16.02.2018 — Russian Central Bank Lowered Key Rate to 7.5%
On 9 February the Board of Directors of the Central Bank decided to lower the key rate from 7,75% to 7.5% per annum. The primary reason for the reduction is the stable level of inflation in the country. The respective information letter of the Central Bank was published on 9 February – from this day the revised key rate shall be applied for the calculation of late payment interest, statutory interest in bankruptcy, and for determining the maximum limit for the reduction of contractual penalties.
The Bank of Russia lowered the key rate by 25 points, and currently it amounts to 7,5% per annum (please see the Central Bank’s notice as of 9 February 2018). This decision is in line with the previously declared the Central Bank’s move from stringent monetary policy to moderate monetary policy.
The Central Bank noted that it may gradually reduce the key rate further at the next board meetings. The next meeting of the Board of Directors of the Central Bank where this issue will be considered is scheduled for 13 March 2018.
15.02.2018 — Large Fines for Companies Violating Procedure for Inviting Foreigners
A bill was introduced to the State Duma toughening the liability of Russian companies, which invite foreigners to Russia. If the bill is adopted, companies acting as inviting parties (including employers inviting foreign employees) will have to control that the invited foreigners observe the purpose of entering the country and get out of the country on time. For non-compliance with this duty, companies may face a fine up to Rubles 500,000 (approx. Euro 7,150).
The State Duma will consider a bill on the introduction of significant fines for companies inviting foreigners, if the invited persons violate migration laws. In particular, the inviting party may be brought to liability if the foreigner violates the purpose of entering Russia or fails to leave the country within the established timeframes. If the bill is adopted, the fine will amount to Rubles 400,000 – 500,000 for companies (approx. Euro 5,720 – 7,150), and to Rubles 45 000 - 50 000 (approx. Euro 540 - 715) for officials.
The bill will affect Russian employers who act as an inviting party for foreign citizens. Thus, companies hiring foreign employees have to pay more attention to migration law matters.
14.02.2018 — Russian Government Encourages Development of Small and Medium-Sized Business
On 8 February 2018, as a result of the meeting of the Presidium of the Council under the President of the Russian Federation on Development of Small Business and Support of Individual Entrepreneurship the Russian Government adopted decisions intended to encourage development of small and medium-sized business. In particular, the following initiatives were endorsed: abolishment of the state duty for the registration of companies and individual entrepreneurs in electronic form (“start a business with zero state duty”), abolishment of the requirement that the company’s office shall be situated at its registered address, reduction of the shareholder’s personal income tax base in case the company is voluntarily liquidated (“closing down a business with no taxes”), as well as raising the marginal revenue level of the company to be eligible for the simplified tax system (that is usually more favorable). Experts assess these legislative initiatives positively and expect that their implementation will promote the development of small business.
On 31 January 2018 the meeting of the Council under the President of the Russian Federation on Development of Small Business and Support of Individual Entrepreneurship was held (please see the agenda, the transcript and the decisions taken on the official website of the Russian Government). A number of important issues have been considered at the meeting, and several decisions aimed at the development of small and medium-sized business and individual entrepreneurship were adopted. Following the decisions taken, the relevant ministries were instructed to draft the respective bills.
Particularly, the Ministry of Finance will draft bills on the abolishment of the state duty (that currently amounts to Rubles 4,000 (approx. Euro 57) for companies and Rubles 800 (approx. Euro 11) for individual entrepreneurs) for filing the application for the state registration of business in electronic form (“start a business with zero state duty”), and on the reduction of the shareholder’s personal income tax base on the cost of the property and money received as a result of the company’s voluntary liquidation (“closing down a business with no taxes”).
Moreover, the Ministry of Finance, together with the Ministry of Economic Development and the Central Bank, will consider the issue on raising the marginal revenue level of the company to be eligible for the simplified tax system.
The Ministry of Regional Development together with the Ministry of Justice and the Ministry of Finance were charged with drafting a bill on the possibility to use the postal address of the company’s bank as the company’s registered address, and examine the option of using the company’s postal or email addresses for this purpose. Thus, according to the proposal it will be no longer required that the company’s office is situated at its registered address.
The initiatives discussed touch upon the issues that are currently topical for small and medium-sized business, and their adoption will simplify bureaucratic procedures and reduce the tax burden.
13.02.2018 — Russia Ranked 29th in Financial Secrecy Ranking
According to the recent study conducted by Tax Justice Network, Russia ranked 29th in the ranking of financial secrecy jurisdictions. To compose the ranking, experts analyzed such areas as the transparency of legal entities’ operations, the integration of tax and financial laws and property registration, the implementation of international standards and the level of international cooperation in 112 countries. The experts concluded that most non-transparent countries are Switzerland, the USA and notorious offshore jurisdictions. At the same time, Slovenia, Great Britain and Belgium were considered to be the most transparent. Russia ranked 29th out of 112 places with the secrecy level of 63.9%.
The British non-governmental organization Tax Justice Network published the results of the report on the financial secrecy in the world. Russia ranked 29th out of 112 places with the secrecy level of 63.9%. As the researchers explain, the final financial secrecy index is composed of the number of offshore activities, transparency in financial matters, involvement in the international data exchange and anti-money laundering activity.
According to experts, the fact that Russian companies are not obliged by law to publish information on beneficiaries and publicly disclose accounting and financial information makes has a negative impact on the results of Russia in ranking. At the same time, it should be noted that the Russian authorities are already implementing reforms in this field: namely, starting from 1 June 2018 the Federal Tax Service will publish basic information about the companies, including the amount of income and expenses, the average number of employees, the amount of taxes paid, tax arrears, penalties and fines.
12.02.2018 — Privatization of Leased State Property on Preferential Terms
The Government of the Russian Federation has presented a bill to the State Duma that broadens the right of the small and medium-sized enterprises leasing state and municipal property to privatize it on preferential terms. According to the procedure effective at the moment, entrepreneurs who were leasing municipal and regional property as of 1 July 2015 may exercise their preemptive right to privatize it. Such a preemptive right is effective until 1 July 2018. The bill suggests that the reference to specific dates shall be eliminated, and that the term of the preemptive right shall be prolonged indefinitely. Moreover, the bill lifts restrictions on the privatization of leased federal property.
At the moment small and medium-sized enterprises who were leasing municipal and regional property as of 1 July 2015, have the right to exercise preemptive right to purchase it on preferential terms until 1 July 2018. The proposed bill significantly expands this right.
In particular, according to the bill the reference to a specific date, by which the property had to be leased, will be eliminated. Furthermore, while under the effective rules, entrepreneurs are to lose this preemptive right on 1 July 2018, the bill suggests prolonging this right for an indefinite term. Another significant development is the expansion of this right to federal property, while previously only leased municipal and regional property could be privatized on preferential terms.
According to experts, despite the fact that the respective tenant’s right to privatize the leased property was in effect for more than ten years, by the moment only a small number of entrepreneurs managed to exercise it. Thus, the business community welcomes this initiative and hopes that the bill will be adopted.