PRESS RELEASE*
The following issues are scheduled for discussion at the Government Presidium meeting on July 14, 2011:
1. On the draft federal law On Amending Article 13 of the Federal Law On Product-Sharing Agreements and Articles 35 and 37 of the Law of the Russian Federation On the Customs Tariff and Declaring Null and Void Some Provisions of Legislative Acts of the Russian Federation.
The draft federal law has been submitted by the Ministry of Energy.
Since 2008, customs authorities have ceased giving operators of the existing product-sharing agreements (PSA) a confirmation for exemption from the customs duty on the amount of exported hydrocarbons that were due to (owned by) the Russian Federation, since the exemption of the customs duty is envisaged by Article 346.35 of the Tax Code, the provisions of which, in compliance with Article 2 of the code, are not applied to the relations of establishing, introducing and levying customs payments and also to the relations ensuing from control over customs payments, appealing acts issued by customs authorities, the activities (inactivity) of their officials and bringing offenders to justice, unless provided otherwise for by the code.
Article 37 of the Law On the Customs Tariff stipulates that pursuing the Russian Federation’s trade policy within its customs territory allows offering tariff preferences in form of returning a previously paid duty, reducing a duty rate and in exceptional cases exempting goods from duty, including goods imported in the Russian Federation as a contribution to the authorised funds of companies with foreign investment and of foreign companies. It also exempts certain types of goods of these companies’ production, exported by these companies in cases envisaged by a PSA signed by the government or an authorised state agency in compliance with the legislation, or during the pay-off period of foreign investment as envisaged by the Supreme Council of the Russian Federation.
Taking into account the principles of the existing PSA legislation, which provides for the possibility for the Russian Federation to receive revenues from the implementation of a PSA in the monetary form, thus authorising the investor to sell the products due to the government and to transfer the returns from the sale to the budget system, levying the customs duty when an investor exports products due to the government seems excessive, since it does not increase the returns and, moreover, results in a significant increase in the number of administrative procedures.
The draft suggests introducing amendments to Article 35 of the Law On the Customs Tariff that envisage exemption of exported goods owned by the parties to an agreement from the customs duty, and also to Article 37 of the same law that envisage excluding the duplicate provision on allowing tariff preferences in the form of a return on the previously paid duty, the reduction of the duty rate and in exceptional cases the exemption from the duty of goods exported by the investor.
Besides, the draft suggests introducing amendments to Clause 1, Article 13 of the Federal Law On Product-Sharing Agreements that would allow taking into account the special procedure for calculating and making obligatory “non-tax” payments, envisaged not only by the tax or customs legislation, but also by other legislative acts of the Russian Federation (for example, payments for subsurface use envisaged by the Law of the Russian Federation On Subsurface Resources) when preparing and implementing PSAs.
2. On the draft federal law On Amending Article 82 of the Criminal Procedural Code of the Russian Federation.
The draft federal law has been prepared by the Ministry of the Interior.
Law enforcement agencies’ fight against corruption-related crimes (commercial bribery, bribery, bribe-taking) and other crimes (trafficking of arms, drugs, precious stones and metals, counterfeit money) envisages the use of money and other valuables during the investigation.
For this purpose not only the money from the federal budget allocated to law enforcement agencies are used in their investigative work, but also (as envisaged by the Federal Law On Investigative Work) the money of legal entities and individuals (for example, in the case of extortion).
Practice shows that, if necessary, these parties are willing to provide their own money (including significant sums) and valuables for this purpose for the short term on condition of their quick return.
However, current legislation does not provide for the possibility of a fairly quick return of money and valuables used for the specified purpose to the owner. In compliance with Part 1, Article 82 of the Criminal Procedural Code, confiscated money and valuables that are declared physical evidence are entered upon the record and are returned to their rightful owners after the sentence comes into force or after the period for appealing the dismissal of the criminal case is over.
This circumstance not only prevents more close cooperation of legal entities and individuals with law enforcement agencies in the fight against corresponding crimes, but also to a certain extent limits the owner of the money and the valuables while exercising his/her ownership rights.
With this regard, the draft law proposes introducing amendments to Article 82 of the Criminal Procedural Code that envisage the possibility of returning the money and the valuables confiscated during the investigative work (after their examination and other necessary investigative actions) to their rightful owner before the time envisaged by Part 1 of this article.
