KPMG: On the most important developments for business in 2010

Oleg Ganeles
Senior Consultant, Tax & Legal

KPMG in Russia and CIS
+7 495 937 4477

In my view, the most significant events for business in the Russian legal system in 2010 were:

The launch of the Russia-Belarus-Kazakhstan Customs Union. From January 1, 2010, common customs tariff and non-tariff regulation was introduced, and from July 1, 2010, the Customs Union Customs Code took effect.

As a result, a significant proportion of customs tariff policy making powers was transferred from the Russian government to the Customs Union Commission. In addition, July 1 also saw the Agreement on the principles of collecting indirect taxes on the export and import of goods, the performance of work, and the provision of services in the Customs Union (January 25, 2008), the Protocol on the procedure for collecting indirect taxes on the export and import of goods in the Customs Union and the mechanism for monitoring their payment (December 11, 2009), and the Protocol on the procedure for collecting indirect taxes on the performance of work and provision of services in the Customs Union (December 11, 2009) take effect.

Under these, indirect taxes on the import of goods into Russia from another Customs Union member are paid by the importer not during customs processing (which has been abolished), but via a tax declaration filed with a tax authority once the imported goods have been accounted for. This procedure previously applied only to goods imported from Belarus.

Federal Law 86-FZ (May 19, 2010) introduces amendments to the law On the legal status of foreign citizens in the Russian Federation, simplifying the procedure for obtaining work permits for highly qualified foreign specialists. Such specialists are no longer subject to quotas, and the duration of their work permits has been increased to 3 years. To qualify as a "highly qualified specialist", a foreigner must earn a salary of at least 2m RUB a year. The Russian government reserves the right to reduce these requirements.

Ruling 13640/09 of the Presidium of Russia's Supreme Court of Arbitration (February 25, 2010) states that a taxpayer was entitled to calculate its VAT base, for transactions involving the assignment of claims to non-residential premises under a contract for investment in the redevelopment of a bus station, as the difference between the value of the assigned property rights, set in the assignment contracts, and their cost of acquisition, incurred by the taxpayer as an investor.

The court pointed out that the details of determining the tax base for the assignment of property rights are covered by Article 155 of the Tax Code in the case of the sale of property rights for residential buildings, residential premises, garages and parking spaces, but that no special procedure exists for determining the tax base for the sale of property rights to non-residential premises.

However, the court held that their legal status with respect to VAT should be defined in the same way, on the basis of Article 3 of the Tax Code, under which taxes and charges should be economically justified and not arbitrary. On these grounds, the VAT base for the sale of property rights to non-residential premises should be the difference between the sale price and cost of acquisition of the property rights, not the entire proceeds from the sale. Thus, the Supreme Court of Arbitration filled a gap in the tax law.