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History of the Question
RUS1 Since the
dissolution of the Soviet Union at the end of 1991, the former Soviet republics,
including Russia, have been engaged in creating market-oriented economic
systems. To reach this aim, substantial investment is required. At the beginning
of reforms in Russia, as in other former Soviet republics, there were thoughts
that foreign investment would greatly accelerate the process of reforming the
RUS2 This chapter
examines the current state of foreign investment in Russia, issues of admission
of foreign investment, treatment of foreign investment, relevant international
treaties, and settlement of investment disputes.
Government Investment Programme
RUS3 The Russian
government passed Decree Number 1016 concerning a Comprehensive Programme for
Stimulation Domestic and Foreign Investment in the Economy of the Russian
Federation on 13 October 1995. The Programme has been developed in conjunction
with the Programme of the entitled Reforms and the Development of the Russian
Economy in 1995-1997, as approved by Decree
Number 439 on 28 April 1995.
RUS4 A condition for improving the investment climate is the further
reduction of inflation and the refinancing rate of the Central Bank of the
Russian Federation. One of the central issues in improving the investment
climate is improving guarantees of security to investors in the Russian market.
In accordance with the Programme, the share of foreign investment was expected
to grow from 3.3 per cent in 1995 to 5.2 per cent in 1997. It is proposed to
ultimately increase the share of foreign investment to 10 per cent.
Stimulation of Foreign Investment
RUS5 The Programmes plan for the attraction of foreign investment is
based on the following aims:
Realising Russia's scientific and technical potential, particularly
at converted enterprises in the military-industrial sector;
Promoting Russian goods and technology in the foreign market;
Promoting the expansion and diversification of export potential and
the development of import-substituting production in certain sectors;
Promoting the flow of capital into regions with surplus labour
resources and regions with rich natural resources to accelerate their
Creating new jobs and bringing in advanced forms of production
Promoting the development of the production infrastructure.
RUS6 Measures of the
Russian government intended to improve the investment :climate
Reduce the rate of inflation;
Provide preferential treatment for the taxation of the profit of
commercial organisations with foreign investment, with exemptions from
value-added tax for imported technical equipment and related spare parts; and
Grant preferential credits in foreign currency received from foreign
banks and credit institutions.
WS7 The stimulation of
foreign investment was intended to increase the volume
of capital investment in the Russian economy in 1996 by four per cent ind
in 1997 by seven per cent.
RUS8 There has been an
appreciable progress in the reform of civil legislation in
the Russian Federation. A substantial Civil Law reform was started in 1994 by
the adoption of the first part of the new Russian Civil Code. In 1995, the
Russian Parliament passed the second part of the Civil Code. The new Russian
Civil Code builds on previous Soviet Civil Law, but it represents a significant
advance for Russia in the promotion of free enterprise and the regulation of
contractual and other commercial relations in a market economy. The Russian
Civil Code prevails over inconsistent provisions of other laws, edicts of the
President, or decrees of the government. There will not be a separate Commercial
RUS9 New legislation is
planned in regard to tax incentives for the capitalisation of profit, the
development of a secondary securities market and the transfer of capital,
insurance activity and guarantees, mortgages, preventing the flight and
encouraging the return of domestic capital from abroad, and attracting foreign
Admission of Foreign Investment Definitions and Forms of Investment RUS10 The Law on Foreign Investment
specifies that foreign investors can be:
Foreign legal persons;
Foreign citizens, including stateless persons;
Russian citizens permanently residing abroad who are registered in their country
of residence to engage in commerce;
Foreign states; and
RUS11 The Law on Foreign
Investment defines the property that can be understood as foreign investment as 'all
types of material assets and intellectual property invested by foreign investors
into entrepreneurial and other types of activity with the aim of deriving profit'.2
Investment can take the following legal forms in accordance with article 3 of
the Law on Foreign Investment:
Equity participation in joint ventures founded with Russian participants;
Establishment of wholly owned subsidiaries;
Acquisition of enterprises, assets, buildings, structures, equity
stakes in enterprises, shares, bonds and other securities, and other property
not prohibited from foreign investment by other Russian legislation;
Acquisition of rights to use land and other natural resources;
Acquisition of other property rights; and
Other investment activities not prohibited by Russian legislation,
including making loans, issuing credits, and offering property and property
RUS12 The Law on Foreign
Investment provides that enterprises with foreign investment may be set up in
accordance with Russian legislation as:
Enterprises with foreign equity participation (joint ventures), as
well as their subsidiaries and branches;
Enterprises wholly owned by foreign investors, as well as their
subsidiaries and branches; and
Branches of foreign legal entities.
RUS13 The Russian law
provides for foreign investors a right to make investment in any objects in the
Russian Federation which are not prohibited by law ind
which may include:
Newly created, modernised, fixed, and circulating assets in all
sectors of the economy and industries;
Scientific and engineering products;
Rights to intellectual property; and
Legal Forms of Enterprises with Foreign Investment
RUS 14 The Russian Civil
Code states the principal legal forms in which an enterprise vith
foreign investment can be organised. Such enterprise can be organised as a:
Limited liability company;
Company with additional liability; and
Joint stock company (open or closed).
RUS15 The registration of an enterprise with foreign investment in Russia is
not a very quick and easy process. Basic rules in respect of registration can be
found in the Law on Foreign Investment. There also were numerous applicable
Presidential Decrees and Governmental Decrees. On 8 July 1994, Presidential
Decree Number 1482 was approved, and it simplified the procedure set forth in
the Law on Foreign Investment. To establish a company with foreign investment in
Russia, the founders must obtain relevant approvals and register with various
government authorities. The documents which should be produced for registration
depend on the following factors:
Status of the founder;
Legal form of enterprise created;
Size of the investment; and
Purpose for which the entity is being created.
RUS16 The foundation
documents of an enterprise with foreign investment must define the objective of
its activity, the composition of its participants, the size and the procedure
for the formation of its authorised capital, the amount of the shares of the
participants, the structure and composition and terms of reference of its bodies
of management, the procedure for making decisions, the issues which require a
unanimous vote, and the procedure for the liquidation of the enterprise.
Contributions to the authorised capital of enterprises with foreign investment
will be jointly assessed by its participants on the basis of world market
prices. Should such prices be unavailable, the amount of the contributions will
be jointly determined by agreement of the participants in the enterprise.
RUS17 The Russian Civil
Code requires state registration of legal entities in the Russian Federation on
the basis of the Law on Registration of Legal Entities.1
At writing, this Law had not been enacted, and the Regulation on Procedure for
Registration of Business Entities with Governmental Authorities is in force
because it does not conflict with the new Civil Code.