3. On the draft federal law On Amending Article 26 of the Federal Law On Narcotic Drugs and Psychotropic Substances.
The draft federal law has been submitted by the Ministry of Healthcare and Social Development.
It proposes giving the Ministry of Healthcare and Social Development the power to determine the procedure for printing and distributing special forms of receipts for prescribing narcotic drugs or psychotropic substances (in coordination with the Federal Service for Drug Control).
Presently, the Ministry of Healthcare and Social Development does not have this right, while the reserve of the specified forms of receipts, printed earlier, needs to be replenished.
The financing of the printing of these forms is to be provided starting from 2012 from budget appropriations envisaged for the Ministry of Healthcare and Social Development.
4. On the draft federal law On Ratification of the Convention between the Government of the Russian Federation and the Government of the Republic of Chile on Avoiding Double Taxation and Preventing Evasion of Income and Capital Taxes.
The draft federal law has been submitted by the Ministry of Foreign Affairs and the Finance Ministry.
The Convention between the Government of the Russian Federation and the Government of the Republic of Chile on Avoiding Double Taxation and Preventing Evasion of Income and Capital Taxes was signed in Santiago on Nov. 19, 2004.
The Convention was based on the draft standard agreement on avoiding double taxation of income and property and also on the standard models recommended by the Organisation for Economic Cooperation and Development and the United Nations.
The draft law envisages the ratification of the Convention in compliance with Subclause A, Clause 1, Article 15 of the Federal Law On the International Treaties of the Russian Federation.
The convention covers the taxes on incomes and the capital of persons who have their permanent residence, permanent location, location of management or registration in the Russian Federation or the Republic of Chile.
Under the convention, the taxation of incomes (profits) from entrepreneurial activities of a person of one contracting state is administered in the other contracting state if such a person is engaged in activities in that other state through a permanent representative office located there. With regard to building and assembly work and the corresponding supervisory activities, and also professional services and other independent personal activities, the profits from such activities will be taxable if the duration of such work exceeds six months or 183 days within any 12-month period.
The income from immovable property may be taxed in the state where such property is actually located.
The profits derived by the enterprise of one contracting state from the use of ships or aircraft in international carriage are taxed only in that state.
Capital represented by immovable property may be taxed in the state where such property is actually located.
The dividends paid by a company which is resident in one state to the resident of the other state may be taxed in this other state. If such dividends are taxed in the state of origin and their recipient is a person who has de facto rights to dividends, the tax shall not exceed:
a) 5% of the total sum of the dividends if the de facto recipient directly owns at least 25% of the capital of the company that pays the dividends;
b) 10% of the total sum of the dividends in all other cases.
The right to tax interest is given to the state where the recipient of the income is resident. At the same time, the source state may be given this right, too, but in this case, the tax cannot exceed 15% of the total sum of the interest.
The royalties arising in one state and paid to the resident of the other state may be taxed in this other state.
However, these royalties may also be taxed in the state where they arise, but if the de facto recipient is a resident of the other state, the tax shall not exceed:
a) 5% of the total sum of the royalties for the use of, the right to use any industrial, commercial or scientific equipment;
b) 10% of the total sum of the royalties in all other cases.
The convention provides an individual income taxation regime similar to that of internationally accepted. An individual shall pay taxes on all his/her incomes in the country where he/she stays for more than 183 days in any 12-month period.
An exception, in line with international practice, is made for the members of the crews of transport vehicles, actors, athletes, civil servants, pensioners, students, interns and trainees.
The convention guarantees against tax discrimination, regulates the procedure of considering petitions and applications by taxpayers and of resolving disputes, as well as the issues of exchanging information between the competent bodies of the contracting states and determines methods of eliminating double taxation.
5. On the draft federal law On Ratification of the Protocol on Amending the Agreement between the Government of the Russian Federation and the Government of the Republic of Cyprus on Avoiding Double Taxation of Income and Capital dated Dec. 5, 1998.
The draft federal law has been submitted by the Ministry of Foreign Affairs and the Finance Ministry.
It envisages the ratification of the Protocol on Amending the Agreement between the Government of the Russian Federation and the Government of the Republic of Cyprus on Avoiding Double Taxation of Income and Capital dated Dec. 5, 1998, and signed in Nicosia on Oct. 7, 2010.
