Monitoring of the Federal Legislation dated 20.10.2006

Decision of the Presidium of the Higher Arbitration Court of the Russian Federation No. 13322/04 of September 19, 2006

The Presidium of the Higher Arbitration Court of the Russian Federation recognised that the cases challenging normative legal acts of the Ministry of Finance of the Russian Federation on issues of taxation fall in the jurisdiction of the courts of arbitration. The decision was stipulated by the appeal of the company that did not agree that the lower-instance court terminated the proceedings of the case challenging the Letter of the Ministry of Finance of the Russian Federation No. 03-02-05/2/35 of June 10, 2004 on the registration of leasing operations for taxation purposes proceeding from the fact, in particular, that there is no Federal Law qualifying as the sphere of reference of the arbitration court the cases challenging normative legal acts of the Ministry of Finance of the Russian Federation.

The Presidium emphasised that since the Decree of the President of the Russian Federation No. 314 of March 9, 2004 on the system and structure of the federal bodies of executive power handed over to the Ministry of Finance of the Russian Federation the functions of the Ministry of Taxation of Russia in adoption of normative legal acts in the sphere of collection of taxes and fees and explanatory work on legislation on taxes and fees, which is envisaged also in Item 1 of Article 4, Item 1 of Article 34.2 of the Tax Code of the Russian Federation, therefore, such acts are subject to the rules of appealing specified in the Tax Code of the Russian Federation. According to Articles 137, 138 of the Tax Code of the Russian Federation, organisations and independent entrepreneurs shall appeal against such acts by submission of application to the arbitration court in compliance with the legislation on arbitration procedures.

Meanwhile, the Presidium found it possible to leave in force the challenged judicial act, since the challenged Letter contains explanations of the tax legislation providing no obligations to anyone. It does not introduce any rules of conduct obligatory for any unidentified circle of persons, therefore, not being of normative nature. In such circumstances, the company’s application requesting to invalidate the provisions of the mentioned Letter may not be processed in the Higher Arbitration Court of the Russian Federation whose jurisdiction includes the cases challenging the normative legal acts of the federal bodies of executive power.

Letter of the Department of the Tax and Customs Tariff Policy of the Ministry of Finance of the Russian Federation No. 03-03-04/4/154 of October 6, 2006

Explains that the Tax Code has imposed a restriction stating that in the determination of the taxable base, the profit from the main activities may not be reduced by the amount of losses from operations with securities. The Code does not restrict opportunities of reducing the profit from operations with securities by the amount of losses from the main activities.

In the determination of the total taxable base for the profit tax, the losses from the main activities are reduced by the amount of profits from operations with securities. If the amount of losses from the main activities is greater than the profit from operations with securities, the object of taxation for the profit tax does not emerge.

Information of the Department of External and Public Relations of the Central Bank of Russia of October 20, 2006

From October 23, 2006, the rate of refinancing (bank rate) of the Bank of Russia is fixed in the amount of 11% annual (in pursuance of the Direction of the Central Bank of Russia No. 1734-U of October 20, 2006).

This is the second rate reduction during the year 2006. From June 26, 2006, the mentioned rate was fixed in the amount of 11.5% annual by the Direction of the Central Bank of Russia No. 1696-U of June 23, 2006.