RUS18 All documents
submitted to the registration authorities must be in the Russian language or in
a foreign language with a Russian translation attached. The translation should
be notarised and legalised.
RUS19 The government
authorities involved in the registration procedure are the Moscow Registration
Chamber, the State Registration Chamber, and the Antimonopoly Committee. The
Moscow Registration Chamber issues certificates of registration for Russian
enterprises with foreign investment. A Russian company with foreign investment
must obtain certificates of registration from both the Moscow Registration
Chamber and the State Registration Chamber. In addition, the Antimonopoly
Committee must be notified within 15 days following the establishment of a
company if its founders have combined assets greater than 100 statutory minimum
wages. The foundation documents that must be presented to the Moscow
Registration Chamber consist of the:
Charter of the company;
Memorandum of incorporation;
Minutes of the meeting of the founders; and
Original guarantee from the landlord of the legal address of the
RUS20 After provisional registration, companies with foreign investment must
submit proof of registrations from other state bodies, including a confirmation
of registration with the Russian Federation State Committee for Statistics,
confirmation of registration with the Tax Inspection, confirmation of
registration with the Pension Fund, declaration in respect of the seal of the
company, and documents from a Russian-authorised bank, staling
that the company has opened a bank account with 50 per cent of the charter
capital paid in.
RUS21 The foreign investor must produce:
Original letters from the bank of the foreign investor, stating
that the foreign investor is solvent;
Articles of incorporation of the foreign company;
Registration certificate or an extract from the Commercial Register; and
Copy of the decision of a competent body of the foreign company on the
establishment of the company in Russia.
RUS22 After receipt of
the permanent certificate of registration from the Moscow Registration Chamber,
the company must apply for registration with the State Registration Chamber. The
State Registration Chamber requires the same documents as the Moscow
RUS23 After registration
of the company in the form of a joint stock company with the State Registration
Chamber, its shares should be registered with the Russian Federation Ministry
Finance. An enterprise with foreign investment may be denied state registration
only in the event of violation of the procedure governing the establishment of
such enterprises in accordance with Russian legislation. The refusal to register
an enterprise may be appealed to the courts.
RUS24 If, on the
expiration of one year following registration, the appropriate documents have
not been submitted to confirm the contribution by each participant in the
enterprise of 50 per cent of the amount of its authorised capital, the body
which has registered the enterprise will declare the registration void and order
its liquidation. An enterprise with foreign investment may establish
subsidiaries which enjoy the rights of legal entities, as well as branches and
representative offices within and outside Russia.
Regulation of Admission
Restrictions on Foreign Investment
RUS25 In General. The
Law on Foreign Investment states that foreign investment may take any form not
prohibited by Russian legislation.1
RUS26 Licensing. Russian
law contains certain provisions in respect of licensing of certain activities.
Government Decree Number 1418 of 24 December 1994 establishes the procedure for
obtaining licences and provides a list of the types of activities for which a
licence is required. The following operations are subject to licensing:
Specialised privatisation investment funds and companies;
Intermediation in securities transactions;
Production and import of securities blanks;
Customs warehouse activities;
Use of natural resources and mining;
Construction, maintenance, and use of nuclear and radioactive installations,
technology, and products;
Transportation of goods and passengers by road;
Loading and unloading operations;
Storage services; and
RUS27 Sectors Restricted by Law. There are restrictions on foreign investment in insurance,
communications, and banking companies registered in Russia. Under the Law on
Insurance, companies providing insurance services must be majority-owned by
RUS28 According to
Russian Central Bank Letter Number 14 of 8 April 1993, the Central Bank is
obliged to annually fix a limit on foreign capital participation in the banking
system. The higher minimum capital requirement for foreign banks is determined
in accordance with Russian law.
RUS29 Some limitations in respect of foreign investment are contained in
international agreements to which the Russian Federation is a party. For
example, an agreement between the Russian Federation and the United States on
investment promotion of 3 April 1992 contains a list of areas where mutual
investment may be restricted or prohibited. The agreement signed between Russia
and Bulgaria signed on 8 June 1993 states the right of the governments to
determine sectors and spheres where the activity of foreign investors can be
limited or prohibited.
Regulation. The Law on Protection of the Environment of 19 December 1991
establishes the basis for environmental protection. The Law states that
compensation must be paid for damages caused to the environment, and there is no
distinction between liability for on-site and off-site pollution. In addition to
administrative fines and criminal liability, an injured party may have the right
to compensation, together with the right to apply for an injunction to prevent
future harmful activity.
RUS31 The Law gives a
right to the Russian Ministry of Environmental Protection and Natural Resources
to establish permissible pollution limits and obligatory payments for
industrial-waste discharge. The Law prescribes three kinds of civil remedies for
Compensation for damage caused to the environment as a result of an
Restoration of the environment at the defendant's expense; and
Termination of environmentally harmful activities
that cause damage to the public or the environment.
RUS32 The establishment and registration of enterprises with foreign capital
and associated with large-scale construction or reconstruction projects which
could harm the environment will require a prior ecological inspection.
RUS33 Capitalisation Requirements. The Law on Joint-Stock Companies contains
requirements in respect of funds and net assets required of a joint-stock company.
Article 35 requires that a reserve fund in the amount provided for by the
charter of the company, but not less than 15 per cent of its charter capital, be
created. The reserve fund is to be formed by obligatory annual deductions. The
annual deductions may not be less than five per cent of net profit.
RUS34 The reserve fund
of a company is to be earmarked for covering its losses, he cancellation of
bonds, and the purchase of stock in the company. It may not be used for other
purposes. A company may not adopt a decision concerning he payment or
declaration of dividends:
Until the entire charter capital of the company is paid up in full;
Until the purchase of all shares which must be purchased in
accordance with the Law;
If, at the time of the payment of dividends, the company is liable to
be deemed insolvent or bankrupt; or
If the value of net assets of the company is less than its charter capital and
the reserve fund and the excess over face value of the liquidation value
determined by the charter of the issued preferred shares or becomes less than
the amount thereof as a result of the payment of dividends.1
RUS35 Other Restrictions.
Russian law does not contain requirements with regard
to export targets. Nor does it require foreign investors to hire local staff.
RUS36 Guarantees against Expropriation.
The Law on Foreign Investment provides protection against nationalisation,
confiscation, and illegal actions by state bodies.