The protocol specifies certain terms used in the agreement (profits from international carriage, dividends, interest) and also the provisions of the agreement related to holding mutual agreement procedures and consultations by the competent bodies of the two states, including in case of disputes related to determining the effective location of the management of legal entities.
Article 5 “On the Permanent Representation” of the Agreement will be amended with provisions that elaborate the procedure of taxing part of profits from providing services. Articles 6 and 10 “On Profits from Immovable Property” and “On Profits from Dividends” will be amended with provisions that allow for taxing the profits of mutual funds. Article 13 “On Profits from Estrangement of Property” will be amended with provisions that allow taxing the profits from estranging the shares of companies, the capital of which is represented by immovable property by 50% or more (with certain exceptions accepted in international and Russian practice). Articles 26 “On the Exchange of Information” and Article 27 On “Assistance with Tax Collection” are presented in compliance with the provisions of the Model Tax Convention on Income and on Capital of the Organisation for Economic Cooperation and Development. The agreement will also be amended with Article 29 “On the Restriction of Preferences.”
6. On the draft federal law On Amending the Law of the Russian Federation On International Commercial Arbitration.
The draft federal law has been submitted by the Ministry of Economic Development.
In 2006, the UN General Assembly introduced amendments to the UNCITRAL Model Law on International Commercial Arbitration, which was adopted in 1985 by the UN Commission on International Trade Law, in line with practices of international commercial disputes.
The draft law seeks to streamline the provisions of the current Law of the Russian Federation On International Commercial Arbitration with the Model Law.
International practice shows that in recent years priority areas for improving the regulations of international commercial arbitration have included the form of an arbitration agreement and the use of injunctions.
The new regulation of the form of an arbitration agreement offers a detailed description of potential ways to satisfy a claim in a written form in line with the current practices of signing commercial agreements.
Thus, Article 7 of the draft law “On the Definition and Form of an Arbitration Agreement” has been edited. The article gives a clearer definition of an arbitration agreement. Additionally, it specifies the requirements to the forms of an arbitration agreement and determining the moment of signing an arbitration agreement.
New provisions related to injunctions reflect current trends and international standards in this sphere that are recommended for all states to take into account in their legislation. They envisage the introduction of additional provisions on the possibility of making a decision with regard to injunctions in any form, on the terms of the use of injunctions and on the temporary nature of such measures. Along with these provisions, the draft law regulates the grounds (conditions) for the use of injunctions.
Notably, the draft law proposes introducing provisions that will allow a court of arbitration to make a ruling on injunctions and will also define the procedure for injunctions.
Notably, Articles 171-179 give a court of arbitration the powers to make a ruling on injunctions, define the conditions for making such a ruling, define the procedure for petitioning such a ruling and conditions for making preliminary rulings on injunctions, define a special regime for preliminary rulings on injunctions, determine the procedure for changing, suspending and cancelling rulings and preliminary rulings on injunctions, determine the procedure for providing counter injunction, the procedure for disclosing of information and for compensating losses, and determine the procedure for injunctions ordered by court.
7. On the signing of the Agreement between the Government of the Russian Federation and the Government of the Republic of Guatemala on Mutual Encouragement and Protection of Capital Investment.
The draft resolution has been submitted by the Ministry of Economic Development.
It envisages the granting of a most favoured regime to investors whereby investment is allowed into the territory of the state referred to in the agreement in accordance with its legislation, and the investors of the state of the other contracting party are granted a regime no less favourable than the regime granted to national investors or investors of third countries. Each party reserves the right to apply and introduce in accordance with its legislation exemptions from the national regime with regard to foreign capital investment.
The draft guarantees the protection of capital investment against seizure – nationalisation, expropriation or other measures with similar consequences, except when such measures are taken in public interests under a procedure envisaged by the laws of the states of the contracting parties. The mechanisms of capital protection against seizure and reimbursement of damage are specified. Measures of judicial protection of the rights of investors, and procedures of resolving investment disputes, including through international arbitration, are envisaged. The free transfer of incomes and other payments arising from capital investments is guaranteed.
In compliance with Article 15 of the Federal Law On the International Treaties of the Russian Federation, the agreement is subject to ratification after signing.
8. On submitting to the president of the Russian Federation for ratification the Agreement between the Russian Federation and the Republic of Abkhazia on a Joint Russian Military Base on the Territory of the Republic of Abkhazia.
