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.

We would like to remind you that from 01.01.2022, the application of the standards FAS 6 “Fixed Assets” and FAS 25 “Accounting of Leases/Rentals” is mandatory.
Much has been written and said about the new FAS. We, for our part, have been reviewing the standards in our newsletters and webinars.
However, even with the information available from open sources, accountants have many practical questions about how to apply the new standards in their company. There are a number of issues that need to be resolved individually for each company.

For example:

• What discount rate should be used when calculating lease payments?
• How should cash flows be determined and at what rate should they be dis-counted in an impairment test?
• For which assets will the residual value be non-zero and how should the re-sidual value be determined?
• How do I make adjustments to a lease agreement?
• What entries should be made when the asset is impaired, when the asset is revalued?
• Which points should be changed/added in the accounting policy?
• and many others

Drawing on our extensive experience with international accounting standards, as well as a large number of real-life cases from clients, we can offer “emergency assis-tance” to accountants in answering these relevant and important questions.
In case you have difficulties and/or questions regarding the application of the new lease or fixed asset standards, send us an email with the subject “Question on the new FAS”. We will answer quickly and to the point.

On 29 November 2021, with the adoption of Federal Law No. 382-FZ, changes to the tax treatment of leasing transactions were introduced.

Changes affecting the calculation of property tax – clause 49 of Law 382-FZ makes amendments to Article 378 of Chapter 30 of the Tax Code, meaning that the tax for rented property, including finance lease (leasing) agreements, is payable by the lessor.

Changes affecting the calculation of profit tax:

• Law 382-FZ (clause 21) excludes clause 10 of Article 258 of the Tax Code, which allows the lessee or lessor to depreciate the leased property depending on who records the leased asset on their balance sheet under the terms of the agreement. In other words, the lessee will no longer be able to depreciate the leased asset in tax accounting starting from 2022, as was the case previously if the lessee accounted for the leased asset on their balance sheet – with the introduction of the changes, the leased asset will only be considered depreciable property by the lessor in tax accounting;
• clause 23 of the adopted law also changes the procedure for calculating profit tax in terms of how expenses under leasing agreements are recognised (sub-clause 10, clause 1 of Article 264 of the Tax Code) – if the payments under the agreement include the purchase price of the leased asset, which passes into the lessee’s ownership after the agreement ends under a sales agreement, the leasing payments are recognised as expenses less the purchase price;

Accounting for the purpose of paying transport tax does not change with the entry into force of Law 382-FZ.

The Federal Law comes into force on 1 January 2022.

In our message No. 6/2021 dated 06/11/2021, we informed about the planned changes in the workflow regulations, which could have a significant impact on the work of companies that use ERP systems hosted on servers located outside the territory of the Russian Federation.

On December, 24th 2021 the Ministry of Finance of Russia issued information message No. IS-Uchet-35 on the adoption of Order No. 224n dated 23.12.2021, according to which the due date for the requirement to store accounting documents on the territory of the Russian Federation, according to the Federal Accounting Standard FAS 27/2021, is postponed from January, 1st 2021 to January, 1st 2024.

The amendments were adopted in order to provide conditions for the organizations for proper preparation to store accounting documents in the Russian Federation, by postponing the due date of paragraph 25 of FAS 27/2021 from January 1st , 2022 to January 1st, 2024.

It is noted that the due date of the beginning of whole FAS 27/2021 standard remain in force, with the exception of paragraph 25 of FAS 27/2021 on the storage of accounting documents, data contained in such documents, and the placement of databases on the territory of the Russian Federation, which is subject to mandatory application from January 1st, 2024.

Information message No. 6/2021 with a detailed review of FAS 27/2021 can be found found at the following link.

We will be glad to answer your questions!

Оn January 1, 2022, the Resolution of the Government of the Russian Federation №1951 dd. 16.11.2021 comes into force. It concerns increasing the rate limit for insurance payments in cases of temporary disability and maternity, and also mandatory pension insurance:

• The rate limit for social insurance, in cases of temporary disability and maternity, for each individual does not exceed 1,032,000 rubles on a cumulative basis starting fr om the 1 January 2022;
• The rate limit for mandatory pension insurance does not exceed 1,565,000 rubles on a cumulative basis starting from the 1 January 2022 for each individual.

The payments for health care insurance and social payments in case of injuries will have to be made on the basis of all the taxable incomes irrespective of their amount. There will be no lim it for them, as before.

We would like to draw your attention to the fact that starting fr om January 1, 2022 a new standard for accounting for fixed assets (hereinafter referred to as FA) is mandatory for usage – FAS 6/2020.

