Monitoring of the Federal Legislation dated 4.08.2006

Decision of the Government of the Russian Federation No. 471 of July 31, 2006 on Amending the Regulations on Tenders for the Creation of Special Economic Zones and the Rules for Drawing Up and Filing a Bid for the Creation of a Special Economic Zone

The amendments are made in connection with the adoption of Federal Law No. 76-FZ of June 3, 2006 which introduced a new type of special economic zone -- tourism & recreation special economic zone -- set up to develop and effectively use tourism resources in Russia.For instance, to assess the feasibility and effectiveness of a would-be tourism & recreation special economic zone the following criteria must be taken into account: the availability of engineering, transport, social and other infrastructures in that area, the actual condition thereof, the forecast number of jobs to be created and of tourists to be attracted etc.

Decision of the Government of the Russian Federation No. 470 of July 31, 2006 on Amending the Regulations on the Ministry of Economic Development and Trade of the Russian Federation and the Regulations on the Federal Agency for Special Economic Zone Administration

The amendments lay a legal foundation for the activities of the Ministry of Economic Development and Trade of the Russian Federation and the Federal Agency for Special Economic Zone Administration in terms of regulating the formation, operation and termination of tourism & recreation special economic zones, and the terms for pursuing entrepreneurial activities on the territories thereof.Apart from that, the Ministry of Economic Development and Trade of the Russian Federation has acquired the right to define a procedure for the administrative body of a special economic zone to transfer to a joint-stock company with 100% interest of the Russian Federation of the function of a state customer within the boundaries of the special economic zone for the preparation of area-planning documents and the creation of the engineering, transport, social, innovative and other infrastructures of the zone with federal and regional budget funds.The Federal Agency for Special Economic Zone Administration is to hand over the specifications for connecting to utility lines and the building permits received to the individual entrepreneurs and legal entities that carry out construction or re-construction in a special economic zone.

Letter of the Federal Tax Service No. ShT-6-03/688@ of July 7, 2006

Explanations are provided concerning certain issues relating to the application of the legislation on value added tax to the transactions envisaged by Item 1 of Article 164 of the Tax Code.When a foreign organisation provides the services of looking for and recruiting participants in a foreign state for participation in an international exhibition held by a Russian organisation in Russia then the territory of Russia is not deemed the "place of provision" of these services, and accordingly these services are not subject to value added tax.The foreign organisations which have not registered with tax bodies as taxpayers and which acquire goods (works and services) on the territory of the Russian Federation from the foreign persons not registered with tax bodies are not deemed tax agents for value added tax purposes, and accordingly, they have no duty to calculate, withhold and remit to the budget the tax on income amounts remitted to a seller. When an organisation which provides the services of passenger and luggage carriage sells air tickets through an agent's network the tax base for value added tax purposes is to include the whole sum received by the agent for the air tickets sold on instructions of the organisation including the amount of agent's fee.