We would like to bring to your attention that the order of the Ministry of Finance dated 30 May 2022 N 86n approved the new standard FAS 14/2022 “INTANGIBLE ASSETS” (registered with the Ministry of Justice of Russia 28 June 2022, no. 69031).

The beginning date of application of the standard is the accounting period of 2024, with early application permitted.

Simultaneously with the adoption of the new standard, RAS 14/2007, “Accounting of intangible assets”, will be discontinued with effect fr om 1 January 2024.

Before adopting the new standard, we recommend the following actions:

• Conduct an inventory of the organisation’s intangible assets (hereinafter, IA) that could be classified as IA in accordance with FAS 14/2022;
• Establish a limit on the value of IA in order to classify acquisition and creation costs as IA, or recognise them as expenses for the period;
• Make changes to the company’s accounting policies;
• Determine the useful life expectancy of IA and the terms of annual useful life assessment for relevance;
• Choose the method of subsequent accounting of IA (after initial recognition), at initial or revalued cost (applicable if there is an active market for IA in accordance with IAS 38);
• Determine the residual value of IA on the company’s balance sheet and the terms of its annual valuation;
• For the method of valuation of IA at revalued cost, determine the frequency of revaluation for each group of IA;
• Reflect changes in the organisation’s balance sheet as at 01.01.2024 using incoming adjustments;
• Disclose information in the notes to the company’s accounting (financial) statements.

What does this mean in practice?

For accounting purposes, intangible assets are to be classified by type (electronic computer programmes (ECPs); databases; inventions; utility models; industrial designs; production secrets (know-how); selection achievements; licences and permits) and group.

The unit of accounting for intangible assets is an inventory item.

An inventory object of intangible assets is a set of rights to it arising in accordance with contracts or other documents confirming the existence of the organisation’s rights to such an asset.

A complex object that includes several protected results of intellectual activity (e.g., a multimedia product, a single technology) may also be recognised as an inventory object of intangible assets.

Under the new standard, an entity has the right to independently set a value lim it on the attribution of an item to either IA or expenditure for the period upon completion of capital expenditures related to the acquisition, creation of the assets (paragrath 7   FAS 14/2022).

The standard introduces the concept of residual value – the amount that an organisation would receive if the item were disposed of. The residual value of an IA is deemed to be zero, except in the following cases:

• a contract requires another party to purchase the intangible asset from the organisation at the end of its useful life;
• there is an active market for the item, from which its residual value can be determined;
• it is highly probable that an active market for the item will exist at the end of its useful life.

(paragraph 36 FAS 14/2022).

Depreciation elements such as the residual value, useful life and depreciation method should be reviewed systematically (at least at the end of each year) for changes and, if necessary, adjusted (paragraph 42 FAS 14/2022).

Transition period

Under paragraphs 52-54 of FAS 14/2022, the effects of a change in accounting policy arising from the adoption of the new standard should be recognised retrospectively – as if the standard had been applied from the start of the acquisition of IA.

However, an organisation has the option not to restate comparative amounts for periods prior to the reporting period, but to reflect the changes in carrying amounts resulting from the adoption of the standard through the organisation’s retained earnings.

Prospective application of the standard, without incoming adjustments at the beginning of the year is only possible for organisations that have the right to apply simplified accounting methods, including simplified (financial) reporting (paragraph 55 of FAS 14/2022).

to help keep an overview of what is important for doing business in the vast flow of information, we have summarised the news and practical advice essential for foreign businesses in Russia on payments, deliveries of goods and other aspects to pay attention to. 

More detailed and up-to-date information is regularly posted on swilar’s Telegram channel t.me/swilar.

The information is posted in Russian, but with the translation function in Telegram you have access to the most up-to-date news in the language of your choice.

DELIVERIES

List of goods restricted for export

As a reminder, with the imposition of sanctions, a large number of goods have become restricted both for export fr om the EU territory and for export fr om the territory of the Russian Federation.

To view the current list of EU restrictions on the export of goods, please click here. To check whether your goods are subject to restrictions, you can contact your Chamber of Commerce and/or the responsible approval authority (BAFA, SECO or other, depending on the country of residence of the sender).

The Russian Federation has also imposed export restrictions on a number of goods in recent months. The latest Resolution of the Government of the Russian Federation No. 850 of 11 May 2022 (published on 12.05.2022) clarifies the list of goods restricted for export from the Russian Federation. Some of the previous restrictions have been lifted, and the customs codes (TN VED codes) of the EAEU for commodity items from Resolutions No. 311, 312, 313 have also been clarified. 

To find out whether your goods can be exported from the territory of the Russian Federation under this regulation, you need to check whether your TN VED code is in the list of customs codes in the regulation.

