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A Quick Introduction To Russian Labor And Immigration Law
This month Alinga's experts give a quick overview to introduce you to Russia's Labor and Immigration legislation.
Alinga Expands Legal Services
While retaining its current services of business formation, consultation on corporate, labor, and migration law, and dispute resolution, and audits of corporate documents, Alinga has now grown to offer services specific to real estate investment, mergers and acquisitions, anti-monopoly and strategic investments clearances.
Alinga is Growing!
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Small Is Beautiful
As businesses have collapsed and companies hemorrhaged jobs during the crisis, Russian lawmakers are relying on the country’s nascent small and medium-sized enterprises to generate jobs through a small scale privatization program. But one recent regulation in particular has had regional and municipal authorities up in arms over possible loss of lucre and privileges. Legislators have voted to extend a law giving SMEs the priority right to privatize or buy premises leased from state and municipal authorities.
Business In Russia Survey
Professors Daniel McCarthy and Sheila Puffer of Northeastern University, who have published extensively on business and management in Russia, are currently studying the use of favors in Russia and the US. They would appreciate your filling out a survey that can be accessed through the following link. All responses are anonymous and your identity will not be tracked. The survey will take approximately 10-12 minutes. Please respond, if possible, by June 15.
Alinga Consulting Group
+7 (495) 988-21-91
consult@acg.ru
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Chet Bowling,
Managing Partner | |
| Welcome!
This month we launch a new format for our Market Update to match our new homepage and service pages for accounting and payroll, audit and taxation, and legal services.
Let us know what you think!
This month, we provide a new overview from our newly expanded legal services department that will quickly introduce you to Russia's labor and immigration legislation.
We would also like to remind you again that Alinga's parallel accounting and conversion services can help attract investors and help managers make better decisions. Get the most accurate financial information in form you need it when you need it.
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Foreign Companies' Income From Property Rental Taxed At 20%
According to Letter #03-08-05, dated March 5, 2010 from the Ministry of Finance, foreign and international organizations owning fixed assets in Russia must register their property with the proper authorities in the area where the property is located. This does not apply to transportation equipment, as defined by the law on fixed assets. Leasing fixed assets is regarded as "actively conducting business" and requires the formation of a permanent legal presence in Russia. Related income is taxable. Income received by foreign organizations (leasers) from rental property that is not considered a permanent legal presence is still subject to income tax, regardless of the form in which the income was received. Such income is subject to taxation at a rate of 20% from the Russian company (lessee), who is the source of payment and is recognized as the tax agent.
Insurance Deducted From Permanent Residents' Wages
According to Point 15, Part 1, Article 9 of Federal Law #212 dated July 24, 2009, foreigners temporarily residing in Russia are not subject to such insurance contributions. Foreigners' residency is regulated by Federal Law #115 dated July, 27, 2002. It states only those foreigners with permanent residency permits are recognized as permanently residing in Russia. Individuals arriving with or without a visa or who have temporary residence permits, are treated as foreign citizens temporarily residing in Russia. Thus, only foreigners with permanent residency are subject to mandatory social insurance contributions in connection with temporary disability, childbirth, or other benefits according to employment contracts.
Liquidation Payments To Non-resident Shareholders Regarded As Dividends
In Letter #03-08-05 dated March 31, 2010, the Ministry of Finance explains the taxation procedure for settlement payments from the liquidation of a Russian company to shareholder-residents of the Republic of Cyprus. The Letter states, for the purposes calculating income taxes and capital gains tax under the Double Taxation Agreement between Russia and Cyprus, such settlement payments should be regarded as dividends. The computation of the income tax base in relation to such income is stated in Point 2, Article 277 of the Tax Code. According to the Code, upon the liquidation of a company and the distribution of said company's property, the income of the taxpaying shareholders of the liquidated company is based on the market value of the received property minus the actual amount paid for their shares.
Ministry Of Finance Explains Tax Procedure For Dividends Paid To Non-Residents
In Letter #03-03-06/1/134 from March 15, 2010, the Ministry of Finance explains the tax procedure for dividends distributed by an organization to a non-resident of Russia. The letter notes that the amount of tax to be withheld from the income of taxpayers receiving dividends is paid by the tax agent. The tax base is determined in respect to income received by the tax agent in the form of dividends. in the event that a Russian organization—the tax agent—pays out dividends to a non-resident or foreign organization, the tax base of the taxpayer who received the dividends on each payment is defined as the sum of the distributed dividends. Subparagraph 3, Point 3, Article 284 or Point 3, Article 224 of the Tax Code sets the rate of tax accordingly.