The corresponding changes were made by the Order of the Ministry of Finance N204n dated September 17, 2020. Before transition to the new standard, we recommend that you do the following:

• Establish a limit on the cost of fixed assets to allocate the cost of an asset to the FA or the low-value FA category;
• Conduct an inventory of fixed assets and other assets that, in accordance with FAS 6/2020, could be classified as fixed assets based on the new cost limit;
• Make appropriate changes to the accounting policy of the Company;
• Determine the useful life period of the FA and the terms of the annual testing of it for relevance;
• Sel ect the method of subsequent accounting of the FA (after initial recognition), at initial or revalued cost;
• Determine the liquidation value (hereinafter referred to as LV) of fixed assets on the balance sheet of the enterprise. and the timing of the annual LV assessment;
• For the method of assessing fixed assets at a revalued cost, establish the frequency of revaluation of fixed assets for each group of revalued fixed assets;
• Reflect changes in the organization’s balance sheet as of 01.01.2022 using incoming adjustments;
• Disclose relevant information in the accounting (financial) statements of the company.

What does this mean in practice?

According to the new standard, an organization has the right to independently set a cost limit for classifying an object as a fixed asset, in the contrast to the previously existing limit of 40,000 rubles.

With an increase in the limit (if, for example, an organization decides to set it at the level of 100,000 rubles in order to make it equal to the FA limit in tax accounting), some fixed assets may no longer meet the accounting FA lim it criteria and will need to be reclassified as low-value FA, writing off the net book value of the period as an expense (clause 5 of FAS 6 / 2020), while it will be still necessary to keep inventory and off-balance sheet records of such objects.

The standard introduces the concept of residual value – the amount that an entity would receive if an item were disposed of (including tangible assets remaining after disposal), less the estimated disposal costs at the time of disposal. A LV of the particular can be equal to zero if at the end of the UL no more benefits are expected fr om the disposal of the object, if receipts are expected, but they are not material, or if it is impossible to determine how much will be received upon disposal of an asset (paragraph 31 of FAS 6/2020). 

The liquidation value of fixed assets should be systematically (at least, at the end of each year) analyzed for changes and, if necessary, adjusted (clause 37 of FAS 6/2020).

Also, the innovation of the standard – the accrual of depreciation on fixed assets is not suspended (including in cases of downtime or temporary break in the use of fixed assets), except for the case when the residual value of an item of fixed assets becomes equal to or exceeds its book value (hereinafter BV). If subsequently the residual value of such an item of fixed assets becomes less than its book value, depreciation is resumed on it (paragraph 30 of FAS 6/2020).

What should be done?

According to paragraphs 48-49 of FAS 6/2020, the consequences of a change in accounting policy associated with the beginning of the application of the new standard should be reflected retrospectively – as if the specified standard had always been applied.

It is necessary to recalculate and adjust the balance sheet statement in the part of fixed assets as of 01.01.2022, in case there was no early application of the standard, and also determine the BV – the initial asset cost less accumulated depreciation. The initial cost should be calculated according to the previously existing rules, and the accumulated depreciation – according to the norms of the new standard (clause 49).

Prospective application of the standard, without incoming adjustments at the beginning of the year, is possible only for organizations that are entitled to use simplified accounting methods, including simplified accounting (financial) statements (paragraph 51 of FAS 6/2020).

We will be happy to answer your questions!

We would like to introduce you to the new standard FAS 27/2021 “Documents and document flow in accounting”, approved by Order No. 62n (registered with the Ministry of Justice on 07.06.2021).

The standard introduces new concepts and legislative norms that significantly change the order of document flow and storage of companies’ documents (except for organizations in the public sector).

The new standard regulates such things as the procedure for signing documents, the date of documents, the language of documents, making corrections and other aspects mandatory for local accounting services in Russia after the introduction of the standard. For your convenience, we have prepared a consolidated overview of the main changes introduced by the new FAS (the overview is available in Russian at the link).

Special attention of foreign companies operating in Russia deserves paragraph 25 of the standard:

Storage of accounting documents
An economic entity must keep accounting documents as well as data contained in such documents and locate the databases of such data in the territory of the Russian Federation.

If the laws or regulations of the country – the place of business outside the Russian Federation – require storage of accounting documents in the territory of this country, such storage should be ensured.

The paragraph about the need to keep accounting registers in the Russian Federation raises the most questions from foreign companies.

Many international companies (especially those using SAP, Navision and other international accounting systems) often use servers outside the Russian Federation, which are shared by the group of companies, so the requirement to store registers within the country may entail significant structural changes.

At the moment, however, there is no direct indication in the standard (paragraph 25) as to whether the primary accounting registers should be stored in Russia or whether it will be sufficient to ensure the storage of a copy of the registers to meet the requirements of the new FAS.

In this connection, collective appeals by international business associations to the Ministry of Finance requesting the necessary clarifications are currently being prepared. We are closely monitoring the situation and will be happy to offer updates on this topic should further information become available.

We will be glad to answer your questions!

Recently, there have been an increasing number of cases in which Russian companies that are part of an international group of companies have been asked to submit the global documentation (so-called master file) to the Russian tax authorities, especially in the context of the formation of the regular transfer price declaration and documentation.

