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<title>Russin & Vecchi Newsletter - April 2004</title>
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<td width="81%"><font face="Verdana, Arial, Helvetica, sans-serif" size="2" color="#FFFFFF">Russia
Report. A Quarterly Newsletter.<br>
April 2004</font></td>
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<td valign="top" bgcolor="#FFFFCC"><p> </p>
<p><font size="2" face="Arial, Helvetica, sans-serif"><strong><font color="#993300" size="4" face="Verdana, Arial, Helvetica, sans-serif">New rules outline Sakhalin border zone</font></strong><br>
<strong>Special passes required for entry, commercial activities</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Sakhalin Oblast Administration
enacted regulations March 23 that fill the legal vacuum that had existed
regarding the Sakhalin border
zone, reports Denis Marchenko, of Russin & Vecchi’s Yuzhno-Sakhalinsk
office. “The new regulations define the border zone and require
passes for people and means of transport entering it, as well as for
commercial and other activities within it," Marchenko explains.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> The regulations
outline a five-kilometer zone along certain segments of the coast of
the Korsakov, Nevelsk and Aniva administrative districts,
and the administrative borders (excluding population centers) of the
Northern Kuril, Kuril, and Southern Kuril districts, he notes. In Korsakov
district, the zone occupies the eastern shore from Cape Svobodny to
Cape Aniva, and Aniva Bay from Novikovo to Cape Aniva. In Nevelsk district,
the zone occupies the western shore from Shebunino to Cape Kriljon,
and
in Aniva district, from Kirillovo to Cape Kriljon.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> The remaining districts
on Sakhalin Island island, including Okha and Nogliki, are not considered
border zone territory, Marchenko reports.</font></p>
<p> </p> <p><font color="#993300" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Pact eases entry permit system for some Japanese</strong></font><font size="2" face="Arial, Helvetica, sans-serif"><br>
<strong>Sakhalin agency to invite qualified Hokkaido representatives</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Sakhalin government
and Japan's representative office in Sakhalin have signed an agreement
to simplify the procedure for entry permits
for some Japanese residents, reports Denis Marchenko, of Russin & Vecchi’s
Yuzhno-Sakhalinsk office. The pact affects employees of the Hokkaido
governor's office, the Hokkaido Governor's Representative Office on Sakhalin
and their families, and other organizations helping
to implement the Agreement on Friendship between Sakhalin and Hokkaido,
he notes. </font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The late Sakhalin
Gov. Igor Farkhutdinov and Hokkaido Gov. Tatsuia Hori signed that agreement
in 1998, Marchenko explains.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> Under the recent
agreement, the Sakhalin Oblast Administration's Committee for International, Overseas Economical and Interregional
Relations will issue invitations to qualified Japanese citizens,
he reports.<br>
</font></p>
<p> </p> <p><font size="2" face="Arial, Helvetica, sans-serif"><strong><font color="#993300" size="4" face="Verdana, Arial, Helvetica, sans-serif">Required documents outlined for PSA tax exemptions</font></strong><br>
<strong>Decrees cover relief from property, transport taxes, duties</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Russian government
has established sets of documents that investors in recent production
sharing
agreements (PSAs) must present when applying
for exemptions from property taxes, transport taxes and customs duties,
reports Rita Hoffman, of Russin & Vecchi’s Yuzhno-Sakhalinsk
office. For property and transport tax exemptions, one must show “exclusive
use” of the pertinent taxable item for activities established in
a PSA, she explains. The customs duty exemption law requires only “use,” she
notes.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The transport tax
exemption can apply to “means of transport other
than standard passenger vehicles smaller than buses,” she reports.
She adds that government decrees in January require documentation of
various sorts for each exemption category. Operators acting on behalf
of taxpayers also must submit notarized powers of attorney, she reports.</font></p>
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<td valign="top" bgcolor="#FFFFCC"><p> </p>
<p><font size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#993300">Some firms must disclose owners of
1% or more</font></strong></font><font size="2" face="Arial, Helvetica, sans-serif"><br>
<strong>Specialized depositary, management companies covered</strong></font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Finance Ministry
has issued forms on which specialized depositary and management companies
must
disclose all shareholders with an interest
of 1 percent or more, reports Zhanna Radmaeva of Russin & Vecchi’s
office in Vladivostok. “With this increase in corporate transparency,
heads of specialized depositary and management companies will be liable
for the adequacy of data provided to the Finance Ministry,” she
stresses.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> The new procedure,
enacted Jan. 28, covers any specialized depositary that has entered
a services agreement with the Pension Fund and management
companies that have entered pension savings asset management agreements
with the Pension Fund, she notes. Forms must be filed annually, by
July 1 following the year covered by each report.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> The public will
be able to search the identity of shareholders on the Finance Ministry’s web site, Radmaeva notes.<br>
</font></p> <strong><font size="4" face="Verdana, Arial, Helvetica, sans-serif"> <font color="#993300">Court overrules agency rule on expense logbooks</font></font></strong><font size="2" face="Arial, Helvetica, sans-serif"><br>
Rule for businesses paying simplified tax violated code
</font>
<p><font size="2" face="Arial, Helvetica, sans-serif">The Russian Federation’s Supreme Arbitrazh Court has overruled
an order by the Ministry on Taxes and Levies regarding logbooks of income
and expenses for businesses using the simplified tax system, reports
Natalya Prisekina, of Russin & Vecchi’s Vladivostok office. “The
repealed order (from March 2003) required the reporting of companies’ operational
expenses. Thus, it required recording of all income and expenses, including
those that are not necessary to calculate the single tax,” she
explained.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> The Supreme Arbitrazh
Court ruled Jan. 22 that federal ministries do not have authority to
unilaterally change the Tax Code, Prisekina said.
The Court concluded that the Tax Code does not obligate entrepreneurs
to record in their logbooks any economic activity that does not affect
tax calculations, she notes.</font></p>
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<p><font size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#993300">Putin
restructures government, forms ‘super ministry’</font></strong></font><font size="2" face="Arial, Helvetica, sans-serif"><br>
<strong>New agency consolidates oil, gas, nuclear energy, construction </strong></font></p> <p><font size="2" face="Arial, Helvetica, sans-serif">President Putin has announced
a significant restructuring of Russian Federation government, reducing
the number of ministries from 30 to 17,
reports Rinat Zakirov-Ziev, of Russin & Vecchi’s Moscow office.
Of special note, Zakirov-Ziev says, is creation of a “super ministry” — the
Ministry of Industry and Energy — that consolidates the former
ministries of Industry, Science and Technology; Energy; and Nuclear Energy
(“Gosstroi’).</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> Viktor Khristenko,
who handled the duties of prime minister after the resignation of the
Kasyanov government, heads the new “super ministry,” Zakirov-Ziev
reports. The reforms, announced March 9, seek increased efficiency
and effectiveness within the executive branch, he explains.</font></p>
<p><font size="2" face="Arial, Helvetica, sans-serif"> He observes that
wide-scale reform of Russian/Soviet Union government also occurred
in the 1950s and 1960s, although government reverted
to pre-reform structure during the 1970s and 1980s. “This very well
may be a scenario for the on-going administrative reform in Russia as
well,” he says.</font><font size="2" face="Arial, Helvetica, sans-serif"><br>
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<td><p><font size="1" face="Arial, Helvetica, sans-serif">© 2004 Russin & Vecchi,
LLP</font></p>
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