Nationalisation requires an act of the Russian Parliament, and confiscation
measures must be taken in accordance with a decision by the Parliament, the
President, or the government.2
RUS37 In the cases of
nationalisation and confiscation, a foreign investor must )e compensated
promptly and adequately. The compensation paid to a foreign investor
will be equal to the actual value of the nationalised or sequestrated investment
prior to the announcement concerning the de
facto or impending nationalisation or
sequestration. Compensation will be payable without any unfounded delay and in
the original currency of the investment. Prior to the payment of the
compensation, interest will be paid on it according to the interest rate
existing in the Russian Federation. Damages including the loss of profit
incurred by a foreign investor as a result of the illegal actions of state
bodies will be compensated by these state bodies.
RUS38 Tax Incentives.
Russian law provides tax incentives for enterprises with foreign investment
which operate in priority areas and certain regions. There is a two-year tax
holiday for enterprises registered after I January 1994 which are involved in
material production activities and have at least 30 per cent paid in foreign
equity participation equal to at least US $10-million. The tax holiday is
available only if income from production activities during the first two years
comprises greater than 70 per cent of enterprise's total income from all
RUS39 Customs Incentives. Under the Law on Foreign Investment, assets imported
by foreign investors as part of the contribution to the authorised capital of
enterprises with foreign investment within the periods of time specified by the
constituent documents of such enterprises for their formation, as well as assets
intended for their own material production, will be exempt from customs duties
and import tax.
RUS40 Assets imported into Russia by the foreign staff of enterprises with the
involvement of foreign investment for their own needs will be exempt from
customs duties. On 23 July 1996, the Russian government approved Decision Number
883, establishing that commodities imported to the customs territory of the
Russian Federation as a contribution of a foreign founder to registered (shared)
capital will be exempted from customs duties if the commodities are:
Not subject to excise duties;
Qualified as fixed production assets; and
Imported within the deadlines fixed for the building up of the registered
(shared) capital in constituent documents.
RUS41 However, if the commodity is sold, customs duties due as of the date of
conditional issue must be paid in compliance with customs legislation of the
Russian Federation. Tariff incentives, such as return of previously paid
customs, lower tariff rates, or total exemptions, apply to:
Imported goods that will be contributions to authorised capital;
Certain products and exports; and
Property imported by foreign employees for their own needs.
RUS42 With the permission
of the Russian government, tariffs are reduced by SO per cent on certain goods
imported as foreign investment if:
The foreign suppliers are founders of enterprises producing similar
goods in Russia;
The enterprise uses Russian raw materials and labour;
The enterprise invests in material production;
The total investment in the enterprise is no less than US$100
The foreign contribution to the authorised capital of the enterprise
is not less than US $10 million.
RUS43 Export and Import Operations. In accordance with the Law on Foreign investment,
enterprises fully owned by foreign investors and joint ventures with more
than a 30 per cent foreign involvement have the right to export their products
and import products for their needs without licences, with the exception
of the cases stipulated for by international treaties valid in Russia.1
RUS44 The procedure for
defining products as the enterprise's own exports and
those imported for its own needs are established by the Russian government on
the basis of rules of origin which are in compliance with internationally accepted
Products imported for the owner's needs will be understood :o mean the assets of
the enterprise, including raw and auxiliary materials, semifinished
products, components, and equipment, used directly by the enterprise
in the process of material production of its own products.
RUS45 Depreciation Allowance and Revaluation of Assets.
By virtue of Decree lumber 7 of 19 August 1994,
enterprises of all forms of property are granted the right, starting from I July
1994, to apply declining ratios in the amount of 0.5 to depreciation deductions,
provided financial and economic performances of the enterprises after
revaluation of fixed assets materially deteriorate.1
Treatment of Foreign Investment
RUS46 According to
principles of international law, the host country, the recipient of an
investment, must guarantee foreigners and their property a certain minimum
The minimum standard means that the expropriation:
Can only take place in the general interest;
May not be done in a discriminatory way;
Must be coupled with effective, prompt, and appropriate compensation;
Must take place according to lawful expropriation procedures, which guarantee
the expropriated person sufficient legal protection.3
RUS47 The Law on Foreign
Investment states that foreign investment in Russia will enjoy the full and
unconditional legal protection provided by Russian legislation and international
treaties. The legal status of foreign investment and of the activity of foreign
investors may not be less favourable than that provided for the property,
property rights, and investment activity of nationals, with the exception of the
cases stipulated by the Law on Foreign Investment.
RUS48 The Russian Federation is a party to various international agreements
related to foreign investment. Provisions in the international agreements take
precedence over conflicting domestic legislation. In principle, the guarantees
granted to a foreign investor in accordance with a national legislation and
international treaties can be divided into three groups, as follows:
Guarantees providing inviolability of property, which is a foreign investment in
the territory of a host country;
Guarantees providing a right of a foreign investor to use results of his
activity carried out in the territory of a host country; and
Guarantees connected with the settlement of investment disputes.
Protection and Security of Person and Property Rights
RUS49 The Russian
Constitution states that guarantees will be provided for the integrity of
economic space, a free flow of goods, services, and financial resources, support
for competition, and the freedom of economic activity. In the Russian
Federation, recognition and equal protection are given to private, state,
municipal, and other forms of ownership. The right of private property is
protected by law.
RUS50 Article 35 of the Constitution provides that everyone has the right to
have property and possess, use, and dispose of it, both personally and jointly
with other people. No one may be deprived of property otherwise than by a court
decision. Forced confiscation of property for state needs may be carried out
only with compensation. The right of inheritance is guaranteed. The principle of
the inviolability of private property is stated and regulated in the new Civil
Regulation of Investment Agreements
RUS51 Under the Decision of 24 July 1995 and Presidential Decree Number 73 of
25 January 1995, investment agreements must take into consideration the
requirements of the domestic market and necessity to increase the Russian
Federation's export potential. The parties to an investment agreement are the
Ministry of Economics of the Russian Federation and a foreign company which has
made a contribution to the authorised capital of a Russian legal entity at
not less than US $100 million and which makes direct investment in the
production industries of the Russian Federation of not less than US $100
million. For the preparation of an investment agreement, a foreign investor must
submit to the Ministry of Economics a draft investment agreement, based on the
model investment agreement provided by the government, and a feasibility study
made by an independent examination.
Intellectual Property Rights
RUS52 The rights of
enterprises with foreign investment to intellectual property are safeguarded in
accordance with Russian legislation.
Hard Currency Issues
RUS53 All enterprises
operating in Russia are obliged to exchange 50 per cent of their hard currency
income for rubles on the domestic currency market. It is possible to buy hard
currency for import needs or for transfers abroad.
