Windfall tax for major companies to be introduced in Russia

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Monitoring of the Federal Legislation dated 26.07.2005

Federal Law No. 122-FZ of July 23, 2005 on Amending the Law of the Russian Federation on the Status of the Heroes of the Soviet Union, the Heroes of the Russian Federation and the Full Knights of the Order of Glory

The citizens honoured with the title of the Hero of the Soviet Union, the Hero of Russia and full knights of the Order of Glory shall be granted the right to chose between enjoying privileges in kind and receiving monthly cash payments. By request of the said citizens, they and their family members shall be either granted privileges, as regards medical care and sanatorium-and-spa treatment, prosthetic and orthopedic services, provision of medicines, payment for public utilities and travelling or shall receive monthly payments at the rate of 25 thousand roubles with the subsequent indexation of this rate of payment similarly to the basic part of the labour pension. With this, in both cases privileges shall be preserved in respect of their servicing in the first turn at out-patient clinics and polyclinics, their treatment at in-patient clinics, military hospitals, hospitals, in respect of their provision with medicines in the first turn, delivery of medicines to their homes, obtainment in the first turn of perm its to treatment at sanatoriums, preventoriums and rest homes once a year, out-of-order use of all types of communication, installation of home telephones and some other ones.

In the event of death of the said persons their family members shall reserve the right to receiving monthly payments in cash or to the privileges in kind.

This Federal Law shall enter into force as of January 1, 2006.

Federal Law No. 121-FZ of July 22, 2005 on Amending Article 54 and 55 of the Federal Law on Making Amendments and Addenda to Some Legislative Acts of the Russian Federation, on Declaring Invalidated Individual Legislative Acts of the Russian Federation, on Granting Individual Guarantees to the Personnel of Internal Affairs Bodies, Bodies for Control over Traffic of Narcotics and Psychotropic Substances and of the Abolished Federal Tax Police Bodies in Connection with Taking Measures Aimed at Improving Public Administration

The amendments provide for granting individual social guarantees to the persons dismissed from the tax police bodies in connection with re-organisation thereof. Thus, the persons dismissed from the federal tax police bodies and employed by the federal executive bodies or other state bodies by way of transfer shall preserve the record of service in the ranks they previously had that shall be taken into account when conferring regular special ranks on them (class ranks, skill categories). The said persons shall be granted regular leaves subject to the record of service in the federal tax police bodies. The said persons shall not be subject to the personnel re-certification, and one-time allowances and dismissal wages shall not be paid to them. They shall be likewise entitled to registration as persons in need of improving living conditions at a new duty station with the account taken of the previous date of such registration.

The amendments likewise concern granting the right to the pensioners, dismissed from the federal tax police bodies that have a certain record of service, to medical aid at medical institutions of the Ministry of Internal Affairs of Russia, as well as some other privileges granted to them.

This Federal Law shall enter into force as of January 1, 2006 and shall extend to the legal relations rising as of July 1, 2003.

Federal law No. 120-FZ of July 22, 2005 on Amending the Code of Administrative Offences of the Russian Federation

The Federal law establishes a stricter administrative liability for installing at a motor vehicle wittingly false state registration plates and for driving such motor vehicle, for installation on a motor vehicle without the appropriate permit devices for giving light and sound signals (except for security alarm systems), as well as for an unlawful use of special colour schemes for motor vehicles used by operative services.

In the event of driving a motor vehicle which is unlawfully equipped with the said devices, as well as the one which bears special colour schemes of motor vehicles of operative services, without having a special permit to it, the Federal Law provides for, in addition to a fine, the probability of prohibiting to drive the transport vehicle (accompanied by the removal of state registration plates).

A stricter liability of officials is established for allowing to drive transport vehicles with wittingly false state registration plates or those equipped with forbidden light signals and devices installed without a special permit to it.

Federal Law No. 119-FZ of July 22, 2005 on Amending Chapter 21 of Part Two of the Tax Code of the Russian Federation and Declaring Invalidated Individual Provisions of the Laws of the Russian Federation on Taxes and Fees

The maximum rate of the proceeds received within the three preceding successive calendar months for the sale of commodities (works and services), which is related to the right of organisations and individual businessmen to the release from estimation and payment of value-added tax, is increased from 1 to 2 million roubles. Taxpayers shall forfeit the right to such release, if the rate of the proceeds received by them within the three preceding months exceeds 2 million roubles.

