submitted by a federal autonomous institution concerning the existing demand for relevant services, estimated on the basis of forecasted changes in the quality of specific consumer services, the level of satisfaction with the volume and quality of the services currently being rendered, and the capacity of a given federal autonomous institution to render such services;
b) immovable property or especially valuable movable property consolidated to a federal autonomous institution by its founder, or acquired by that autonomous institution at the expense of the funding issued to it by its founder for the purpose of acquisition of such property, for the upkeep of which no financial backing is provided by the founder, which has been leased out with the consent of its founder;
c) the indices for the fulfillment, by a federal autonomous institution, of the assignment issued to it in a given reporting financial year;
d) the volumes of budget allocations and the limits imposed on budget obligations, of which the founder of a federal autonomous institution has been duly informed in the established procedure.
It should be reminded that the list of budget allocations that may be earmarked for the transfer to a budget-funded institution is strictly limited (Article 70 of the RF Budget Code); by contrast, no such list is established for autonomous institutions, and so such allocations are earmarked by its founder when granting corresponding subsidies to it from the budget when forming a specific assignment.
Thus, financial backing for the fulfillment of an assignment is provided by means of budget allocations earmarked for a given federal autonomous institution:
a) subsidies designed to compensate for the standard costs of rendering services to physical and (or) juridical persons;
b) subsidies designed to compensate for the standard costs of the upkeep of immovable property and especially valuable movable property consolidated to a federal autonomous institution by its founder, or acquired by a federal autonomous institution at the expense of the funding issued to it by its founder for the purpose of acquisition of such property (with the exception of property leased out with the consent of its founder), as well as subsidies earmarked
for the payment of tax levied on relevant property recognized as the object of taxation, including land plots.
Besides, it is established in addition that to a federal autonomous institution created as a result of altering the type of an already existing federal state institution, within the period of 3 years since the date of its creation, a subsidy should be granted from the federal budget for the purpose of equalizing the amount of financial backing for the fulfillment of the assignment issued to that federal autonomous institution by its founder. In particular, the size of subsidy for such autonomous institutions is to be determined as the difference between the amount of budget allocations granted to a budget-funded institution for the period of a current year and the planning period and the size of subsidy designed to compensate for the standard costs of the rendering of services by the autonomous institution and for the standard costs of the upkeep of the corresponding immovable property and especially valuable movable property.
By the same Decree the RF Ministry of Economic Development and Trade was also delegated with the task to approve, in coordination with the RF Ministry of Finance, the methodological recommendations for calculating the standard costs of the upkeep of immovable property and especially valuable movable property consolidated to an autonomous institution created on the basis of property in federal ownership (hereinafter - federal autonomous institution) by its founder, or property acquired by a federal autonomous institution at the expense of the funds allocated to it by its founder for the acquisition of such property (with the exception of property leased out with the consent of its founder), as well as for the payment of taxes levied on relevant property recognized as the corresponding object of taxation, including land plots. In this connection, it is prescribed to federal bodies of executive authority performing the functions and executing the powers of the founder of a federal autonomous institution, to develop and approve, in coordination with the RF Ministry of Finance, the standard costs of the upkeep of property consolidated to an autonomous institution.
Besides, by this Decree it is also established that the size of standard costs of the fulfillment of an assignment is to be estimated by the founder on the basis of the approved standard costs of the rendering of services to physical and (or) juridical persons within the framework of an assignment, as well as the standard costs of the upkeep of the corresponding immovable property and especially valuable movable property and the payment of taxes, except in the cases established by acts issued by the RF President and the RF Government.
Subsidies are to be transferred, in the established procedure, to an account opened for the federal autonomous institution at a credit institution.
The granting of such subsidies to a federal autonomous institution during a financial year is effectuated on the basis of agreements concluded between the founder and the federal autonomous institution concerning the procedure and conditions for the granting of special privileges. The founder may amend and make more precise the wording of such an agreement with due regard for a given sector's specific features. The schedule for the transfer of subsidies during a financial year, as well as their size, are to be determined by the aforesaid agreement.
