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Featured Article:   SAC Rules On Changes To LLC Law This month Alinga's experts overview an important court ruling that may affect your LLC (OOO).      Alinga news:   Seminar "Update on Doing Business in Russia" Alinga held a seminar for their clients titled 'Update on Doing Business in Russia' on May 25, 2010 at the AEB office. The seminar focused on several key business and legal issues, including the changes in hiring foreign specialists. Based on the feedback, the seminar was deemed informative and provided useful information for decision makers in Russia. Follow the link to find key presentations from the seminar.   Meet Our Team Meet our team! This new page presents bios on our senior employees and a short history of our company!      Alinga is Growing! we are seeking:    Специалист отдела бухгалтерского сопровождения      business in russia :   Economic News in Review - May 2010 The following resource is meant to quickly introduce the reader to some of the major English-language commentary concerning the current financial crisis in Russia, how that crisis might affect Russia's government and ruling structure, and what the international outlook is for Russian business.   Review Of Recent Changes To Tax-Related Legislation In The Russian Federation This monthly Russian-language service from Alinga and regular feature of the Alinga Market Update is designed to bring your financial personnel a broad view of recent changes to the Russian Tax Code. Forward this link to them!   Meeting With Heads Of US Venture Capital Funds President Dmitry Medvedev discussed the investment climate in Russia and the country's innovation potential with heads of US venture capital funds. Watch First Channel's report on the meeting and exerpts from the discussion.   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

Chet Bowling, Managing Partner

Welcome from Chet Bowling

There is renewed confidence in the Russian market, a sense that this is a good (read "cheap") time to enter that market. I draw this conclusion by the amount of new business we have seen in Q1 2010 as compared to Q3-Q4 2009, much of which is multinationals who have long had a distributor in Russia but now decided to open a corporate office on the ground - both to sell directly to the client and to "be closer to the distributor and provide more support."

Russian GDP is up 3% y-o-y for Q1. However, things vary widely from sector to sector. Manufacturing seems to be almost at standstill while retail and service seem to be picking up rapidly. Construction is still in the doldrums as far as we can tell, but our clients in that sector are optimistic with "more proposals out compared to this time last year." Banks still seem reluctant to lend, but mortgage lending is definitely increasing and consumer credit is showing some growth. Large companies are finding government banks willing to help refinance debt owed to big private banks. Yet, some jitters remain about nonperformance - and collateral has been transferred in lieu of payments in some cases. As always, the price of oil is the main factor. If we stay at $70 we could see rapid growth by the end of the year.

Contact us today!

Yulia Mazur, Partner Head of Accounting

Can Tax Overpayments Be Applied To Personal Income Tax?

No one questions that it is possible to offset the overpayment of one federal tax against another - excpet, sometimes, tax officials. Although extensive arbitration practice regarding these types of disputes has not been fully formed yet, there has still not been a court case which has ruled that this kind of overpayment offset procedure is prohibited by law. This article outlines arguments to justify deducting overpayments of federal taxes from PIT owed. However, this practice will most likely have to be defended in court.

Galina Belikova, Director  Audit and Tax Department

Organizations Do Not Pay PIT For Staff In Foreign Branches

The Ministry of Finance has answered an official question on whether a certain organization must act as the tax agent and pay PIT for employees that work at its Libyan branch if the branch had been created and registered by the organization in Libya. This concerns Russian citizens who work in foreign branches as their primary place of business according to their employment contracts. The ministry notes that if the employment contract specifies that a staff member’s workplace is in a foreign country, or if individuals operate and render services in a foreign country as stipulated in a civil law contract, the compensation received by these individuals is not treated as income from a Russian source. Thus, the employer does not act as the tax agent when its employees' income is received from a source outside of Russia.

New Tax Regime For Foreigners Employed On Personal Patents

A law that will come into force January 1, 2011 will introduce a special personal income tax regime for foreigners working for private individuals in Russia. The tax will be a fixed advance payment of 1000 rubles per month. Legislators hope that this will simplify taxes paid by domestic help such as nannies and housekeepers. The tax is to be paid by foreigners according to their place of residence the day before the start of the working period specified by their permit. They will receive a reciept from the tax authorities for the payment. The tax will be adjusted annually for inflation. The federal law will also provide new, more advantageous conditions that will attract highly-qualified foreign specialists (professionals earning more than two million rubles per year) to work in Russia. Such foreigners will be allowed to pay 13% tax for the entire length of their contract, rather than having to pay 30% for the first 180 days and then switching to 13% of they have established themselves as tax residents.

Security Deposits To Foreign Venders Are Considered Prepayments

In cases  where a foreign company licenses its trademarks to a Russian organization, Russia is considered the location where these services took place for calculating taxes. If the Russian organization pays a vendor that later on will be added to its account for payment for services under the contract, then the Ministry of Finance considers this a preliminary payment of services. Non-residents must pay VAT on these prepayments. This VAT is deductable on the basis of invoices after the services provided for by the licensing contract are performed, but only those services that are part of transactions subject to VAT. If the foreign organization gives a refund due to a refusal to conclude a license contract, the VAT that has already been paid is also deductable.

Anatoly Gakenberg, Head of Legal Practice

Featured Article:

SAC Rules On Changes To LLC Law

The Supreme Arbitration Court of the Russian Federation (SAC) has released Informational Letter #135 “On Issues Related to the Application of Article 5 of Federal Law ‘On Introducing Changes to Part One of the Russian Civil Code and to Other Legislative Acts of the Russian Federation.’” It is worth commenting on some of the key points of the Informational Letter which affect many companies in Russia. The article by the specialists of Alinga’s Legal Department revisits issues related to company’s re-registration, such as requirements for registration, charter documents and changes to it, register of shareholders and other issues. 

FMS May Introduce Mandatory Fingerprinting For Foreign Workers

The State Duma is considering the bill in its second reading. It also stipulates that work permits will be introduced at a rate of one thousand rubles for migrant workers who work for private individuals. The permits would be valid for one to three months, beginning the day of procurement, and could be extended repeatedly for one to three month periods. However, the total duration of the permit, including any extensions, should not exceed 12 months from the issue date. The license would allow migrant workers to work only in the area in which it was issued. If the new law is adopted, foreigners in Russia who do not require a visa would be subject to madatory photographing and fingerprinting when issued work permits. Migrants without work permits, as well as foreigners who turn to the FMS for restoration of lost or damaged documents (migration cards or visas), would undergo this procedure as well.

Banks May Be Obligated To Disclose Commissions

The State Duma will consider the draft bill “On the Introduction of Amendments to Article 29 of the Federal Law ‘On Banks and Banking Activity’” (in the section which establishes the responsibility of lending agencies to inform clients about commission rates when withdrawing funds at ATMs). This is the bill’s second reading; the first occurred at the end of January, 2010. The bill has been improved with corrections prepared by the Association of Russian Banks and its members. The bill would require banks to warn a client—the user of a debit card— about the bank’s commission rate on withdrawing funds from an ATM.  The bank would also need to add a separate line on the ATM receipt listing the amount of commission taken as a result of the transaction.