Operations of opening and keeping bank accounts of organisations and natural persons, including bank accounts used or making settlements under bank cards, as well as operations and services connected with servicing bank cards, are exempted from taxation. Furthermore, there shall be exempted from taxation operations of granting loans in the monetary form, commission by private notaries of notarial actions and rendering of services of legal and technical nature in compliance with the laws on notariat. There shall not be taxable by value-added tax the sale of scrap and waste of ferrous and non-ferrous metals and transfer for advertising purposes of commodities (works, services), one unit of which can be acquired (created) for 100 roubles at the most.

Foreign organisations that have several subdivisions (representative offices or branches) on the territory of the Russian federation shall independently select the subdivision at whose place of tax registration they shall file tax declarations and pay the tax in total on the operations of all their subdivisions located on the territory of the Russian Federation. Foreign organisations shall be obliged to notify on their choice in writing the tax authorities at the location of their subdivisions.

The specifics of determining the tax base, when transferring property rights, are established. The specifics of estimation and payment to the budget of the tax, when making operations in compliance with a contract of society in participation (a contract of joint activity) or a contract of property trust management on the territory of the Russian Federation, is defined. It is established that, when selling on the territory of the Russian Federation commodities of foreign persons which are not registered with tax bodies as taxpayers, there shall be deemed as tax agents the organisations and individual businessmen engaged in business activities with the participation in settlements on the basis of contracts of agency, contracts of commission agency or agency contracts made with the said foreign persons. In this instance, the tax base shall be determined by a tax agent as the value of such commodities subject to excise taxes (for excisable commodities) without the inclusion therein of the amount of the tax.

As on January 1, 2006, payers of value-added tax shall be obliged to hold an inventory of accounts payable and receivable as on December 31, 2005 inclusive. On the basis of the results of the inventory shall be determined accounts receivable for commodities sold but not paid for and preferential rights, the operations of whose sales (transfer) are recognised as objects of taxation, and accounts payable for commodities (works, services), that are not paid for, and for property rights accepted for registration prior to January 1, 2006 which include the amounts of value-added tax advanced for payment by the sellers of commodities (works and services) and of property rights and are subject to tax deductions. Payers of value-added tax that have previously determined the time of assessing the tax base as the date of payment shall include into the tax base the monetary funds received prior to January 1, 2008 for paying off the said accounts. If the accounts receivable are not paid prior to January 1, 2008, they sh all be subject to inclusion by a taxpayer into the tax base in the first tax period of 2008.

If prior to January 1, 2008 a taxpayer does not pay the amount of the tax advanced to it by the sellers of commodities (works and services) and property rights which are registered by it prior to January 1, 2006, tax deductions of such amounts of the tax shall be made in the first tax period of 2008.

This Federal Law shall enter into force as of January 1, 2006, apart from individual provisions that shall enter into force as of January 1, 2007.

Federal Law No. 118-FZ of July 22, 2005 on Amending Chapter 21 of Part Two of the Tax Code of the Russian Federation

The amendments specify a procedure for imposition on value-added tax on organisations being re-organised and on newly established organisations in the course of re-organisation of legal entities. Making by re-organised organisations operations connected with the transfer of rights and duties by way of legal succession must not lead to the rise of unreasonable tax obligations or double taxation of both re-organised and newly established companies. Chapter 21 'Value-Added Tax' of the Tax Code of the Russian Federation is supplemented by Article 162.1 establishing the specifics of taxation when re-organising companies. The amendments made shall allow to avoid an unreasonable increase of legal successors' outlays in the course of re-organisation and to advance the appropriate amounts of value-added tax for deduction.

This Federal Law shall enter into force upon the expiry of one month as of the date of official publication thereof but at the earliest on the first day of the following tax period, as regards value-added tax. The operation of this Law shall extend to the legal relations rising as of January 1, 2005.

Federal Law No. 117-FZ of July 22, 2005 on Amending Some Legislative Acts in Connection with the Adoption of the Federal Law on Special Economic Zones in the Russian Federation

The amendments are aimed at ensuring the conditions for implementation of the provisions of Federal Law No. 116-FZ of July 22, 2005 on Special Economic Zones in the Russian Federation. The amendments establish privileges and preferences for participants of special economic zones in the Tax Code, Customs Code, Land Code, Town-Planning Code and in some other federal laws.

This Federal Law shall enter into force as of January 1, 2006.

Federal Law No. 116-FZ of July 22, 2005 on Special Economic Zones in the Russian Federation

A procedure for creation, functioning and termination of special economic zones in the Russian Federation is established by this law.