Thus, legislation grants to the relevant bodies of executive authority the powers necessary for determining the standard costs incurred by an autonomous institution in accordance with the two types of subsidies allocated to them, while the estimation of such standards is also associated with the need to develop the corresponding methodological base.
Neither the Law "On autonomous institutions" not this Decree contain any stipulations as to whether the activity of an autonomous institution within an assignment should be profitable or not. Evidently, these issues will be dealt with at the time of developing the founders' assignment and establishing the tariffs on the services being rendered within the framework of these assignments.
Improvement of legislation aimed at protecting competition
By Federal Law of 8 November 2008, No 195-FZ, "On the introduction of alterations in Federal Law"On the protection of competition" certain alterations were introduced in order to lift some of the restrictions established with regard to transactions with state and municipal property, as well as with property of commercial organization; besides, this law abolished some of the obligations of credit institutions established within the framework of antimonopoly control over their activity. The powers of the antimonopoly body concerning the consideration by it of the petitions filed by economic subjects, as envisaged by the Law 'On the protection of competition', were thus defined more precisely.
The regulation of transactions with state and municipal property.
In accordance with the Law "On the protection of competition", the conclusion of contracts of lease, non-reimbursable use, trust management, or other contracts envisaging the transfer of the rights of ownership and (or) use in respect of state or municipal property may be effectuated only on the basis of the results of contests or auctions for the right to conclude such a contract. No compliance with that procedure in respect of state or municipal property which is not consolidated by the right of economic jurisdiction or operative management is required in those cases when the aforesaid rights to property are granted on the basis of acts issued by the RF President or the RF Government, court rulings, or Federal Laws whereby another procedure for the disposal of that property is established.
The Law has been augmented by this list of exclusive cases, and so no contests or auctions for the right to conclude contracts envisaging the transfer of the rights of ownership and (or) use in respect of state or municipal property are required in the following instances: when such rights are transferred on the basis of international treaties; or to state bodies, or to bodies of local self-government, or to state off-budget funds, or to the RF Central Bank; and also in the instances when such rights are transferred for a period of no longer than 30 days (in this connection, it is forbidden to grant the aforesaid rights to such property to one person for a total period of more than 30 calendar days without conducting contests or auctions). However, it is possible to conclude, without contests or auctions, the contracts for the transfer of property intended for religious use into the non-reimbursable use by religious organizations, including buildings and structures (Subitem 'a' of Item 1 Article 1 of this Law).
The list of cases when it is possible to conclude the contracts envisaging the transfer of the rights of ownership and (or) use of state or municipal property without contests or auctions is extended to state or municipal property consolidated by the right of economic jurisdiction or operative management to state and municipal enterprises and institutions (Subitem 'b' of Item 1 of Article 1 of the Law).
The Law has been augmented by the norm whereby it is established that until 1 July 2010 it is permitted to renew, without auctioning, the contracts of lease of state or municipal property concluded prior to 1 July 2008 with small and medium-size business entities. In this connection, the conclusion of the aforesaid contracts of lease can be possible for a term no
longer than until 1 July 2010. besides, it is specified that this permission is not extended to the conclusion of contracts of lease of state or municipal property with small and medium-size business entities in the form of credit institutions, insurance undertakings (with the exception of consumer cooperatives), investment funds, non-government pension funds, professional participants in the securities market, pawnbrokers, parties to product sharing agreements, gambling enterprises, non-residents of the Russian Federation (with the exception of cases envisaged in international treaties), as well as small and medium-size business entities engaged in the extraction and procession of mineral resources (with the exception of the most common types of mineral resources) (Item 5 of Article 1 of the Law).
From the Law "On the protection of competition", whereby it is stipulated that it is mandatory to conclude agreements envisaging the transfer of the rights of ownership and (or) use of state and municipal property consolidated by right of economic jurisdiction or operative management to state and municipal enterprises and institutions only on the basis of the results of tenders or auctions (with the exceptions as determined by the Law), any mention as to trusteeship management agreements has been abolished (Subitem 'b' of Item 1 of Article 1 of the Law).
