REVIEW OF CHANGES IN THE RUSSIAN LEGISLATION
June 2003
This material is provided through the support of the US Agency for International Development (USAID) and the Department for International Development (DFID under agreements with the Russian Microfinance Center and Fund “FOR A.” This review is for information purposes only. Neither the authors of this review nor the Russian Microfinance Center shall be liable for any damage to any organization's property due to any use of explanations, conclusions and interpretations of effective legislation contained herein.
Author: LEGEM PERFERRE
Edited by: Russian Microfinance Center
1.1. RF Tax System
A Coordinating Commission was set up to reconcile the differences between the Duma members and the Government around taxation-related laws; however, in spite of all efforts, the Duma failed to consider the Government-sponsored tax reform bills before the scheduled end of the current parliamentary period, so the period was extended to give it more time .
Finally, the Government got its proposals adopted.
Adopted Normative Legal Acts:
· Federal Law of 6 June 2003 No 65-FZ "On amending Part Two of the RF Tax Code, on amending some other legal acts of the Russian Federation, and on the annulment of certain RF legal acts"
Published in Rossiiskaya Gazeta of 10 June 2003 No 111.
Ø The RF Tax Code is amended by new Article 26.4 "Taxation under production sharing agreements.”
· Ministry of Taxes and Levies (MTL) Order of 25 April 2003 No BG-3-05/214 “On amending the Guidelines on the calculation and payment of the Unified Social Tax”
Published in the supplement to Uchet. Nalogi. Pravo.- Official Documents of 18 July 2003, No 23.
Ø The taxation regime is changed in favor of foreign nationals and stateless persons.
Ø Starting on 1 January 2003, all payments made in favor of foreign citizens or stateless persons under employment contracts, civil law service contracts, and copyright agreements will be taxed according to general rules.
Normative Legal Acts pending before the Duma
· The State Duma adopted in the first reading the Government-sponsored bill "On amending Section VIII of the RF Tax Code, on amending Article 19 of the RF Law 'On the Fundamentals of the tax system in the Russian Federation', and on the annulment of certain RF legal provisions related to taxes and duties."
Ø The bill amends the Tax Code by adding a chapter on “Taxation of Inheritance and Gifts.”
1.2. Banking
Adopted Normative Legal Acts:
· RF CB Regulation of 21 June 2003, No 1297-U “On legalizing cards containing samples of signatures and an imprint of the seal”
Published in Vestnik Banka Rossii of 27 June 2003 No 36.
Ø The regulation establishes rules for legalizing cards with signature samples and imprints of the seal, which legal entities must provide to authorized credit institutions for the purpose of opening and maintaining their bank accounts.
· RF CB Regulation of 20 June 2003, No 1296-U “On changing the Central Bank refinancing rate"
Published in Vestnik Banka Rossii of 25 June 2003 No 35.
Ø Starting on 21 June 2003, the Central Bank rate is established at 16% annually, as opposed to 18% before.
Ø In late April, the State Duma adopted amendments to the Tax Code related to the income taxation of ruble deposits. Previously, interest on deposits in excess of 3/4 of the CB rate was taxed, while now only an excess of full CB rate will be subject to income tax.
· Official Notification of the RF CB of 02 June 2003 “On the adoption of the International Accounting Standards by the Russian banking sector.”
Published in the supplement to Uchet. Nalogi. Pravo.- Official Documents of 18 June 2003, No 23.
Ø Starting on 1 January 2004, all credit institutions in Russia are expected to prepare their financial statements in accordance with the International Accounting Standards (IAS).
Ø Financial statements made in accordance with the IAS will be based on Russian accounting, with subsequent conversion into international standards.
Ø In addition, credit institutions will also continue to file their financial statements made according to the Russian standards with their local Bank of Russia institutions until 2006.
2. Laws on entrepreneurship and entrepreneurial activities
Until recently, a lack of a single approach to regulating the registration of individual entrepreneurs caused certain problems. In June 2003, a new law was adopted to ensure consistency across legislation regulating the incorporation of businesses, with a single set of registering authorities and a relevant state registry.
Adopted Normative Legal Acts:
· Federal Law of 23 June 2003 No 76-FZ “On amending the Federal Law on state registration of legal entities”
Published in Rossiiskaya Gazeta of 25 June 2003 No 122.
Ø A new chapter is added regulating the registration of individual entrepreneurs.
Ø A single state registry of individual entrepreneurs is established consistent with the existing principles, forms, and methods.
3. Civil Law
The experience of applying the law “On agricultural cooperation” confirms the law's timeliness and relevance. However, over the years of its application since 1995, the need emerged to amend some of its provisions.