Decree Number 1928 of 17 September 1994 on Private Investment gives the right to
the Russian government to put 0.5 per cent of the gross domestic product into
financing efficient investment projects. State participation in a project can be
Loans by the Russian Central Bank;
Government purchase of equity in joint-stock companies that can later be sold on
the market once the project is profitable; and
Special incentives for large investment when a foreign contribution exceeds 30
per cent of share capital.
Privatisation and Foreign Investors
RUS55 In General. There
are some restrictions on foreign participation in privatisation. Section 10 of
the privatisation program allows foreign investors to participate in auctions,
tenders, and investment tenders with prior notification of the Ministry of
Finance. Government approval is required for the privatisation of enterprises in
the defence industry, the gas and oil industry, transport and communication
enterprises, and enterprises extracting and processing strategic ores, precious
and semiprecious stones, and radioactive and rare-earth elements.
RUS56 Foreign investors are not allowed to participate in the privatisation of
enterprises located in restricted areas. After auction or tender, the
privatisation bodies must submit information on the successful foreign bidder to
the Federal Counter-Intelligence Service, which has a right within one month to
advise the Russian government to block the transaction.
of Land. The privatisation legislation does not deal with land. Under
Presidential Decree Number 301 of 25 March 1992, privatisation of land is
possible in connection with the privatisation of the enterprises that occupy the
RUS58 President Decree
Number 631 of 14 June 1992 provides the procedure for purchasing land for
commercial and industrial purposes in connection with privatisation, with
certain exceptions for national parks, public gardens and parks, river
embankments, and beaches. Decree Number 631 provides two types of procedures for
purchasing land, as follows:
In connection with the privatisation of an enterprise; and
For expansion of the business activities of a privatised enterprise.
Natural Resources and foreign Investment
RUS59 The Law of 30
December 1995 on Production Sharing Agreements establishes a legal basis for the
exploration, development, and production of mineral raw materials within the
Russian Federation, as well as on the continental shelf and/or within the
boundaries of the exclusive economic zone of the Russian Federation under the
terms and conditions of production-sharing agreements.
RUS60 A production-sharing agreement is an agreement under which the Russian
Federation gives to the investor an exclusive right for exploration,
development, and production of mineral raw materials and conducting operations
related thereto on a chargeable basis and for a certain period, with the
investor undertaking to perform the operations for his own account and at his
Securities Market Regulations
The main legislation in the field of securities regulation is Resolution Number
78 of 28 December 1991, approving the Regulations on Issuance and Circulation of
Securities and Stock Exchanges. The Ministry of Finance is responsible for the
securities market in Russia. The other regulator of securities markets is the
newly created Federal Commission for Securities and Capital Markets, which have
the status of the Ministry.
RUS62 The Law on Foreign
Investment provides that foreign investors have the right to acquire securities
of enterprises with registration with the Ministry of Finance.1
Foreign investors may acquire securities in Russian currency and in foreign
currency. The amounts in foreign currency will be converted into rubles
according to the exchange rate established by the Russian Central Bank. The
Regulations on Issuance and Circulation of Securities and Stock Exchanges state
that a legal entity or a group of legal entities associated through contractual
or property arrangements must notify the Ministry of Finance within five days
after acquiring more than 15 per cent of the shares of a securities issuer.2
There is an exception for a joint-stock company's founders at the time of
RUS63 It is necessary
for foreign investors to obtain Central Bank licences when they buy shares in
Russian companies for foreign currency. A purchase for rubles does not require a
licence. However, in such case, a foreign investor must open a rubles account in
a Russian-authorised bank.
RUS64 The Law on Competition and Restriction of Monopolistic Activities is
aimed at restricting monopolistic activities and unfair competition. The Law
proscribes several forms of monopolistic activities:
Unfair trade practices of the enterprise that has a dominant market position;
Agreements or co-ordinated actions between enterprises or other organisations
aimed at the restriction of competition;
Acts undertaken by state bodies aimed at the restriction of economic
independence of entrepreneurs or of a competition; and
Agreements or co-ordinated actions between state bodies or state bodies or
private organisations aimed at the restriction of competition.
RUS65 The following
activities are determined unfair competition:
Dissemination of untrue information that may be detrimental to
Misleading consumers about specific aspects of goods or services;
Wrongful comparison of goods or services;
Unauthorised use of trademarks, names of enterprises or goods, or the
imitation of the form, packing, or design of goods or other entrepreneurs; and
Acquisition, use, or dissemination of technical or other information
such as business secrets without consent of the owner.
RUS66 The Law states
that the State Committee for Anti-Monopoly Polices Structures must:
Take necessary measures to prevent monopolistic activities and unfair
Recommend improvements in legislation and in its implementation in
the area of market development and competition;
Advise state institutions to undertake certain actions to develop
competition and markets, including the creation of attractive conditions for
Control the adherence to antimonopoly requirements in cases of
foundation, merger, reorganisation, or liquidation or organisation of companies;
Control large purchases and sales of shares that may lead to the
dominating position of an entrepreneur in the market.
RUS67 The State
Committee for Anti-Monopoly Polices Structures has the following
To order entrepreneurs, state institutions, and their executives to stop
violations of antimonopoly law;
To advise state institutions on the introduction of licensing procedures or
bands on export or import activities of entrepreneurs that violate antimonopoly
To impose penalties for the violation of antimonopoly law; and
To bring a statement of claims to the courts or other jurisdictional
bodies, including the public prosecutor, for the violation of antimonopoly law.
RUS68 Employees of enterprises with foreign investment are subject to Russian
labour law, which consists of the following acts:
The Labour Code;
The Law on Employment of the Population;
The Law on Trade Unions;
The Law on Minimum Wages; and
The Law on the Resolution of Labour Disputes.
RUS69 Russian law
contains provisions against discrimination on the basis of gender, religious
belief, and age. Joint ventures, wholly owned subsidiaries, and accredited
representative offices of foreign companies have the right to hire Russian
citizens directly. Three months is the usual maximum length to keep a new
employee on probation, although Russian law specifically states that a six-month
period may be established with agreement of the labour union.
RUS70 The term of
employment is set by agreement between the employer and employee, and it may be
for an indefinite term, a definite term of no more than five years, or for the
time required to perform specific work. A term may be set for the time necessary
to perform specific work only where employment arrangements cannot be
established for an open-ended period, either because of the nature of the work
done, the conditions in which such work is to be done, or when it is in the
interests of the employee to have such a contract.
RUS71 In accordance with
the Labour Code, an employer cannot require an employee to perform tasks outside
the scope of duties described in the contract. Changes in the employee's duties
cannot be made unilaterally by the employer. The
employer must notify an employee two months in advance of any changes in working
conditions. Because employees may be terminated only for cause, the inclusion of
more responsibilities and duties in the contract makes this process easier.