The regulation of transactions with the property of commercial organization concluded with the preliminary consent granted by the antimonopoly body.
The Law "On the protection of competition" established the list of transactions with the property of commercial organizations that in the presence of some specially determined conditions can be concluded only with the preliminarily obtained consent of the antimonopoly body. These conditions, in particular, are as follows: the aggregate value of assets belonging to the person acquiring the property and of those belonging to the person whose property is being acquired; or the aggregate proceeds from the sale goods in combination with asset value, or the fact of one of the parties to a given transaction being entered in the register of economic subjects occupying a certain share of the market.
The transactions which, under the aforesaid conditions, should be subject to preliminary coordination with the antimonopoly body are, in particular, the receipt into ownership, use or holding by an economic subject (or a group of persons) of the fixed assets or intangible assets of another economic subject (with the exception of a financial institution), if the balance-sheet value of the property constituting the object of a transaction or related transactions exceeds twenty per cent of the balance-sheet value of the fixed assets or intangible assets of the economic subject executing the alienation or transfer of property.
The newly introduced alterations have excluded, from among the aforesaid fixed assets (and thus also from the category of objects the transactions with which are subject to preliminary coordination with the antimonopoly body), land plots, as well as buildings, structures, premises and parts of premises, or uncompleted construction objects not intended for industrial use (Item 2 of Article 1 of the Law).
The issues of antimonopoly control over the activity of financial institutions.
The Law "On the protection of competition" establishes the responsibility of financial institutions (the category of which, in particular, encompasses credit institutions and insurance undertakings, stock and currency exchanges, leasing companies and asset managers) to submit to the federal antimonopoly body notifications concerning all the agreements achieved between them in any form, or their agreements with bodies of local self-government, or with any organizations. The agreements that do not require such notifications are those concluded be-
tween financial institutions whose aggregate share on the commodities market is smaller than the norm established by the RF Government, as well as those representing agreements concerning the rendering of financial services, or those representing agreements concluded between financial institutions in the course of their routine economic activity.
It is specified by the newly introduced alterations that the antimonopoly body must be notified only concerning the agreements concluded in writing between financial institutions or financial institutions and bodies of executive authority (federal or RF subjects'). In other words, from now on there will be no mention of "the federal" antimonopoly body as the addressee for such notifications, or any mention of agreements achieved in any form other than in writing, or of agreements with bodies of local self-government and "any organizations".
The list of agreements which are not subject to mandatory notifications is now augmented by the following types of agreements: the agreements between financial institutions which are not concerned with the rendering of financial services to third parties; the agreements that must be achieved under the contracts of rendering financial services; the agreements concerning the cancellation of previously achieved agreements; the agreements concerning the alteration of previously achieved agreements without altering in any significant way the terms stipulated therein; and the agreements representing a preliminary agreement.
A new definition is now introduced for another type of agreements which is also included in the list of exceptions from the mandatory notification procedure - the agreements concluded between financial institutions whose asset value, as estimated on the basis of the accounting balance as of the last reporting date prior to the date of concluding the agreement, is not in excess of the value threshold established by the RF Government. As is mentioned earlier, the list of exceptions previously included the agreements between those financial institutions that "had an aggregate share on the commodities market below the normative value established by the RF Government".
From the list of documents to be attached to the notification, the financial and economic reporting documents that must be submitted to the RF Central Bank and to the federal bodies of executive authority regulating the financial services market have been excluded (Item 4 of Article 1 of the Law)
It is specified by the newly introduced alterations that those financial institutions that failed to notify, in accordance with the Law "On the protection of competition", the antimo-nopoly body concerning their agreements concluded prior to the date of these alterations coming into force, if their duty to notify it concerning such agreements is indeed envisaged by the Law "On the protection of competition", must submit the relevant notifications to the antimonopoly body within 9 months from the date of these alterations coming into force. Such notifications, if submitted within the aforesaid period, will be deemed to be submitted within the proper timelines established by antimonopoly legislation (Article 2 of the Law).