Licences, certificates and permits for importing goods into the Russian Federation

Government Resolution No. 353 of 12.03.2022 extends the validity of a number of permits and licences and simplifies the conditions for importing and certifying products in the Russian Federation:

– It postpones the need to undergo periodic conformity assessment for products for a year in many industries;

– It also makes it possible to use documents from foreign certification bodies or foreign laboratories as proof that products are safe.

To find out whether you can benefit from this measure, you should check whether your licences and certificates are included in the list of permits renewable under the Resolution.

Please note that the Resolution applies only in the Russian Federation and not in other EAEU Member States.

Permission of parallel imports

On 19.04.2022 the Ministry of Industry and Trade signed Order No. 1532 approving the list of goods for which the protection of the exclusive rights to the results of intellectual activity expressed in such goods and the means of individualization with which such goods are marked will not be applied (the Order entered into force on 07.05.2022). A list of goods provided for inclusion in the list of parallel import authorisations can be found here.

The list contains both customs codes and names of specific brands/trademarks. The ministry suggested that more than 50 groups of goods should be sold without the permission of the rights holder. In total, the document contains about 200 items.

According to further comments from the Ministry of Industry and Trade it is understood that the list may be updated: foreign brands that continue to operate on the Russian market may be excluded from the list.

INTERNATIONAL PAYMENTS

In the list of frequently updated restrictions, it is not easy to pick out important details. For your convenience, we have compiled an overview of the experience we have gathered with regard to the payment situation.

As a reminder, 7 Russian banks have been cut off from SWIFT. The latest (6th) sanctions package also includes new restrictions on the banking sector. The list of banks to be excluded from SWIFT was extended by 3 Russian banks: Sberbank, Rosselkhozbank and Moscow Credit Bank, which will be cut off on 14.06.2022.

On the side of the EU

Other than this, there are no current EU restrictions on payments to counterparties in the Russian Federation. However, the majority of payments are processed manually by banks in Europe and/or include additional compliance checks to avoid money transactions involving sub-sanctioned individuals or entities. The sender/receiver of a payment from the Russian Federation may therefore need to provide additional explanations, disclose more detailed information and the processing of the payment may be delayed.

On the side of the Russian Federation

The Russian Federation has introduced a number of restrictions that need to be taken into account when planning payments.

In particular, there are restrictions on (the list is incomplete and is based on the most frequent questions from companies):

• the refunding of loans and interest to foreign legal entities from unfriendly countries (carried out in rubles, for amounts exceeding 10 million rubles per month a special type C account must be opened and authorised by a special Government commission).

• purchase of currency by foreign residents in the Russian Federation and transfer of foreign residents’ own funds abroad (representative offices and branches are restricted from transferring funds to the head office).

• Payment of dividends from both AOs and OOOs. According to Presidential Decree No. 254 of 04.05.2022, dividends are subject to the same regulation as loans (see above).

• Payment of royalties and remuneration for the use of intellectual property/individualisation tools. Presidential Decree No. 322 of 27.05.2022provides that in relation to this type of payments to foreign right holders who meet certain criteria (e.g. who have ceased business in Russia) payments will have to be made in rubles using a special type O account.

It should be taken into account that the restrictions, however, do not apply to payments for goods under supply contracts. With regard to foreign currency payments, significant relaxations have been introduced in the currency control regulations of Russian banks.

For payments for services, there is a lim it on prepayments (not more than 30% of the total amount to be paid). However, the lim it does not apply to a certain list of services or to contracts of less than USD 15,000 (or its equivalent in another currency).

The regulation on compulsory sale of foreign currency earnings introduced in February (initially 80% of incoming funds were to be sold within 3 days of crediting; later the regulation was gradually relaxed to 50% within 120 days) was officially abolished starting from 10.06.2022. The decision was taken by a sub-committee of the governmental commission for the control of foreign investments in Russia, which was authorised to do so by a Presidential Decree of 09.06.2022.

FORCE MAJEURE

At the moment there is no clear understanding as to whether the current restrictions on both parties constitute force majeure.

That said, under the general procedure in Russia, the parties concerned (the party to the contract who has not fulfilled/unduly fulfilled the obligation) are entitled to apply to the Chamber of Commerce and Industry of the Russian Federation (or the subject of the Russian Federation) to obtain an opinion on force majeure circumstances occurring in the territory of the Russian Federation.

In this case the decision on the acceptance/non-acceptance of the received opinion will be made by the counterparty independently. If the counterparty disagrees, the dispute will be resolved in court, with the CCI opinion being one of the pieces of evidence of the party’s inability to meet/properly meet its obligations.

Information on how to apply, deadlines and fees, as well as all contact details are available on the official website of the Chamber of Commerce and Industry of the Russian Federation.

If the foreign supplier company can produce a force majeure certificate from its authorised body, the Russian buyer will not need to apply to the CCI of the Russian Federation separately. A foreign certificate of force majeure can also be presented in the Russian Federation.