Adopted Normative Legal Acts:
· Federal Law of 11 June 2003 No 73-FZ “On amending the Federal Law on agricultural cooperation”
Published in Rossiiskaya Gazeta of 17 June 2003 No 115.
Ø The amendments relate to the management of cooperatives, their membership, and property relations.
Ø It is established that executive authority in a cooperative is exercised by the chairperson and the board. If a cooperative has fewer than 25 members, it may choose to elect only a chairperson and a deputy chairperson, stating so in its charter. The chairperson and the board are elected from the members by a general meeting of the cooperative for a maximum period of five years. The chairperson is a member of the board and he/she chairs the board.
Ø The terms "member of the cooperative" and "associate member of the cooperative" are clarified: a cooperative member participates in the production or business operation of the cooperative and is responsible for the cooperative’s obligations, while an associate member does not participate in the operation and is not responsible for the coop's obligations.
Ø The law is further amended by an article explaining some specifics of agricultural credit cooperatives.
Ø Membership of a credit cooperative cannot be less than 15 individuals and/or 5 legal entities and it cannot be more than 2 thousand individuals or 200 legal entities.
Ø A credit cooperative must establish a mutual financial assistance fund as a source of loans to its members. This mutual assistance fund is formed by the credit cooperative's own money, as well as loans from members, associate members, credit institutions, and other organizations. Only loans of money are possible. The amount of the fund, rules for its formation and use must be determined by the credit cooperative's charter and by decisions of the general meeting of members.
Ø A credit cooperative is not allowed:
- to lend to non-members;
- to issue securities;
- etc.
Ø Agricultural cooperatives and their unions must harmonize their charters with the amended Federal Law within a year of its effective date.
See Appendix 1 for information as of June 2003 concerning the progress of bills mentioned in our previous reports.
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Appendix 1
BILLS CONSIDERED IN JUNE 2003
No / Nameof the bill / Concept / Status as of 01.06.03 / Progress in June / Comment
Tax Law
1. / "On amending Section IX of the RF Tax Code and Article 20 of the RF Law ‘On fundamentals of the RF tax system’, and on the annulment of certain RF legal provisions related to taxes and duties" (sponsored by the Government). / On amending the Russian Tax Code by Article 30, Corporate Property Tax. / Introduced as lawmaking initiative / Adopted in its first and second readings.
2. / “On amending Article 220 of the RF Tax Code” (sponsored by the RF Government). / On increasing the amount of property-related deduction from individual income tax. / Introduced as lawmaking initiative / Adopted by the Duma in its first, second and third readings.
Endorsed by the Federation Council
3. / "On amending Chapter 21 of the RF Tax Code" / On reducing VAT from 20 to 18 percent. / Introduced as lawmaking initiative / Adopted by the Duma in its first, second and third readings. Endorsed by the Federation Council
7. / "On amending article 241 of the RF Tax Code" (proposed by A.D. Zhukov, M.M. Zadornov, V.M. Reznik, and S.I. Shtogrin). / On decreasing the maximum UST rate on 1 January 2005. / Introduced as lawmaking initiative / Adopted in its first reading.
Banking
8. / “On amending the Federal Law on insolvency (bankruptcy) of credit institutions” (sponsored by the State Duma members) / A new version of the law on insolvency (bankruptcy) of credit institutions. / Adopted in its first reading. / No changes.
9. / “On insuring deposits by private individuals with Russian banks" (sponsored by the Russian government) / Establishes a system of deposit insurance. / Introduced as lawmaking initiative / No changes. / The relevant Duma committee recommended adopting the bill in its first reading.
10. / “On amending the Federal Law on SME support in the Russian Federation” (sponsored by the State Duma members) / Simplifies bank credits to SME / Introduced as lawmaking initiative / No changes.
Financial and Tax Supervision
11. / “On amending Articles 198 and 199 of the RF Tax Code” (sponsored by the RF Government). / Toughens punishment for tax-related crimes. / Adopted in its first reading. / No changes.
12. / “On currency regulation and control" (sponsored by the RF Government) / A new version of the law / Adopted in its first reading. / No changes.
13. / “On the annulment of legal provisions on monitoring private individuals’ expenses for taxation purposes" (sponsored by the RF Government) / Repeals the monitoring of private individuals’ expenses by tax authorities. / Adopted in its first reading. / Adopted in its first, second and third readings. Endorsed by the Federation Council
Civil Law
17. / “On credit cooperation" (sponsored by the RF Government) / Establishes a legal framework for credit cooperatives. / Adopted in its first reading. / No changes.
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