Corporate legislation will be amended so as to increase control over the internal activity of limited liability companies. Among other things, practically all transactions with shares in an LLC will be subject to notarial certification and additional control by notaries. Moreover, the new legislation increases control by the tax authorities over registration activities. The new legislation will come into force on January 01, 2016.

According to the amendments, notaries will have a more important role in transactions involving shares of LLCs and their subsequent registration. Among other things, practically all transactions with shares in a LLC will be subject to notarial certification, such as: (i) an offer to sell shares (if a shareholder of a LLC wants to sell its shares to a third party, it first has to offer it to other shareholder); (ii) both, a decision to increase the charter capital and information on the shareholders present when the said decision was made; (iii) a call to buy-out a share, which can be made by a shareholder that voted against or abstained during the voting regarding a large-scale transaction or increase of charter capital; (iv) a shareholder’s statement declaring its withdrawal from the company.

Moreover, the law changes the procedure under which shares in a LLC can be sold: the said transaction is subject to notarial certification and has to be made in one document. Furthermore, the notary shall certify not only the sale of shares to third parties, but also the sale of shares to existing shareholders when they exercise their pre-emption right. An application to introduce changes to the Unified State Register of Legal Entities (EGRYUL) will be sent for registration by the notary who certified the transaction, in electronic form, within 3 days as of notarial certification. Registration shall be carried out within 3 working days.

Nevertheless, starting from 2016 it will be possible to avail of new rules simplifying the incorporation procedure. Thus, an LLC may operate either based on a charter specifically developed for the said company, or based on a model charter. The relevant choice shall be made in a shareholder resolution. The use of model charters will expedite control by the tax authority on the incorporation stage, and subsequent check of creditworthiness carried out by business partners.

Moreover, the new legislation increases control by the tax authorities over registration activities. Thus, the tax authority will be empowered to check information submitted for inclusion into the EGRYUL, i.e. it will be able to request relevant supporting information, such as explanations, certifications, or carry out inspections and engage experts. The tax authority will also have the right to make a note stating that the information submitted by the company for registration with the EGRYUL is false, provided that the company fails to timely make relevant changes.

According to the new legislation, the EGRYUL will reflect that the company has decided to change its address. Thus, the registration of change of address will be carried out in two stages: the decision on change of address will be registered first, followed by the registration of the change of address itself within 20 days, based on a separate application. The application shall be supported by documents confirming the company’s right to use the premises. Previously, no such requirement was fixed by statute, however all companies used to provide such supporting documents in practice, in order to ensure prompt registration.

The Russian Government has issued a Resolution governing the procedure under which Russian citizens shall inform the Russian tax authority of their foreign bank account activity. The procedure has been introduced in order to levy tax on income of Russian residents received abroad.

According to the Resolution, Russian citizens who opened a bank account abroad are obliged to inform the Russian tax authority of their foreign bank activity. Reports are to be submitted to the the tax authority annually, 5 months after the end of the relevant accounting period (i.e. calendar year). Thus, the filing deadline for 2015 is June 01, 2016.

In case several Russian citizen have opened a joint account in a foreign bank, the report is filled by every individual separately. Should the joint bank account be shared by a Russian citizen and a foreigner, the latter is exempt from the relevant obligation.

The report can be filled online via the taxpayer’s user account (provided that it is signed by an enhanced digital signature), by submitting a hard-copy in person, or by recorded delivery. The tax authority may request supporting documentation for the purpose of currency control.

Reports of foreign bank activity have been introduced in order to tax income of Russian residents received abroad. Thus, under the amendments to the Russian Tax Code effective from 2016, Russian citizens will have to pay a 13% personal income tax levied on income received from all bank deposits in foreign banks. Currently, tax is levied only on foreign bank deposits with a 9% interest rate. 

After the mass cadastral value reassessment carried out in Russia, often the cadastral value of real estate determined by relevant state authorities exceeds its market value. The Supreme Court has clarified which evidence to adduce in order to prove this fact, as well as which rules are to be used by appraisers.

A claimant filed a suit against the Federal Cadastre Chamber arguing that the cadastral value of real estate it owns exceeds its market value by three times, referring to the report prepared by an independent appraiser that had received a positive review by appraisers who were members of a self-regulatory organisation (SRO).

The lower courts refused to satisfy the claim, concluding that the independent appraiser’s report was unreliable, as the appraiser failed to apply the appraisal standard “Determination of the cadastral value” (Federal appraisal standard No.4) approved by the Decree of the Russian Ministry of economic development No. 508 dated 22.10.2010.

Nevertheless, the Supreme Court quashed the lower courts’ decisions and ordered a re-trial of the case (Resolution dated 21.12.15 No. 305-ЭС15-12075 in the case No. А40-81849/2014). The Supreme Court noted that the relevant appraisal standard is applicable only to determining the cadastral value of the real estate, and therefore is not applicable to establishing its market value.

The Supreme Court also confirmed that the following evidence shall be adduced in order to challenge the cadastral value: a report determining the cadastral value as of the date the state authority determined its cadastral value;  as well as a relevant expert opinion.

The Russian State Duma has passed a bill amending the Federal law “On the Federal Security Service” in its third reading. The bill broadens the powers of the Federal Security Service (FSB), such as the powers connected with the use of weapons in self-defence and for the purposes of the fight against terrorism, and also entitles FSB officers to take fingerprints without having to inform citizens thereof.

According to the bill, a FSB officer will be entitled to fire a gun without warning, provided that any delay may endanger the life and health of citizens or the said officer.  Moreover, a FSB officer will be able to use any means turned out to be at hand in self-defence, provided that he or she does not have a gun or special equipment. Also, the bill provides that special equipment can be used by a FSB officer in order to prevent civil unrest.

Furthermore, the FSB will be empowered to obtain, record, store, classify, use, provide and destroy fingerprint data, and will not be obliged to warn an individual that such data will be, or has been, collected.

According to Alexander Hinstein, Deputy Head of the State Duma Security Committee, currently the FSB does have these powers, however they are provided for by secondary legislation. Should the bill be enacted, into law, the broad powers of FSB officers will have a statutory basis.

The Russian State Duma is considering a bill which makes it simpler to check whether one’s business partner is trustworthy. According to the bill, certain information, such as the amount of paid taxes and duties, taxpayer’s income and expenses, will no longer be subject to the tax secrecy treatment. Notably, as clarified by the Supreme Arbitrazh Court, companies doing business in Russia are obliged to ensure that their business partners are trustworthy and shall bear the negative consequences if they fail to do so: e.g. they may be deprived of their right to claim a VAT refund under a contract with a fly-by-night company.

The bill has been proposed as it is often next to impossible to obtain sufficient information required in order to check a company’s trustworthiness. Although the Russian tax authorities possess such information, it is subject to the tax secrecy treatment and therefore cannot be disclosed to third parties.

According to the bill, the following information shall be disclosed: the average number of employees and their total income in the preceding calendar year; the amount of taxes and duties; as well as the taxpayer’s income and expenses according to its accounting statements. If the bill is passed into law, taxpayers will be obliged to annually disclose this information, and it will be published on the official website of the Russian Tax authority.

Arguably, disclosure of such information may enable to carry out full-fledged business partner checks and will make business dealings more transparent. Nevertheless, imposing such an obligation may be too burdensome, or could be abused, e.g. by the company’s competitors or potential corporate raiders.