05.02.2016 — Russia among World’s Most Miserable Economies, Yet Bloomberg Predicts Economy Growth

Russia took 14th place in the most ‘miserable economiesranking prepared by Bloomberg and published on February 05, 2016 (

Misery index calculations were compiled using inflation and unemployment data. The ranking predicts the development of the countries’ economies. In 2015, Russia took 7th place in a similar ranking (with the misery index of 21.2).

According to the ranking as of year-end 2015 the most ‘miserable economy’ is Venezuela (with the misery index of 159.7), followed by Argentina (39.9), South Africa (32), Greece (27), Ukraine (26.3), Spain (21.2), Serbia (20.9), Turkey (18.8), Brazil (16.8) and Kazakhstan (16.7).

Experts have noted signs of improvement in the economies of Russia, Romania and Ireland, and predict that these countries will achieve a more favourable position in 2016. After Russia’s GDP contracted by 3.7% due to the fall in oil prices and high inflation, economists anticipate that Russia’s economy will gradually return to a 1.3% growth in 2017. Bloomberg has estimated that Russia’s misery index in 2016 will amount to 14.5.

04.02.2016 — Supreme Court Prohibits Recovery of Exchange Rate Difference

The Russian Supreme Court has recently considered a dispute connected with the enforcement of an award issued by an ad hoc Stockholm arbitral tribunal. The debtor (Gazpromneft Moscow Refinery) challenged a bailiffs decision to recover the exchange rate difference made upon the request of a US-based company Joy Lud, and asked the court to terminate enforcement proceedings on grounds of full performance (case No. А40-157161/2014). Lower courts have refused to satisfy the debtors claims, however the Supreme Court reversed their decisions.

Enforcement proceedings were initiated after Joy-Lud Distributors International, Inc., a US company, won a landmark arbitration case against OJSC Moscow Oil Refinery (currently - Gazpromneft Moscow Refinery) in 2005. Joy Lud was awarded a sum of USD 28 million and accrued interest by an ad hoc Stockholm arbitral tribunal as a result of breach of contract by the Refinery.

There had been a major delay in enforcement proceedings due to a number of related court and criminal proceedings, however eventually in August 2013 the Gazpromneft Moscow Refinery transferred the accrued debt (RUB 1.7 billion, which at the time was equivalent to USD 51.1 million) to the bailiffs. Nevertheless, the bailiffs were prohibited from distributing the said amount on the basis of injunctive relief requested by the Refinery. The injunctive relief was lifted only in July 2014, and Joy Lud managed to recover RUB 1.7 billion. However, in view of the changed exchange rate, the said amount was equivalent to USD 47.5 million only. Upon the application of Joy Lud, in August 2014, the Russian bailiff service issued a Decree ordering the recovery of the remaining USD 3.6 million from the Refinery.

The first instance court refused to declare the Decree unlawful, concluding that the debtor (i.e. the Refinery) failed to perform the bailiff’s orders in full. According to the court, the debtor carried out the award involuntarily, therefore it can be deemed to have performed the award in full only when the funds reached Joy Lud’s account. The appellate and cassation instance courts reached similar conclusions.

The Supreme Court reversed the lower courts’ decisions, stating that they do not comply with the Federal law “On enforcement proceedings”, and declared that the bailiff’s Decree ordering the recovery of the remaining USD 3.6 million was unlawful. Nevertheless, the Supreme Court refused to terminate enforcement proceedings requested by the Refinery based on full performance. The reasoning of the Supreme Court can be assessed after its full decision will have been published.

03.02.2016 — Moscow and Miami Deemed Riskiest Prime Real Estate Markets

Based on the Prime Cities Forecast Report-2016 prepared by an international residential and commercial property consultancy Knight Frank, Moscow was ranked 11th among top global cities regarding the risks in the segment of luxury real estate investment.

All together Prime Cities Forecast report includes 11 top global cities markets; thus investments in Moscow’s prime real estate were named the riskiest investments in that segment.

The study's risk score is based on two assessments: the likelihood of the best and worst scenarios occurring (SWOT analysis) and the potential market impact of these scenarios.

Experts also note that low income growth and a slowing domestic economy are considered the lowest risks to luxury markets of most cities.

02.02.2016 — “Black List” of CFC Jurisdictions Updated

The Federal Tax Service of Russia (“FTS”) has prepared a draft update of the “black list” of jurisdictions subject to the law on controlled foreign companies (“CFCs”). The list is supposed to come into force on April 1, 2016.

The list is generally comprised of countries that do not have agreements on information exchange with Russia as well as jurisdictions that do not reply to all queries, though such agreements are present, and have not established practice of information exchange with Russia.

Please note that the “black list” is applied under the law on CFCs that obliges shareholders of CFCs established in the “black list” jurisdictions to pay taxes on undistributed profits (13 and 20 per cent for natural persons and legal entities, accordingly).

Initially, 119 countries and 18 territories were on the list, including even such non-offshore jurisdictions as Austria, the United Kingdom, Switzerland, and Brazil.

The updated list consists of 111 countries and 22 territories and no longer includes Austria, the United Kingdom, and Switzerland. Abkhazia, Israel, Lebanon, Malta, and South Ossetia are neither “black-listed” any more. However, Angola, Greenland, Taiwan, the Faroe Islands, Guam, Puerto Rico, and the Virgin Islands (USA) will be on the “black list.”

The full update on the list of offshore jurisdictions (in Russian) may be found on

01.02.2016 — Russia Ratifies New Double Taxation Treaty with China

Russian President Vladimir Putin approved a bill ratifying the new China-Russia double taxation treaty (DTT) signed on October 13, 2014 and subsequently amended on May 08, 2015.

The currently effective DTT was signed back in 1994. Nevertheless, the countries decided to enter into a new DTT, which would fully reflect modern economic realities.

The main key differences between the agreements are as follows. The new DTT sets forth that a service permanent establishment (PE) will be created if a foreign enterprise carries out services within 183 days within any twelve-month period, whereas under the existing DTT the relevant period is 18 months. The new DTT does not change the rules regarding a construction PE: its status is still triggered within 18 months, as was under the 1994 treaty.

Moreover, the new DTT decreases the withholding rates of royalties (from 10 to 6%) and dividends (from 10% to 5%, provided that the the beneficial owner holds more than 25% of the shares and this holding amounts to more than EUR 80.000). The withholding rate on interest is likewise reduced from 10% to 5%.

Furthermore, according to the new DTT a tax residence certificate shall not be legalised or apostilled.

The 2014 DTT is expected to come into force on January 01, 2017, provided that China ratifies it by the end of 2016.