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<td width="555" valign="top"><font face="Verdana, Arial, Helvetica, sans-serif" size="2" color="#FFFFFF">Russia
Report. A Quarterly Newsletter.<br>
May 2005</font></td>
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<td valign="top" bgcolor="#FFFFCC"><p> </p> <p><font color="#800000" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Curbs
promised on repeat tax audits</strong></font><br>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Putin, cabinet promise relief soon for vexed businesses</strong></font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">President Putin and Russian cabinet officials are promising
to curb tax authorities’ ability to conduct repeated tax audits
on companies, sometimes years after original audits, Rinat Zakirov-Ziev
and Alexander
Podolsky, of our Moscow office, report. According to news agencies, Putin
promised business leaders in late March that formal proposals on this
would be coming very soon, they add.<br>
</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
Current law restricts first-time audits to records of the previous
three years. However, as Podolsky explains, existing law is unclear
about limits
for the timing and scope of repeat audits — although they can
come in only two circumstances. The first is reorganization or liquidation
of the audited organization. The second is when one tax authority exercises
control over a subordinate agency.<br><br>
Zakirov-Ziev
and Podolsky point out that the hierarchy of tax authorities includes a
significant number of levels. As authorities supervise other
agencies lower in the hierarchy, one taxpayer can undergo numerous
repeat audits, the two observe. The proposed legislation would be
intended to
restrain repeat audits in these circumstances, Zakirov-Ziev and Podolsky
comment.</font><br>
</p>
<p> </p> <p><font color="#800000" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Duty
for crude oil exports hits record high</strong></font><br>
<strong> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rate
jumps to $102.6 per ton for sales outside RF</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On April 1, the Russian Federation raised its customs
duty for crude oil to its highest level ever — $102.6 per ton — reports
Elena Iourkina of our Moscow office. This represents a 23.6% increase
over the previous $83 per ton rate, she notes.<br>
<br>
The duty applies to exports of crude oil and its products (commodity
code #2709 00) outside the Customs Union — Belarus, Kazakhstan,
Kyrgyzstan, Russia and Tajikistan, she explains.</font></p>
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<td valign="top" bgcolor="#FFFFCC"><p><font color="#800000" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Passports,
visas to include biometric data</strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><BR>
<strong>Government OKs development of new system</strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Russian
Federation government has approved the concept of including biometric
information on passports and visas, reports Olesya Mormul, of our Yuzhno-Sakhalinsk
office. Although the government’s March 15 order did not define “biometric
information,” that probably would include fingerprints and a
coded photograph of the document holder’s face, she explains.<br>
<br>
The new system would include visas, residence permits, refugees’ pass
documents and passports of Russian Federation citizens, Mormul says.
The primary reason for the new system would be more effective barriers
to terrorists and illegal migration, and improved control of passports
and visas, she explains.<BR><BR>
The March 15 order
set out guidelines for implementing the new system, including protection
of individuals’ rights and health when collecting
the biometric information. The order also directs agencies to guarantee
confidentiality of information they receive, to collect only that personal
data needed to originate passports or visas, and to provide full access
to individuals to the biometric information collected about them.</font><br>
</p> <p> </p>
<p><font color="#800000" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Work
permits resume in foreign employees dispute</strong></font><br>
<strong><font size="2" face="Arial, Helvetica, sans-serif">Ruling
could improve situation for employers of foreigners</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Federal Migration Service
resumed issuing individual work permits to foreign employees of branch/representative
offices of foreign legal entities at the end of April.<BR><br>
Evgeny Kuzmenko, of our Yuzhno-Sakhalin office, notes that many will
recall that FMS stopped issuing work permits to this category of foreign
employees at the beginning of 2005. FMS did not issue any official
instructions in this regard, but it appears that this decision was
made based on an old contradiction between the migration and passport-visa
legislation (in interpretation of Russian passport-visa authorities).<BR><br>
Recently, a group of foreign investors applied to the RF Prime-Minister,
Mr. Fradkov, to settle the problem. Pursuant to instructions of Mr.
Fradkov, the new policy of FMS was inspected and as a result, FMS resumed
issuing work permits. <br>
Now it is not clear in what manner the problem was solved. As was the
case in the beginning of 2005, FMS did not issue any official instructions.
Also, territorial bodies of FMS are not aware that the policy was changed
once again and continue to refuse to issue individual work permits
so far, reports Kuzmenko.<br><br>
Still, he comments, it appears that the absurd situation where tens
of thousands of foreign employees were unable to comply with Russian
immigration law is finally being resolved.</font><br>
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<p> </p>
<p><font color="#800000" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Antimonopoly
reporting requirement thresholds rise</strong></font><br>
<strong><font size="2" face="Arial, Helvetica, sans-serif">Far fewer
transactions now subject to authorities’ oversight</font></strong></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">A newly enacted measure
significantly raises thresholds for petition and notification requirements
under Russia’s antimonopoly law,
reports Evgeny Kuzmenko, of our Yuzhno-Sakhalinsk office. Companies surpassing
the thresholds must notify authorities of transactions such as mergers,
creation of subsidiaries, and appointments to executive bodies or boards
of directors, he explains.<br><br>
As of March 22, the threshold for prior approval requirements is RUR
3 billion (approximately $101 million); for notification, it now is RUR
200 million (approximately $7.3 million). Kuzmenko notes that the threshold
for petition requirements had been RUR 20 million ($730,000) and for
notification requirements either RUR 20 million ($730,000) or RUR 10
million ($365,000), depending on the type of transaction involved.<br><br>
The changes should reduce significantly both the number of transactions
subject to antimonopoly authorities’ control and the burden for
companies and authorities alike, Kuzmenko comments.</font></p> <p> </p>
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<td valign="top" bgcolor="#FFFFCC"><p><font color="#800000" size="4" face="Verdana, Arial, Helvetica, sans-serif"><strong>Russia
to offer ‘special economic zones’</strong></font><br>
<strong> <font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax,
regulation incentives could attract foreign investors</font></strong><br>
<br>
<font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Russian
Federation government has approved legislation to create “special
economic zones” for capital investments of at least 10 million
euros, reports Natalia Prisekina, of our Vladivostok office. The
zones would feature reduced administrative barriers and tax burdens,
special land use regulations and a privileged customs regime, she
notes.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Final enactment
of the law could come by the end of this year, with the first zone
created in 2006. The government hopes to attract foreign investment
in manufacturing while restricting further extraction and processing
of minerals. The government wants to diversify the Russian economy
and make Russian industry more competitive worldwide by encouraging
development of technology, she adds.</font></p> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Meanwhile,
German Gref, minister for economic development, has assured foreign
investors that the government would not designate oil fields in the
Sakhalin 3 project as "strategic" — thus barring foreign
investors under RF law, Prisekina reports.</font></p>
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<td valign="top"><p><font size="1" face="Arial, Helvetica, sans-serif">© 2005 Russin & Vecchi,
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