RUS72 Wages are required to be paid at least twice monthly in rubles. The
employer must withhold income tax and transfer the employee's income tax from
the enterprise's bank to a state budget account. The usual work week cannot be
longer than 40 hours. Any additional hours are considered overtime, which can be
required only on the basis of the extraordinary circumstances, such as
unforeseen delay in finishing prescribed tasks and failure of a replacement employee
to show up at the designated time. Employers make social insurance and pension
payments that are a percentage of their employees' total remuneration, including
bonuses and benefits.
RUS73 Employment may be
terminated on the following grounds:
Unsuitability (eg, lack of qualifications
or health reasons);
Systematic and unjustified
non-fulfilment of work duties, despite disciplinary measures;
Absence without good reasons; » Prolonged
absence from work due to disability;
Reinstatement of an employee who previously filled the position;
Coming to work drunk or under the influence of narcotics; and
Liquidation of the employer or the redundancy of the position.
RUS74 Under the
Presidential Decree of 16 December 1993, foreign nationals working
in Russia must obtain work permits. In some cases, there is need for employers
to obtain the authorisation of the Ministry of Migration to hire foreign
nationals. The Regulation on Hiring and Use of Foreign Labour provides the
system of issuing authorisations and work permits. Enterprises with foreign investment
must pay social insurance premiums for Russian and foreign employees
according to the rates established for enterprises and organisations in Russia.
Entry Visas and Residence
RUS75 In accordance with
the Law on Exit from the Russian Federation and entry
into the Russian Federation of 18 July 1996, a foreign national requesting
entry to Russia, transit travel across Russia, or exit from Russia is
obliged to bear a national passport with a visa, unless otherwise stated in an
international treaty. Visas are issued by Russian
consular offices abroad on the basis of invitation
letters from Russian persons, tourist agreements, and visa applications. Foreign
nationals must be registered with the Russian Ministry of Internal affairs
during their stay in Russia.
RUS76 The Law on Foreign
Investment states that free economic zones will be established within the Russia
with the purpose of attracting foreign investment and advanced foreign
technologies and management, expertise, as well as for the purpose of the
development of the export potential of Russia. Free economic zones shall provide
a beneficial economic status to foreign investors and enterprises with foreign
investment in comparison with other regions. Besides the rights and guarantees
extended by the existing legislation to foreign investors and enterprises with
foreign investment, the latter will enjoy the following additional benefits when
conducting economic activities in free economic zones:
Simplified procedure for the registration of enterprises with the foreign
Lower taxes, including the tax concerning repatriated profits1
Reduced tax rates for the use of land and other natural resources;
Extension of rights to a long-term lease of up to 70 years, with the right of a
Special customs regime, including reduced import and export duties and a
simplified procedure for crossing the border; and
Simplified procedure of exit and entry for foreign persons, including visa-free
RUS77 There are
approximately 15 free economic zones in Russia. Unfortunately, many free
economic zones are not effective. Some positive changes can be found only in Yantar
RUS78 The Law on Foreign
Investment includes the principle of transfer abroad of investment proceeds in
After the payment of taxes and duties, foreign investors will be guaranteed the
free transfer of payments abroad in connection with the investment made,
provided such payments were obtained in foreign currencies. Such payments may
Income from investment, including profits, dividends, interest, and license or
Payments for technical assistance and maintenance and other fees;
Amounts payable on the grounds of the rights arising from monetary claims and
claims arising in connection with the execution of contractual duties which have
an economic value;
Amounts received by investors in connection with the partial or full
liquidation, or sale of investment; and
Compensation for illegal actions of state bodies.
Transfer of Compensation
RUS79 The law provides a
guarantee for free transfer of a compensation payable, without unfounded delay,
in the original currency of the investment in the case of nationalisation and
confiscation. Unfortunately, the Russian investment law does not contain
provisions in respect of compensation for loss due to war, armed conflict, or
Reinvestment of funds
RUS80 The Law on Foreign
Investment provides for the possibility to reinvestment of investment proceeds
in local currency inside Russia1
Any sums received by a foreign investor in Russian currency may be reinvested
within Russia and used in compliance with Russian legislation. In this respect,
foreign investors may maintain current and settlement accounts in Russian
currency in banks in Russia duly authorised by the Russian Central Bank without
the right to transfer amounts from such accounts abroad.
Unfortunately, the problem of bribes continues to be prevalent in business
activity in Russia.2
There is a real danger that the success of economic reforms can be breached
by corruption and the Russian Mafia. The question whether the fair business can
win a victory over corruption and the Mafia depends on the development of
RUS82 The new Criminal Code came into effect on I January 1997, and it
contains broad provisions in respect of corruption. The Russian Federation
Chamber of Commerce and Industry has created its own register of reliable
To be registered, the applicant must undergo a financial audit, which includes
showing evidence of profits over the last two years, and demonstrate that he can
cover short-term debts and that his bank loans are not overdue. The audit also
examines the liquidity of the enterprise, the ratio of balance-sheet expenses to
production expenses, and the level of equity capital. The enterprise must
present copies of its founding documents, registration certificate, and balance
sheet, as well as a report of financial results certified by an auditing firm or
the Tax Inspectorate. If an applicant passes the audit, he is placed on the list
of reliable business persons for one year.
RUS83 In accordance with
Law Number 2118-1 of 27 December 1996, taxes are divided into three categories,
Taxes of the constituent republics of the Russian Federation;
Taxes of territories, provinces, autonomous provinces, and autonomous districts;
RUS84 The following
federal taxes and fees are applicable:
Tax on exchange activities;
Tax on securities transactions;
Contributions for the replacement of the mineral raw-material
Payments for the use of natural resources;
Profits tax on enterprises;
Income tax on physical persons;
Road fund taxes;
Levies on coats of arms;
Tax on property inherited or received as a gift; and
Levy for the use of the names 'Russia'
and 'Russian Federation'
in a corporate name.
RUS85 There are the following regional taxes and fees:
Tax on the property of enterprises;
Tax on income from timber;
Payment for water; and
Levy on legal entities for educational institutions.