The procedure for the consideration, by the antimonopoly body, of the petitions concerning the preliminary coordination of transactions.
When considering petitions concerning the preliminary coordination of transactions in the instances envisaged by the Law "On the protection of competition", the antimonopoly body shall have the right to make the decision concerning the satisfaction of such a petition, the prolongation of the timelines for its consideration, or the refusal to satisfy it.
By these alterations it is established that the antimonopoly body is empowered to make the decision concerning the prolongation of the timelines for the consideration of such a peti-
tion, in addition to the previously established cases, also in an event when a transaction or another act declared in the petition should be subject to preliminary coordination in accordance with the Federal Law "On the procedure for making foreign investments in the economic societies which are of strategic importance for ensuring this country's defense and state security" prior to the date of making a relevant decision in regard of such a transaction, or another act as envisaged in accordance with this Federal Law. If, in accordance with the aforesaid Federal Law, it is decided that the preliminary coordination of that transaction or another act should be denied, the antimonopoly body must also make the relevant decision concerning its refusal to satisfy the petition for granting a permission for such a transaction or another action (Item 3 of Article 1 of the Law).
A new system for the regulation of auditing
From 1 January 2009, Federal Law "On auditing activity" of 30 December 2008. No 307-FZ, came into force. By this Federal Law, a switchover to a new system of regulating auditing activity is envisaged, which will be different from the previously existing one (which was established by the former Federal Law of 7 August 2001, No 119-FZ, "On auditing activity"). In particular, this new Law envisages the abolition, from 1 January 2010 onwards, of licensing of this type of activity, with the simultaneous introduction of compulsory membership of auditors and audit organizations in one of the self-regulating auditors' organizations (SAO), which are endowed with the relevant powers to control the quality of the auditing services being rendered. From 1 January 2010, the auditing licenses will no longer be valid, and so those audit organizations and individual auditors which will have not joined the self-regulating audit organizations will no more have the right to do audits and render related services. An audit organization or an auditor may be members in only one self-regulating auditors' organization.
The newly adopted Law makes a distinction between the notions of auditing activity and audit. It is established that auditing activity incorporates not only audit (that is, an independent check of the accounting (financial) reporting documentation of the person being audited), but also the rendering of related services, the list of which is to be established by the federal auditing activity standards.
The Law also determines the requirements for entering a not-for-profit organization in the State register of self-regulating audit organizations, as well as the rights and duties of such organizations. A not-for-profit organization in entered in the State register of SAOs on condition of it uniting no less than 700 physical persons or no less than 500 commercial organizations. That is, the members of a self-regulating auditors' organization can be physical persons and (or) organizations which are - respectively - neither auditors nor auditors' organizations. In accordance with the provisions of the previously existing Law No 119-FZ, a professional auditors' association could be granted accreditation on condition of it uniting no less than 1000 attested auditors and (or) no less than 100 audit organizations.
Besides, for a not-for-profit organization to be entered in the State register of SAOs, it is necessary, in order to secure additional liability of its members, to create a compensation fund, to approve the rules for external control of its performance level, and to adopt the Code of Auditors' Professional Ethics. A SAO is obliged to participate in the creation (including the provision of financial backing) and activity of a single attestation board. In addition, a SAO is
also delegated with the function to keep a register of its members - auditors and audit organizations.
The new Law established the requirements to membership in a SAO. In addition to the requirements previously envisaged by Law No 119-FZ, a new requirement is introduced for auditors and audit organizations - irreproachable professional reputation. Besides, it envisages the requirements to the charter capital of an audit organization: the share of the charter (or joint-stock) capital of a commercial organization belonging to auditors and (or) audit organizations must be no less than 51%.