As a reminder: the global documentation (master file) must be provided to the supervisory authority upon their request within 3 months fr om the date of having received an according notice. The file is to be provided in Russian language.

The master file may be requested not earlier than 12 months and no later than 36 months after the end of the reporting year, so e.g. starting from 01.01.2022 till 31.12.2024 for the year 2020. The documentation must comply with the requirements of Article 105 16-4 of the Russian Tax Code.

Please note that the violation of the rules of the Tax Code – failure of the taxpayer to submit global documentation in time (paragraph 2 of Article 129.11 of the Tax Code) may result in a fine in the amount of 100,000 rubles.

From 2020 onwards, the benefits of the so-called “Transitional period” (2017-2019), for which no fines were imposed, no longer apply. From 2020, failure to comply with the requirement to submit the master file to the authorities upon request can result in a maximum amount of fine.

In order to provide the required information to the tax authorities on time, if requested, we recommend the Russian member companies of international company groups to fulfill the following steps in advance:

• request the Global Documentation from the parent company,
• check it for compliance with the requirements of Article 105 16-4 of the Tax Code of the Russian Federation and, if necessary, supplement the File;
• translate the Global Documentation into the Russian language, if applicable.

Expert comment

Eugenia Chernova, Project Leader at swilar: “Not every taxpayer who is a member of an international group of companies may be required to provide global documentation. The existing limits are bound to the total revenue of the group. The lim it depends on the country of residence of the parent company.” If you have any questions about the necessity of global documentation for your company, swilar specialists will be happy to give you qualified advice.

The Ministry of Labor and Social Protection of the Russian Federation has prepared a draft of amendments to Federal Law № 125-FZ dd. 24.07.1998 and Federal Law № 255-FZ dd. 29.12.2006, which will come into force from January 1, 2021 in terms of payment of benefits for temporary disability, maternity and childhood.

 “Direct payments” is a project implemented by the Social Insurance Fund of the Russian Federation since 2011. During this time, 77 regions of the Russian Federation have already joined it. The remaining 8 largest regions (Moscow, St. Petersburg, Krasnodar and Perm, Moscow, Sverdlovsk and Chelyabinsk regions, the Khanty-Mansi Autonomous District) will move to direct payments from January 1, 2021.

Thus, the system of “direct payments” will be effective throughout the Russian Federation from January 2021.

The point of the amendments is that from 1 January 2021 all benefits (with few exceptions) will be paid directly to employees by the Social Insurance Fund (FSS).

Besides, employers will transfer insurance payments to FSS (including contributions for accidents at work and occupational diseases) in full, i.e. without reducing the amount of benefits paid to employees.

Direct payments of employee benefits from the Social Insurance Fund, which are considered in the draft, include:

Temporary disability benefits for the first 3 days of an employee’s illness will be assigned and paid, as before, only by the employer.

With subsequent reimbursement from the Social Insurance Fund, the employer will assign, and pay to working citizens the following types of benefits (the mechanism remains the same):

The mechanism of direct payments is as follows:

1. The employee must submit to the employer:

• a certificate of the amount of earnings (if he/she worked for other (other) employers during the calculation period);

• confirming documents (certificate of disability for work, certificate of registration at a medical institution in the early stages of pregnancy, certificate of birth of a child, etc.);

• application, wh ere details for the transfer of the allowance are specified.

Please be awared, that allowance will be paid by FSS only to the card of payment system MIR.

Important! The term for submission of the sick leave and other documents confirming the occurrence of an insured event is 6 months after the sick leave is closed.

2.The employer within 5 calendar days sends a package of documents to the FSS.
3. The FSS within 10 calendar days checks the documents provided by the employer and makes a decision on the assignment or refusal to pay the allowance.
4. If the decision is positive, the allowance is transferred to the employee’s current account or sent by mail.
5. If the documents are insufficient or incorrect, the FSS sends a notification to the employer. Within 5 calendar days the insured is obliged to replace them, or provide the missing documents.

The way of sending data to the FSS depends on the average number of employees:

The amount and methodology of benefit calculation remain the same.

 Monthly child care allowance awarded in 2019-2020 and continuing into 2021 are paid as follows:

• The employer pays the December 2020 allowance to the employee in the regular order;

• To process an allowance payment from 2021 directly from the FSS:

·         the employee must submit to the employer an application for the allowance directly from the regional branch of the FSS in the standard form and the necessary documents;

·         the employer within 5 calendar days is obliged to transfer the data (inventory, application and documents from the employee or register) to the FSS.

The monthly child care allowance will be transferred from the 1st to the 15th of the month following the month for which the allowance is paid. The allowance for care of the child till 1,5 years at transition to direct payments from FSS, is not subject to recalculation, the sum of the allowance appointed till 01.01.2021, does not change.

We will be happy to answer your questions!