RUS86 Some of the most
significant local taxes and fees are:
Tax on the property of physical persons;
Registration levy on physical persons who engage in entrepreneurial
Tax on advertising;
Levy on trading rights;
Levy for the right to use local symbols; and
Tax for the maintenance of the housing fund and social and cultural
RUS87 The income of a
foreign legal entity can be subject to double taxation n
Russia and the home country of the foreign legal entity. Double-taxation Teaties
eliminate or reduce the impact of double taxation through special rates of :ax
on certain types of income. Russia has the following double-taxation treaties:
Bulgaria, in respect of physical persons, 1977, and in respect of
legal entities, 1978 and 1993;
Czech Republic, in respect of physical persons, 1977, and in respect of legal
Denmark, 1986; ' Finland, 1975, with additional protocol, 1983;
Great Britain, 1985;
Hungary, in respect of physical persons, 1977, and in respect of legal entities,
Ireland, in respect of auto-transport enterprises, 1986;
Italy, in the field of shipping, 1975;
The Netherlands, 1986;
Poland, in respect of physical persons, 1977, and in respect of legal entities,
Slovak Republic, in respect of physical persons, 1977, and in respect of legal
Switzerland, 1986; and
United States, 1992.
RUS88 To obtain the tax
exemptions or preferential tax rates provided by an international treaty to
which Russia is a party, a foreign legal entity must apply for treaty
certification and submit the certification to the entity paying the income. If a
treaty certification is not presented, the entity must withhold income at the
rates prescribed by law for the type of income paid.
RUS89 Russian legal entities with foreign ownership and foreign legal entities
with a 'taxable presence'
in Russia are liable for Russian profits tax. Foreign legal entities with a
taxable presence in Russia are only taxed on profits earned through their
permanent representation in Russia. The profits tax rate varies.
The maximum rate is 35 per cent. The rate comprises federal and regional
elements. The federal rate is set at 13 per cent. The regional rate varies, but
the maximum is 22 per cent for most entities and 30 per cent for banks and
RUS90 The taxable base
consists of profit from sales of goods and services and net income from
non-trading operations, such as leasing income and capital gains. There are
items which can be deducted in arriving at taxable profit, such as:
Profit allocated to a reserve fund;1
Profit reinvested in capital expenditures that exceeds total depreciation in the
Losses from the taxpayer's main activity in the previous five years3
Charitable contributions up to certain limits.4
RUS91 With the aim of
encouraging investment, the legislation provides tax exemptions. For example, a
two-year tax break applies to newly established small Russian legal entities
involved in producing agricultural goods or in the production of consumer,
medical goods, and construction. The law grants a complete exemption from
profits tax for the first two years of operation to qualifying Russian
enterprises with foreign investment. Such entities must engage in production
activities and have foreign investment of greater than 30 per cent of the
paid-in charter-fund capital totalling at least US$10 million.
Taxation of Foreign Legal Entities
RUS92 Foreign legal
entities that receive income from sources in Russia, but not through a permanent
legal representation, are liable to pay tax on that income. The tax must be
withheld by the source of payment of the income. Such income includes income
Investment, such as dividends and interest;
Use of copyrights and licences;
Freight charges and lease payments; and
Management services and other income that results from the provision or use of
any kind of services in Russia through a permanent establishment.
RUS93 The tax rate is 15 per cent for dividends and interest, six per cent for
income from freight, and 20 per cent for all other types of income.
RUS94 The assets tax is
a tax on the annual average balance-sheet value of fixed and intangible assets,
less depreciation, inventory, work in process, raw material, supplies, and
prepaid expenses. Leased assets are subject to the assets tax only if the
taxpayer has a right to buy the asset at the end of lease term. Both Russian
legal entities and permanent representation of foreign legal entities are
subject to the assets tax.
RUS95 The assets tax is fixed as a maximum rate of two per cent, and it must
be paid quarterly. The deadline for filing the reports is the twentieth day of
the month following the reporting period. In the case of a wholly foreign-owned
Russian legal entity, the filing deadline is the thirtieth day of the month
following the reporting period.
RUS96 All legal
entities, including foreign legal entities that receive revenue from commercial
activities conducted in Russia, are liable for value-added tax. A foreign
company need not have a permanent representation in Russia to be liable for
valued-added tax. The tax base for value-added tax is revenue from the sale of
goods and services performed in Russia. The tax base includes:
Unlicensed loans from Russian companies;
Sums received as penalties resulting from the violation of agreements; and
Imputed market price revenue from the provision of goods and services without
RUS97 The valued-added
tax rate is 20 per cent for all goods and services, except food products not
subject to excise tax and children's goods, for which the rate is 10 per cent.
Protection of Foreign Investment Property Protection
RUS98 Russian law defines
neither the method of estimation of the real value af
foreign investment nor a body authorised to fulfil such estimation.
Unfortunately, Russian law merely obliges bodies responsible for damages to compensate
RUS99 The Law on Foreign Investment states that enterprises with participa-:ion
of foreign investment will be free to insure their assets and risks at their 3wn
discretion, if not otherwise stipulated for by law. Insurers can be divided .nto
» Non-state (private) insurers (eg, Lloyd's); »
State insurers (eg, the Overseas Private Investment Corporation); and
Multinational insurers (eg, the Multinational Investment Guarantee Agency).
^USI 00 Foreign state insurers insure non-commercial risks in respect of invest-Tient
in Russia. After the signing of the Treaty on Promotion of Capital investment
between Russia and the United States in 1992, the Overseas Private Investment
Corporation (OPIC) began to insure the
non-commercial risks of American investors in
Russia. OPIC also has a right to look after capital nvestment,
determine repayments, make payments, and file claims.
guarantees Provided by Banks
The new Civil Code contains provisions in respect of a bank guarantee vhereby
a bank (guarantor) issues a written guarantee to a creditor (the beneficiary),
promising to pay a sum owned by a debtor on the presentation )i
certain documents as specified in the bank guarantee. The guarantor's )bligation
to pay the beneficiary depends on the beneficiary's presentation of
the required documents, not on the relationship between the principal and
the beneficiary. The guarantor is obliged to refuse payment to the beneficiary
in the event that the beneficiary presents non-conforming documents or the
demand has been submitted after the term specified in the guarantee. The
obligation of the guarantor to the beneficiary is limited to payment of the
amount for which the guarantee was issued. The guarantor's right to demand from
the debtor compensation of the amounts paid to the beneficiary under the bank
guarantee is determined by the agreement between the guarantor and the debtor.
Protection of Investment by Pledge and Hypotheque
RUS102 A pledge is
defined in Russian law as security for the fulfilment of an obligation under
which the creditor acquires the right, in case of default by the debtor, to be
satisfied out of the pledged property prior to other creditors, except where
otherwise provided by law. The creditor also has the right to be satisfied from
insurance compensation for the loss of or damage to pledged property,
irrespective of for whose benefit the property was insured. There are two
subcategories of pledge, being:
Possessory, the debtor transferring possession of the collateral to the holder
of the security interest; and
Non-possessory, the debtor retaining possession and the right to use collateral.