It is determined that until 1 January 2011 auditors will enjoy the right to carry out auditing activity in accordance with the type of their auditor's qualification certificate, and from 1 January 2011 onwards a single auditor's qualification certificate will be introduced, which will grant the right to do audits in any branch of the national economy. An auditor's qualification certificate will be issued on the basis of the results of a passed qualification examination. The procedure for such an examination, the range of questions offered to an applicant, as well as the procedure for evaluating the results of a qualification examination will be established by an empowered federal body. On the whole, the Law has toughened the requirements to applicants for a qualification certificate. Thus, in particular, it is established that, in order to receive a qualification certificate, an auditor - physical person must have an employment history of no less than 3 years of auditing activity or of keeping accounting records and preparing accounting (financial) reporting documents to the day on which the results of the qualification examination are announced. At least 2 years of the last 3 years within that employment history period must be spent with an audit organization. Previously the necessary requirement to an applicant for an auditor's qualification certificate, as stated in the previously existing Law No 119-FZ, was an employment history of no less than 3 years in an economic or legal sphere.
As before, an auditor in obliged, during each calendar year beginning from the year following the one in which the qualification certificate was received by that auditor, to undergo training under a continuing training curriculum. The SAOs must approve the curricula for such training, as well as determine the minimum duration of a training course, which cannot be less than 120 hours in three successive calendar years and less than 20 hours in each year.
The new rules for sending employees on employment business trips
"ON THE SPECIFIC FEATURES OF THE PROCEDURE FOR SENDING EMPLOYEES ON EMPLOYMENT BUSINESS TRIPS" of 13 October 2008, No 749.
The Statute clearly specifies the documentation to substantiate the fact of a business trip. It is mandatory that a report, in written form, on the work performed during the business trip should be submitted.
The Government of the Russian Federation, by Decree of 13 October 2008, No 749, in accordance with Article 166 of the RF Labor Code, approved the Statute designed to define the peculiarities of sending workers on employment business trips. The Statute entered into force from 28 October 2008.
The Statute defines the peculiarities of sending workers on employment business trips, both in the territory of the RF and in the territory of foreign states.
The Statute offers a more precise definition of the norms that in the past usually gave rise to certain problems due to the possibility of their different interpretations.
Prior to the adoption of this Provision, all employers had to comply with the Instruction, issued by the USSR Ministry of Finance, the USSR State Labor Committee and the All-Union Central Council of Trade Unions (ACCTU) as of 7 April 04.1988, No 62, and entitled "On business trips in the USSR". In accordance with Article 423 of the RF Labor Code, this Statute was applied in the part that was not contrary to the RF Labor Code (and it has not been abolished to this day).
The notion of a business trip is explained in Article 166 of the RF Labor Code, where it is understood as an employee's trip at the instruction of the employer for a determined period of time, in order to fulfil an employment commission outside the place of their permanent work. The trips made by employees whose permanent occupation involves travel or is associated with travels are not deemed to be business trips. The place of permanent work should be understood as the place of location of the organization (or its separate structural subdivision) the employee's work at which is stipulated by a labor contract. According to Article 57 of the RF Labor Code, the terms stipulated in a labor contract should on a mandatory basis include, among other things, the definition of the place of work, and in the event of a person being employed to work at an organization's affiliation, representative office or some other separate subdivision situated in another region, the place of work should be defined with specifying this separate subdivision and its place of location. In the new Statute there exists a separate stipulation to the effect that the business trip, embarked on by an employee at the instruction of the employer or of the person empowered to do so by the employer, to a separate subdivision of the sender (or to its representative office or branch establishment) situated outside of the place of permanent work, should also be recognized as a business trip.
First of all, it should be noted that, whilst previously the maximum period of a business trip was limited to 40 days, without counting en route time, now this restriction has been lifted. In accordance with Item 4 of the new Statute, the length of a business trip is to be determined by the employer with due regard for the volume, complexity and other specific features of the assignment in question. This helps to solve the problem of remuneration for long-term business trips, since previously a business trip exceeding the 40-day limit was qualified as transfer to other work (Article 72.1 of the RF Labor Code).