As a special economic zone shall be deemed a part of the territory of the Russian Federation determined by the Government of the Russian Federation where a special procedure for exercising business activities is in effect. Special economic zones shall be created for the purpose of developing processing branches of industry, high technology branches thereof, making new types of products and development of transport infrastructure. The zones to be created may be only located on the territory of one municipal formation; with this, a zone may not include the whole territory of any administrative and territorial unit.

On the territory of the Russian Federation may be created two types of economic zones, that is, industrial-production ones and technical- promotional ones. The said zones shall be managed by the federal executive body authorised to exercise the appropriate functions and by territorial bodies thereof. As residents of a special economic zone shall be deemed profit-making organisations or individual businessmen which are registered on the territory of the municipal formation, within whose boundaries the special economic zone is located, and which have made with the managerial bodies of the given zone an agreement on the exercise of the appropriate type of activity. A wide range of preferences aimed at stimulation of business activities shall be granted to residents of a special economic zone.

As of the date of entry into force of this Federal Law, the functioning of special economic zones and of free economic zones (except for the special economic zones in the Kaliningrad and Magadan regions) created prior to the entry thereof into force shall be terminated.

The Federal Law shall enter into force upon the expiry of 30 days as of the date of its official publication.

Federal law No. 101-FZ of July 22, 2005 on Amending Chapter 26.2 and 26.3 of Part Two of the Tax Code of the Russian Federation and Some Legislative Acts of the Russian Federation on Taxes and Fees, as Well as on Declaring Invalidated Individual Provisions of Legislative Acts of the Russian Federation

Chapter 26.2 'Simplified Taxation System' and Chapter 26.3 'Taxation System in the Form of Uniform Tax on Imputed Earnings for Individual Types of Activities' of the Tax Code of the Russian Federation are amended by this law.

The rate of a taxpayer 's incomes allowing him to apply the simplified taxation system is increased from 11 to 15 million roubles, as well as the possibility of indexing the said rate subject to changes in consumer prices of commodities (works, services) is established. A procedure for transfer to the simplified taxation system and for transfer therefrom to other tax treatments, a list of outlays decreasing the tax base, as well as a procedure for recognising them, are specified.

One novation made to the Tax Code of the Russian Federation is the introduction of the provision making it possible to apply the simplified taxation system on the basis of a patent. This procedure is established for individual businessmen who do not have employees and exercise the types of activities determined by the laws of the subjects of the Russian Federation. The specifics of such procedure for applying the simplified taxation system lies in the establishment of a fixed tax rate. A patent may be issued for a quarter, six months, nine months and a year at a taxpayer's choice.

Furthermore, a list of the types of activities in respect of which the simplified taxation system in the form of uniform tax on imputed earnings for individual types of activities is widened.

The remaining amendments likewise expand the possibilities of applying special tax treatments for small-scale business subjects and simplify the required procedures.

Taxpayers which have passed over to the simplified taxation system as of January 1, 2003 and which have chosen incomes as the object of taxation shall be entitled as of January 1, 2006 to change the object of taxation notifying tax authorities on it at the latest in 2005.

This Federal Law shall enter into force upon the expiry of one month as of the date of official publication thereof, apart from individual exceptions entering into force as of January 1, 2006.

Federal Law No. 94-FZ of July 21, 2005 on Placing Orders for Supply of Commodities, Carrying Our Works and Rendering Services to Meet the State and Municipal Needs

This Federal Law shall regulate the relations rising in the course of placing orders for supply of commodities, carrying out works and rendering services to meet the state and municipal needs, as well as shall establish a uniform procedure for placing orders aimed at more efficient use of funds received from the budget and from off-budget sources, at providing greater opportunities for participation of natural persons and legal entities in orders' placement, development of fair competition, ensuring publicity and transparency when placing orders.

The provisions regulating the procedure for placing orders on a competitive basis are specified, including the procedure for forming a tender commission, the requirements to the contents of tender documentation and to the procedure for explanation and change thereof, the criteria and procedure for assessment and drawing up of tender bids, as well as a procedure for keeping the record of a tender are determined. The division into competitive and out-of-competition procurement ways is introduced and the conditions, under which out-of-competition procedures for placing orders and a close-end tender may be held, are determined.

The Government of the Russian Federation is vested with the authority of normative and legal regulation when placing orders for the supply of commodities, carrying out works and rendering services to meet the state and municipal needs.