RLJS103 The Civil Code defines the property which may be subject of pledge,
indicating that 'any property, including things
and property rights, may be the subject of a pledge, except for property
withdrawn from circulation, demands inseparably linked with creditor personally,
in particular claims for alimony and compensation for harm caused to life or
health, and such other rights prohibited by law to be assigned to another person'.^
I Civil Code, art 336.
KLJS104 A hypotheque is the pledge of an enterprise or real property, ie,
land, building, structures, facilities, or other objects directly related to
land. A hypotheque of a building or installation is only permitted with the
simultaneous hypotheque under the same contract of
the land on which the building or instal-ation is
situated^ The contract of hypotheque should be
registered and notarised.
ltUSIOS Under current Russian law, a secured creditor may not directly take
title to the collateral, but may only satisfy his debt from the proceeds of
its sale. Fhe collateral will be sold at an
auction sale in accordance with the procedure established by law.^
At the pledger's request, the court may defer the
sale of the collateral for up to one year. Such deferral
does not relieve the debtor from compensating the creditor's losses and the
penalty accrued during the deferral period. In the
case of recovery of the pledge with court involvement, the initial sale price
at the auction sale will be determined by the court. In other cases, the initial
>ale price is set by agreement between the
pledger and pledgeholder. The collateral is sold
to the highest bidder. If the collateral is not sold at the first auction sale, (he
pledgeholder has the right to purchase the collateral from the pledger
and >et off his demands secured by the pledge
against the purchase price. If the collateral is
not sold at a second auction sale, the pledgeholder has the right to retain :he
collateral, valuing it at an amount of not more than 10 per cent less than the initial
sale price set for the second auction sale. The pledge terminates if the
pledgeholder does not use this right to retain the collateral within a month
following the second auction sale.
Investment-protection treaties concluded between Russia and other countries
provide the possibility to settle investment disputes through diplomatic
channels by the way of mutual consultations. Moreover, the contracting states
must attempt to settle investment disputes through diplomatic channels; i
there is failure to reach positive results, the dispute can be settled by a
1 Civil Code, art 340.
2 Civil Code, art 350.
Treaty Protection of Foreign Investment Bilateral
Treaties Purpose of Treaty
RUS107 Foreign investors can be protected by investment-protection treaties.
Such treaties state how the host country must treat foreign investment. Such
obligations are subject to international law. If the host country breaches
treaty, it can be held responsible under international law by the investor's
state for breach of a treaty, which may lead to international sanctions'
From an official point of view, such treaties regulate investment in both
directions, both contracting states being considered as states exporting and
importing capital. Actually, in the investment-protection treaties where Russia
is a party, Russia is intended to be a capital-importing state. The former
Soviet Union concluded and ratified 14 bilateral investment-protection treaties,
China, Peoples' Republic, 1990;
Great Britain, 1989;
Korea, Peoples' Republic, 1990;
Turkey, 1990; and
West Germany, 1989.
RUS108 Russian has concluded the following investment-protection treaties:
I Sornarajah 'State
Responsibility and Bilateral Investment Treaties', 1986 }WT
Norway, 1994; Poland, 1992; Romania, 1993; and Slovenia, 1993.
RUS109 Relations between Russia and the United States are regulated by the
Bilateral Investment-Protection Treaty of 17 June 1992 and the Treaty on
Promotion of Investment of 3 April 1992.
Standard of Treatment
investment-protection treaties normally contain provisions described as:
Treatment no less favourable than that accorded to domestic Russian investors;
'Most-favoured nation treatment';
Treatment no less favourable than that accorded to investors from any third
'Full protection and security'.
RUS111 Article 3(1) of
the treaty with Austria states that each party is obliged to provide in its
territory such regime which is not less favourable than in respect of foreign
investment of any third state. Analogous provisions are contained in all
investment-protection treaties to which Russia is a party. A provision on 'national
regime' is not found in the treaties with Austria,
Finland, The Netherlands, and Switzerland. However, the absence of such
provision does not mean that the principle of national regime is not applied in
respect of these countries'
Nationalisation and Competition
and expropriation are often mentioned in investment-protection treaties. The
treaties prohibit such actions by the host country.
Regulation of Foreign Investment', Canadian Bar
Review, vol 50, 1972, at p
However, nationalisation and expropriation of foreign investment are not
considered as breaches of the principles of international law if they take place
for reasons of general interest and are coupled with fair compensation.
Investment-protection treaties often contain provisions on the insurance of
foreign investment. Thus, for example, in article 8(1) of the treaty with Canada
it is stated that, 'if the party of its competent
body makes any payments to its investors in accordance with insurance or
guarantee agreement, other party will recognise validity of subrogation of an
investor's rights'. Analogous provisions can be found in the treaty with The
Transfer of Payments
RUS114 In the bilateral
treaties concluded by Russia, there is a list of payments which can be
transferred freely abroad by a foreign investor, such as:
Profits received in connection with the investment;
Sums received in connection with liquidation of investment;
Wages and other remuneration for foreign citizens who are allowed to work in
connection with the investment.
RUS115 Russia is a party
to the Multilateral Investment Guarantee Agency Convention of 1988 that provides
insurance against non-commercial risks in all signatory countries. Russia
ratified this Convention on 22 December 1992. Russia has signed, but not yet
ratified, the Washington Convention on the International Centre for Settlement
of Investment Disputes of 1965 and the Energy Charter Treaty of 1994.
Settlement of Investment Disputes In General
RUS116 Russia is a party
to the Washington Convention on the International Centre for Settlement of
Investment Disputes. The Convention has not been ratified, but ratification is
expected in the near future.
Arbitration (Commercial) Courts Participation by Foreign Party
RUS117 Disputes arising
from issues connected with investment, including the amount and terms or the
procedure of the payment of compensation, are dealt with the Supreme Court of
the Russian Federation or by the Supreme Arbitration Court, unless otherwise
stipulated for by an international treaty applicable in the Russian Federation.
Thus, any such disputes can be submitted for arbitration in any country in
accordance with an agreement of the parties. Unfortunately, determination of
jurisdiction to consider such disputes is unclear. Thus, it is practically
impossible to determine the competent court to consider investment disputes.
RUS118 In Russia,
disputes between business people over business matters should be considered by
arbitration courts (commercial courts). The Arbitration Procedural Code of 1995
provides that foreign organisations, international organisations, and foreign
citizens, performing business activities, as well as the persons with no
citizenship, have the right to file claims with the arbitration courts.
