The Russian Government adopted a decree that changes the procedure for calculation of the rental payments for the state-owned land. The amendments provide for the reduced rent rates for the land plots designated for agricultural industry use. Besides, a new procedure was established for the calculation of rental payments for the land, where an unfinished construction is built, it shall be based on the fair market value of the price of the leasehold interest.

According to the Government, establishing the reduced rent rates of the agricultural land plots is aimed at creation of additional measures for promoting the development of the national agricultural industry.

In respect of the lease of the land plots, where the unfinished construction is built, the Decree of the Government provides for a new well-balanced mechanism of the calculation of the rental payments aimed at, on the one hand, the determination of the fair amount of rent, close to the market value, and on the other hand, the protection of the lessee from the frequent changes of the rental payments amount. Previously the rent was calculated based on the market value of each particular land plot with reference to the refinancing rate of the Central Bank of Russia. After the amendments enter into force the amount of rent will be determined by dividing the market value of the leasehold interest by the term of the lease. At that the rent amount determined by the contract cannot be amended more frequently than once every 5 years (please see the Decree of the Government dated 5 May 2017 No. 531).

The Russian Ministry of Finance has issued a clarification, according to which the taxpayer, which erroneously determined the amount of payable taxes in the previous taxation period, can either correct the tax base in that period or deduct the excessive amounts in the next (current) reporting period. However, the last option is only possible if the taxpayer had profits in the current reporting period.

In practice, certain expenses incurred by companies cannot be accounted for in the current tax declaration, in particular due to the lack of supporting documents. In this case such supporting documents are generally obtained after the tax declaration is already filed and the tax is paid, resulting in overpayment. Therefore, the taxpayer is entitled to account for these expenses in the current taxation period, if it has profit. 

If, however, the company was operating at a loss in the current taxation period, the tax base is deemed to be zero, making the re-calculation of excess taxes impossible. In this case it is necessary to perform a recalculation of taxes for the period in which the calculation error was made. In this regard it is necessary to consider that the application for a deduction or return of excessively paid taxes, in particular as a result of recalculation of the tax base, can be filed within three years after the respective tax is paid (Art.78(7) of the Russian Tax Code). 

In a recent case the Supreme Court re-iterated that an extraordinary on-site inspection initiated due to the complaints from the individuals without the approval of the Prosecutor’s Office is only permissible when the inspection is performed immediately after the complaint is received by the state authority. Otherwise the failure to get the Prosecutor’s Office approval in advance is a gross procedural violation, leading to invalidation of the result of the inspection. This position of the Supreme Court creates additional guarantees for the protection of company rights during inspections, and confirms the necessity for companies to pay close attention to the authorities’ compliance with the established formal procedure. 

The legislation in effect prohibits extraordinary on-site inspections initiated due to the complaints from the individuals without prior coordination with the Prosecutor’s Office, unless the inspection was conducted immediately. In such case the authorities are still obliged to notify the Prosecutor’s Office within 24 hours thereof.

In the case considered by the Supreme Court, the State Labor Inspectorate conducted an extraordinary on-site inspection of the employer due to the employees’ complaints, without coordination with the Prosecutor’s office. The inspection was carried out after certain period of time passed after the complaint was filed, rather than immediately. Due to this, the Supreme Court ruled that the labor inspectorate violated the established inspection procedure, due to which the inspection results along with the decision on administrative violation were nullified (Ruling of the Supreme Court dated 03.04.2017 No. 127-AD17-2). 

On May, 2 a bill was introduced to the State Duma, which extends the limitation period for imposition of administrative liability from two to three months. It is supposed that these amendments to the Code of Administrative Offences would promote the decrease of situations, when due to the long term of the investigation the wrongdoers evade administrative liability on legitimate grounds: due to the expiry of the limitation period for the imposition of administrative liability.

The bill provides for the amendment of Article 4.5 of the Code of Administrative Offences, which stipulates the general two months limitation period for the imposition of the administrative liability. Should the bill be approved, the limitation period for most administrative violations will be extended to three months.

The need to amend the administrative legislation in this respect is explained by the fact that often it takes quite a long time to comply with the procedural formalities, necessary to impose the administrative liability on the wrongdoer (such as making inquiries to the respective state authorities and reviewing the relevant information, notification of the offender on the preparation of the protocol, the transfer of the case materials to other state authorities, etc.). Therefore, often the state authorities have to discontinue the proceedings due to the expiry of the limitation period, and the wrongdoers remain unpunished. It is supposed that the introduction of these amendments will lead to decrease of such situations and will promote the inescapable nature of punishment for the administrative offences committed.

The Supreme Court has adjudicated a case concerning the amount of the surety’s liability in case of the debtor’s bankruptcy, which will cause an important impact on the court practice. Despite the fact that after the bankruptcy proceedings are initiated, all the creditors’ claims are filed with the registry of the creditors’ claims and denominated in Rubles at the currency exchange rate effective at the moment they are included in the registry, this does not affect the initial amount of the surety’s liability if the debt was originally denominated in foreign currency. The Supreme Court ruled that the surety is still liable before the creditor in the full amount of foreign currency debt and shall also compensate the creditor the difference in the currency exchange rates between the monetary amount included in the register of the creditor’s claims in Rubles and the amount of debt converted to Rubles at the currency exchange rate effective at the moment of payment.  

We have already announced this case earlier, when the Supreme Court just set the matter for hearing (case No. А40-231538/2015). In this case the lower courts upheld the surety’s reasoning, who argued that since the debtor became bankrupt and the creditor’s (bank’s) claims to the debtor were included in the register of the creditors’ claims in the amount denominated in Rubles, the surety’s liability is also limited by this amount.

Still, the Supreme Court rejected this reasoning. In its decision the Supreme Court noted that “the denomination of monetary claims in their Ruble equivalent in the register of the creditors’ claims does not affect the amount of the surety’s liability before the debtor and does not put him in a disadvantaged position in relation to the debtor, since the currency exchange rate may change either side. Therefore, the Supreme Court ruled that the surety shall pay the creditor the debt in full amount, as initially denominated in foreign currency, converted to Rubles at the currency exchange rate as of the moment of payment, since another interpretation would contradict the essence of the suretyship, because one of its purposes is the protection of the creditor in case of the debtor’s bankruptcy. Thus, the dispute is to be re-examined by the court of the first instance, and the judges shall take into account the conclusions of the Supreme Court.