Time Spent In Russia Determines Tax Status
In Letter #03-04-06/51 dated March 26, 2010, the Ministry of Finance explains that an individual residing in Russia for at least 183 calendar days out of 12 consecutive months is considered a tax resident. The 12-month period begins when the foreigner begins making income, and continues regardless of days spent outside of Russia, except for incidents explicitly provided for by the Code. Once the foreigner has been in Russia 183 days, he/she becomes a tax resident and is subject to a 13% income tax rate, instead of the 30% rate for non-residents. The rate changes during the tax period in which the change of status occurred.
IMF Suggests Crisis Tax
The IMF suggests that the "Big Twenty" countries to assess two additional taxes on large banks. The idea was floated at a meeting of the G-20 Ministers of Finance in Washington. The suggestions will be finalized at the Heads of State summit in June. Rossiiskaya Gazeta advisor Nikita Maslennikov, an expert from the Institute of Contemporary Development, explained that Russia will be obliged to impose the new taxes if "The Twenty" endorse them. According to reports, the IMF has suggested assessing banks and other financial institutions a new flat-rate tax that would support a fund to cover bank loses in case of another global financial crisis. The fund should be 2-4% of the country's GDP. Secondly, IMF proposes raising taxes on bank profits as well as employee pay.
Featured Article:
A Quick Introduction To Russian Labor And Immigration Law
All foreigners in Russia must follow Russian laws as a whole, but also immigration policy in particular. The main legislation regulating foreigners in Russia is Federal Law ¹ 115 "Concerning the Legal Status of Foreigners in the Russian Federation." This law contains the fundamental provisions regarding foreigners in the RF, their arrival and departure, temporary residency, and employment. An article written by Alinga’s Head of Legal Practice explores different grounds for foreigner’s presence in the Russian Federation, such as work visas, temporary and permanent residence and obtaining Russian citizenship.
Attracting The Most Intelligent To Russia
The Ministry of Economic Development proposed a simplification of the migratory process as its main goal in proposals to improve investment conditions in Russia. The Ministry explained that its main goal now is to attract the best minds to the country. It is a matter of personnel—not only for the future of developing innovative technological enclaves, but also for the educational sphere—since "modernization without intelligent personnel is impossible." For such people, officials propose to end all quotas on issuing work permits and entry invitations, to entirely abandon labor certification regarding the use of foreign employees, and to do without employment contracts with the employers. The preparation for these employees currently takes anywhere from 12 to 23 months, but after such changes, it should take no more than a month, according to the Ministry of Economic Development.
Court Rules Post Hurts Competition
On February 26, the Arbitration Court of Moscow upheld the Federal Antimonopoly Court (FAC) ruling that actions taken by the Russian Post could lead to a restriction of competition. Previously, FAC found that Russian Post violated Article 10 of the law "On the Protection of Competition" (which deals with abusing market dominance) after examining its handling of the company JANZEN S.R.O.—the postal operator for Germany and the Czech Republic. The court ordered Russian Post to rectify the violation. FAC received a petition from JANZEN claiming that the actions of Russian Post, a 100% state-owned enterprise, reducing and suspending services for processing international mail at Russian international postal exchange offices and violating the conditions of a contract with foreign operators for postal services - do not comply with antimonopoly legislation.
The Seizure Of Property Does Not Rule Out The Right Of Its Use
In Resolution #F09-1735/10-C5 dated March 22, 2010, the Federal Arbitration Court (FAC) of the Ural District rejected the argument that the seizure of ongoing construction projects would make their completion impossible thereby preventing them from fulfilling commitments. Legislation concerning enforcement procedures prohibits the disposal of seized property belonging to a debtor. However, it does prohibit the property from being used. Furthermore, in accordance with Article 97 of the Arbitration Procedure Code, citizens can petition the court that adopted the measure for its revocation by filing an objection.
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10.05.10
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