The draft resolution has been submitted by the Ministry of Foreign Affairs and the Ministry of Defence.
The provisions of the inter-government agreement regulate the issues of jurisdiction, the status of the military personnel of the joint Russian military base and their families, the procedure for the use and the functioning of the base, the conditions of using the land plots and other property, and also the procedure for using the base together with the Abkhazian armed forces for protecting Abkhazia’s sovereignty and security, including counteraction to international terrorist organisations.
The agreement is subject to ratification in compliance with subclauses A, B and G, Clause 1, Article 15 of the Federal Law On the International Treaties of the Russian Federation.
The implementation of the agreement will not require additional allocations from the federal budget.
9. On submitting to the president of the Russian Federation for ratification the Agreement between the Russian Federation and the Republic of South Ossetia on a Joint Russian Military Base on the Territory of the Republic of South Ossetia.
The draft resolution has been submitted by the Ministry of Foreign Affairs and the Ministry of Defence.
The provisions of the inter-government agreement regulate the issues of jurisdiction, the status of the military personnel of the joint Russian military base and their families, the procedure for the use and functioning of the base, the conditions of using the land plots and other property, and also the procedure for using the base together with the South Ossetian armed forces for protecting South Ossetia’s sovereignty and security, including counteraction to international terrorist organisations.
The agreement is subject to ratification in compliance with subclauses A, B and G, Clause 1, Article 15 of the Federal Law On the International Treaties of the Russian Federation.
The implementation of the agreement will not require additional allocations from the federal budget.
10. On distribution of subsidies to the budgets of Russian regions to support measures to ensure the balance of these budgets in 2011.
11. On the draft federal law On Amending the Federal Law On the Technical Regulations of Fire Safety.
The draft federal law has been submitted by the Ministry of Civil Defence, Emergencies and Disaster Relief.
It proposes amending the Federal Law On the Technical Regulations of Fire Safety with provisions that set requirements for the setup of fire protection units at facilities with fire and explosion hazards due to their technological manufacturing processes, and also at facilities that are of vital importance for the Russian Federation’s national security.
At the same time, the draft law introduces requirements to the fire safety of healthcare and social welfare institutions where people stay on a permanent basis or for inpatient treatment, in part of their additional equipment with fire alarm systems, using personal devices with light, sound and vibration alarms, and with autonomous reserve sources of power supply.
It proposes to increase the separation distance between buildings and facilities of urban settlements and forest ranges from 50 to 100 metres and between buildings and facilities of rural settlements, horticultural cooperatives and non-profit country associations of citizens and forest ranges from 15 to 30 metres.
The increased separation distance will be applied only to newly designed buildings and facilities of the above-mentioned settlements, horticultural cooperatives and non-profit country associations of citizens.
The draft law proposes amending the law with a new article that sets fire safety requirements for technological equipment used in a technological environment with fire and explosion hazards, and also with new parts of the articles that set requirements for the individual and social fire risk at industrial facilities for people living in residential zones close to these facilities, to external fire water supply and to activities of certifying bodies.
It proposes excluding certain requirements for fire safety from the law and including them in fire safety rules that are optional regulatory documents (requirements for passages and approaches to buildings, automated fire extinguishing and alarm systems, smoke protection systems for buildings and facilities, fire water supply to villages and town districts, etc)
12. On allocating to the Government of the Republic of Dagestan funds from the Reserve Fund of the Government of the Russian Federation for the Prevention and Elimination of Emergency Situations and the Aftermath of Natural Disasters to compensate for damage caused when preventing a terrorist attack by lawful means in Makhachkala (the Republic of Dagestan) on Jan. 14-15, 2011.
13. On allocating to the Government of the Republic of Dagestan funds from the Reserve Fund of the Government of the Russian Federation for the Prevention and Elimination of Emergency Situations and the Aftermath of Natural Disasters for compensation payment to a legal entity for the damage inflicted as a result of a terrorist attack committed in the Khasavyurt district, the Republic of Dagestan, on Jan. 26, 2011.
14. On the issuance to the Government of the Karachayevo-Circassian Republic of state housing certificates for distribution among citizens who lost their homes as a result of an emergency on the territory of the Karachayevo-Circassian Republic on Aug. 1-3, 2009.
Moscow,
June 13, 2011
* Press releases by the Department of Press Service and Information are based on the materials submitted by the executive federal bodies for discussion at the Government Presidium.