Federal Law No. 93-FZ of July 21, 2005 on Amending Legislative Acts of the Russian Federation on Elections and Referendums and Other Legislative Acts of the Russian Federation

The amendments are introduced in connection with the adoption of Federal Law No. 51-FZ of May 18, 2005 on Elections of Deputies of the State Duma of the Federal Assembly of the Russian Federation. A greater part of the amendments is made to Federal Laws No. 67-FZ of May 18, 2005 on Basic Guarantees of Election Rights and of the Right to Participation in a Referendum of Citizens of the Russian Federation and No. 19-FZ of January 10, 2003 on Elections of the President of the Russian Federation. The amendments establish a procedure for independent participation of political parties in the elections to state power bodies and local self government bodies; political blocks are be excluded from the number of participants of the election process.

There are established single days for voting at the elections to state power bodies of the subjects of the Russian Federation and local self-government bodies, that is, the second Sunday of March and the second Sunday of October of the last year of exercising the authority by an appropriate body or deputies. Moreover, a 7-per cent barrier is established for admittance of lists of candidates to distribution of the deputy's mandates in the legislative (representative) state power body of a subject of the Russian Federation. The provisions regulating the activities of deputies of the State Duma elected in single-member constituencies and of assistants thereof are excluded from Federal Law No. 3-FZ of May 8, 1994 on the Status of a Member of the Federation Council and on the Status of a Deputy of the State Duma of the Federal Assembly of the Russian Federation. The Federal Law is supplemented by the article defining the concept of a fraction in the State Duma meaning an association of all deputies of the State D uma elected within the composition of the federal list of candidates admitted to the distribution of deputy's mandates. The transfer of a deputy of the State Duma out of a fraction shall be deemed a ground for termination of his deputy's authority.

The amendments made to Federal Law No. 95 -FZ of July 11, 2001 on Political Parties specify the procedure for nomination by political parties of candidates for the deputies (including within the composition of the lists) and for other elective offices in state power bodies and local self-government bodies. The provisions concerning financial report documents of political parties, including a procedure for submitting financial reports to the appropriate bodies, are specified. The increase as of January 1, 2005 of the extent of the state financing of the political parties supported by voters at the federal elections and the indexation as of January 1, 2007 of the rate of the state financing subject to the forecast inflation rate are provided for.

The appropriate amendments are made to the to the Criminal Code of the Russian Federation, Tax Code of the Russian Federation, Code of Administrative Offences of the Russian Federation, Civil Procedural Code of the Russian Federation, as well as to the Laws on Mass Media, on Ensuring the Constitutional Rights of Citizens of the Russian Federation to Elect and to Be Elected to Local Self-Government Bodies and to a number of other legislative acts.

Decree of the President of the Russian Federation No. 855 of July 22, 2005 on the Federal Agency for Management of Special Economic Zones

The Federal Agency for Management of Special Economic Zones subordinate to the Ministry of Economic Development and Trade of the Russian Federation is being established. The Government of the Russian Federation is given an instruction to endorse within a three-month term the regulations on the said agency.

Decision of the Government of the Russian Federation No. 447 of July 23, 2005 on Endorsing the Rates of Export Customs Duties in Respect of the Commodities Made of Petroleum That Are Exported from the Territory of the Russian Federation Behind the Boundaries of the Member States of Agreements on the Customs Union

The export rate in respect of black oil, oil, waste oil products, fuel oils, coke, oil vaseline and paraffin is increased from 56 to 57,4 US dollars per one ton. The export rate in respect of benzol, toluol, xylol, propane, butanes, ethylene, butylene and butadiene, other liquefied gases, light and average distillates and their products, gas oils are increased from 104,1 to 106,6 US dollars per 1 ton.

The Decision shall enter into force upon the expiry of one month as of the date of the official publication thereof.

Decision of the Government of the Russian Federation No. 445 of July 23, 2005 on the Procedure for Rendering by Legal Advice Offices and Bar Associations of Legal Aid to the Military Servicemen Drafted for Military Service on the Issues of Carrying Out Military Service by Them and for Other Reasons Established by Federal laws

Legal aid shall be rendered to military servicemen by legal advice offices and bar associations located in the garrisons where they carry on their military service. Rates of payments to legal advice offices and to bar associations as a remuneration and (or) compensation for outlays, related to rendering by them legal aid to military servicemen, are determined. The payments shall be made by a military unit on the basis of agreements made by way of remitting funds on a cashless basis to the current (settlement) account of a legal advice office or a bar association.

The rate of payment shall be determined by an agreement but may not exceed one minimum labour wage per day.

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