In this connection, the abolition of the maximum period of a business trip should by no means be interpreted so that employees can be dispatched on very long business trips. The fulfillment of an employment commission (as a business trip is defined by Article 166 of the RF Labor Code) does not require permanent work at the place of a business trip. Instead, it can involve the signing of contracts, control measures, supervision, acceptance of work, participation in seminars, and so on. In other words, the period of a business trip is determined by the specific features of such a commission. If, however, an employee performs some continuous functions at the place of a business trip, then it must be treated as transfer to other work.
It should also be noted that the restrictions specified in Decree of the RF Government of 17 February 2007, No 97, "On confirmation of cases allowing foreigners and stateless persons temporarily staying (residing) in the Russian Federation to work outside the administrative subject of the Russian Federation their work permit (temporary residence permit) is valid for" have also remained in force. Thus, foreigners who arrive in Russia for a temporary stay may indeed be dispatched on a business trip, but for no more than 10 calendar days over the whole period of validity of their work permit. For temporarily residing foreigners the overall period of a business trip cannot be longer than 40 calendar days within 12 calendar months.
The documents that organizations are obliged to formalize in connection with business trips have remained the same as before: a business trip certificate; an employment commission; the employer's decision (or order); an advance accounting report; and a report on the completion of work.
In accordance with Item 8 of the Statute, the RF Ministry of Health Care is obliged to determine the procedure and forms for registering the employees who depart from the sending organization and arrive to the organization where they have been sent on a business trip. Until these procedure and accounting forms are duly approved, organizations will have to apply as registration forms the journals for recording arrivals (departures) of their employees to and from business trips approved as Annexes to the old Statute No 62.
In accordance with Item 15 of the Statute, the dispatching of an employee on a business trip outside the RF territory is done on the employer's order, without issuing a formal business trip certificate. However, in an event of a business trip to the CIS countries which have joined intergovernmental agreements whereby the border service agencies make no entries into the documents carried by the citizens who cross their borders concerning the crossing of a State border, it will be necessary to issue a business trip certificate. It is in this business trip certificate that the receiving party must, as before, make entries concerning an employee's arrival and departure.
As before, the employee sent on a business trip is given an advance payment to cover the cost of travel and lodging, as well as per diem16.
One significant innovation is that the list of expenditures to be refunded in connection with a business trip abroad is augmented by the cost of obtaining a foreign passport, visas and other necessary documents; mandatory consulate and airport fees; levies for the right of entry or transit of motor vehicles; compulsory medical insurance; and other compulsory payments and fees (Item 23 of the Statute). The inclusion of the cost of compulsory medical insurance into this list will have a positive effect on the law enforcement practice and serve as the grounds for justifying, in the eyes of tax agencies, the inclusion of these expenses into the costs of business trips in order to diminish the tax base for profits tax (Subitem 12 of Item 1 of Article 264 of the RF Tax Code). Because previously tax agencies believed that the norms
17
stipulated in the RF Tax Code did not allow such a possibility .
In accordance with Item 16 of the old Statute No 62, the employee who had fallen ill while on a business trip was reimbursed for the cost of lodging (except in cases of hospitalization), and also was paid per diem for the whole period of time during which it was impossible, for reasons of health, to fulfill the commission or to return to his or her place of permanent residence (but no more than 2 months). In the new Statute (Item 25) this restriction has been abolished: now an employee enjoys the right to receive per diem and to have the cost of lodging be reimbursed by the employer over the whole period of illness.
If an employee can every day return from the place where he or she has been sent on a business trip in the RF territory, no per diem is paid (as before) (Item 11 of the Statute). Even
16 Irrespective of the size of per diem set by the local normative act of an organization, personal income tax should not be levied on the per diem paid in accordance with RF legislation, on condition the amount actually paid does not exceed 700 rubles per day during a business trip in the RF territory and 2,500 rubles per day during a business trip abroad.
17 See, for example, Letter of the RF Ministry of Finance of 10 May 2006, No 03-03-04/2/138; and Letter of the Administration of the RF Federal Tax Service for the city of Moscow of 19 May 2006, No 20-12/43886@.