RUSH 9 The arbitration courts will accept jurisdiction over cases with the
participation of foreign persons if a defendant (a Russian legal entity) is
located in Russia and the party has a permanent place of residence in Russia.
The arbitration courts in the Russian Federation
also have the right to consider the cases with the participation of foreign
The subsidiary or the representation of the foreign person is
situated in Russia;
The defendant possesses the property in Russia;
The claim follows from a contract, the execution of which must take
or has taken place in Russia;
In a claim for compensation for property damages, the alleged act has taken
place in Russia;
The claim follows from an unjustified enrichment which has taken
The plaintiff in a case involving honour, dignity, or business reputation is in
There is an agreement on jurisdiction between parties.
Application of Foreign Law
RLJS120 The arbitration courts apply foreign law in the following three cases:
Where contemplated by the Russian Law on Conflict of Laws (Foundations of Civil
Legislation of 1991) or international agreements to which Russia is a party;
Where required to do so by agreement of the parties to the dispute which does
not contradict law or international agreements; and
Where so required by force of an international custom recognised in Russia.^
Execution of Foreign Judgments
RUS121 The possibility
of execution of foreign judicial decisions in Russia depends on the existence of
an international agreement, ie, bilateral agreements for mutual legal assistance
in civil and criminal matters. The execution of a decision of a foreign court in
Russia requires permission for execution issued by a competent Russian court on
the application of the claimant.
RUS122 The application is
examined in an open hearing on notice to the debtor. Russian courts do not
examine correctness of the foreign court's decisions on the merits; they check
only for the observance of certain conditions whose violation is a ground for
denying permission for compulsory execution. Permission for execution may be
According to the legislation of the state in whose territory the decision was
rendered, the judgment has not yet taken legal effect;
The party against whom the decision was rendered was deprived of the opportunity
to participate in the proceedings as a result of failure to give that party
timely and proper notice of examination of the case;
Examination of the matter relates to the exclusive competence of Russian organs
of justice (eg, a dispute concerning real property in Russia may be resolved
only by a court in the place where the property is found);
A decision of a Russian court, rendered in a dispute between the same parties,
concerning the same subject, and relying on the same grounds, has already taken
I Foundations of Civil Legislation 1991, art 156.
A case in process in a Russian court) involving a dispute between the same
parties, concerning the same subject, and relying on the same grounds, was
commenced before the case was brought in the foreign court;
The three-year period for presentation of the decision for compulsory execution
has expired; or
Execution of the decision would contravene the sovereignty or threaten the
security of Russia or would contradict the basic principles of Russian
^US123 The Law on Foreign Investment states that international treaties ipplicable
to the Russian Federation may provide for settlement of investment disputes
by international institutions intended for the settlement of economic disputes.^
The Law on International Commercial Arbitration of 7 July 1993 is ?ased
on the UNCITRAL Model Law and applies to
arbitrations, whether id hoc or
institutional, provided they fall within the scope of questions stated n
the Law. The Law applies to international commercial arbitration if the place 3f
arbitration is in Russia. Pursuant to agreement of the parties, the following Tiay
be referred to international commercial arbitration:
Disputes resulting from contractual and other Civil Law relationships arising in
the course of foreign trade and other forms of international economic relations,
provided that the place of business of at least one of the parties is situated
Disputes arising between enterprises with foreign investment, international
associations, and organisations established in Russia; and
Disputes between the participants in enterprises with foreign investment,
international associations, and organisations established in Russia.
recourse against Award
IUS124 An application for
setting aside may not be made after three months lave elapsed from the date on
which the applying party received notice of the
This condition relies on the so-called 'public
order' exception under which, in particular, a
court may refuse to execute a foreign judicial decision against Russia rendered
in violation of the sovereign immunity.
Law on Foreign Investment, art 9.
award. The court may suspend the setting aside proceedings for a period
of time determined by it to give the arbitral tribunal an opportunity to resume
the arbitral proceedings or to take such other action as in the arbitral
tribunal's opinion will eliminate the grounds for setting aside.
Recognition and Enforcement of Awards
RUS125 Russia is a party
to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
done at New York on 10 June 1958. Thus, in Russia, there is a mechanism of
recognition and enforcement of foreign arbitration decisions. An arbitral award,
irrespective of the country in which it was made, will be recognised as binding
and, on application in writing to the competent court, will be enforced subject
to the provisions of the Russian law.
Sanctions for Injury to Investment
RUS126 One of the
principles of the Russian concept of international law is the principle of
reciprocity between states. Accordingly, it is reasonable to assume that, in the
case of injury to investment, any actions by foreign states in connection with
protection of private investment made by their nationals in Russia can be
considered as appropriate from the point of view of the Russian law if Russia
can take such measures in similar cases.
2 Law on Foreign Investment, art 2.
1 Law on Foreign Investment, art 3.
2 Law on Foreign Investment, art 12.
1 Civil Code, art 51.
1 In the guarantee letter, the landlord must confirm the company's use of the premises as its legal address. A copy of the certificate for leased municipal property, a copy of the lease agreement for leased departmental property, and a certificate issued by the technical inventory bureau for property owned by the applicant also must be provided.
1 Law on Foreign Investment, arts 3 and 4.
1 Law on Protection of the Environment, art 36.
1 Law on Joint-Stock Companies, art 43.
2 Law on Foreign Investment, arts 7 and 8.
1 Law on Foreign Investment, art 25.
2 Decision Number 757 of 30 June 1994.
1 In other words, if an organisation makes the decision to apply the depressing ratios, the total of depreciation deductions will be referred to the production costs (costs of circulation) with regard to the applied ratio in correspondence with the credit of account to 'wear and tear of fixed assets'.
1 Law on Foreign Investment, art 35.
Regulations on Issuance and
Circulation of Securities and Stock Exchanges, art 49.
1 In such cases, tax rates will not be less than 50 per cent of those levied on foreign investors and enterprises with foreign investment.
2 2 Law on Foreign Investment, art 10.
1 Law on Foreign Investment, art II.
2 International Chamber of Commerce, International Maritime Bureau, Trading with Russia Today (1996).
1 The maximum allocation is the lower of 50 per cent of the enterprise's gross profit (determined before this deduction) or 25 per cent of the charter fund paid in shareholders' equity.
2 Profit used to repay bank credits that have been used for those purposes also can be used to reduce taxable profit.
3 Loss relief must be taken in equal instalments in each of the five years and, where the relief is not used in one particular year, then it may not be carried forward to a future year. There is no provision for enterprises to offset profits and losses of other related enterprises.
4 The sum of deductions cannot reduce the tax by more than 50 per cent.