OTHER

Moratorium on bankruptcy

С From 1 April to 1 October 2022 there is a moratorium on initiating bankruptcy proceedings at the request of creditors in Russia. The moratorium applies to all companies as well as sole proprietors with the exception of property developer debtors.

Companies covered by the moratorium are prohibited from:

• paying out dividends,

• paying out the actual value of shares,

• repurchasing own shares,

• terminating monetary obligations by setting off a counter claim of the same kind (if this violates or is likely to violate the order of priority for the satisfaction of creditors’ claims).

These restrictions can be avoided by submitting a simple waiver of the moratorium by the company through a personal account on the Fedresourcewebsite.

Business support measures in the Russian Federation

The Russian Federation has introduced a number of both tax and non-tax related support measures for businesses.

The measures include:

• deferral of the payment of insurance premiums;

• special treatment of exchange rate differences for the period 2022-2024;

• accelerated VAT refund procedure;

• and others.

A summary overview of support measures in Russian can be found on the Russian Government website. More information is also available on our website.

Transactions with shares in Russian companies

In a number of cases, transactions with shares (sale, withdrawal of a participant, call option) may require authorisation from a special Government Commission.

However, this rule does not apply to all transactions: a number of exceptions have been named in the Presidential Decree of 04.05.2022. There are also differences in the regulations for joint stock companies and limited liability companies.

We are actively working with these issues for our clients and will be happy to provide further information on request. We make every effort on our part to help keep processes stable for our clients, and we always stay in touch.

More up-to-date information in our Telegram channel.

During the spring of 2022, Russia developed and implemented measures to support small and medium-sized businesses in response to the global situation.

swilar specialists have selected the novelties that are relevant for businesses with foreign capital and have prepared a digest of the measures taken.

The full list can be found on the support measures summary page of the Russian Government website. 

Tax support measures

1. Income tax measures:

• Organisations have the right to switch to monthly advance payments based on actual profit, starting from an accounting period of three months, four months and so on until the end of 2022 (applicable from 01.01.2022).

• Foreign exchange gains arising between 2022-2024 and foreign exchange losses arising between 2023-2024 are only taken into account when settling foreign currency claims that have arisen. Prepayments are not subject to this rule (in force from 01.04.2022).

• When determining the tax base, debts written off by foreign organisations and foreign nationals of Russian organisations under loan and credit agreements concluded before 1 March 2022 will not be taken into account in 2022. No exemption is proposed in relation to debt forgiveness by Russian lenders/creditors.

Undercapitalisation rules will apply a fixed foreign exchange rate as of 01.02.2022.

2. VAT measures:

VAT refunds from the budget on a declaratory basis (i.e. in advance) are possible without a bank guarantee or security if the conditions for the application of the measure are met:

• the organisation is not in bankruptcy, liquidation or reorganisation and

• the amount of the refund claimed does not exceed the aggregate amount of taxes and insurance contributions paid in the calendar year preceding the claim.

The new rules on accelerated VAT refunds will be valid for the tax years 2022 and 2023. The audit of VAT returns has not been abolished, but its completion is no longer a prerequisite for obtaining a refund.

3. Personal income tax measures:

• Income tax is not applied to material benefits, interest on deposits and material support (gifts) received by certain categories of citizens in 2021-2023;

• Controlling persons or founders of foreign organisations (as of 31.12.2021) who have received property or property rights from these organisations in 2022 are exempt from paying personal income tax on this type of income.

4. Other measures:

• Inspections of compliance with currency legislation regarding violations under the Federal Law “On Currency Regulation and Control” have been suspended

• From 09.03.2022 to 01.06.2022, tax authorities have suspended decisions to freeze operations on bank accounts when recovering money from debtors’ accounts (blocking accounts)

• For objects whose cadastral value will increase in 2022 due to the economic situation, the cadastral value as at 01.01.2022 will be taken into account when calculating tax for 2023.

5. “Covid amnesty”

In Moscow, measures have been announced for a so-called “covid amnesty“, which will reimburse previously paid fines for violations of any covid restrictions other than non-compliance with isolation during a COVID-19 infection.

Subsidies will be available to companies and individuals to reimburse previously paid fines.

In order to receive the subsidies, it is necessary to apply to the Moi Dokumenty Centres by 31.12.22 and provide the administrative penalty order and proof of payment of the fine.

The measure can be used from 01.06.2022; application forms are available on the website mos.ru.

6. Moratorium for currency enforcement inspections

The moratorium became effective on 1 June and will run until 31 December 2022. It implies the suspension of most control activities that concern compliance with currency legislation, but will not affect inspections in which violations have already been detected previously, the expiry date of which is 31.12.22.

Also, the moratorium will not affect violations of regulations that were adopted after 27.02.22 as special economic measures in response to the sanctions.

We keep up to date with the latest developments and help our clients to keep their business processes running smoothly.