Dear colleagues! 

In a constantly changing situation, our Telegram channel will allow us to share new information and practical experience with you up to date.

We hope that our recommendations will help you to keep your business processes stable.

The channel is available in Russian.

Comment of swilar Moscow General Director Daria Pogodina for the December issue of the Russian-German Chamber of Commerce briefing

From December 1, 2021, in accordance with amendments to the Federal Law “On Communications” No. 126-FZ dated July 7, 2003, corporate mobile communications will be provided to organizations and individual entrepreneurs only if there is data about the corporate communications user in the Unified Identification and Authentication System (ESIA).

If this requirement is not met, organizations will be disconnected from corporate communications services from December 1.

What is ESIA?

ESIA is a Russian information system used for authorization on the state portal “Gosuslugi”.

How is data entered into ESIA?

Data is entered into ESIA in three stages. The procedure is as follows:

The organization enters the following information about employees using corporate mobile communications in its personal account on the website of the operator providing corporate communications:

personal data of an individual (passport data);
subscriber number;
name of the organization / full name of the individual entrepreneur.
Employees who have access to the personal account of the corporate communications operator can also enter information about themselves.

The employee confirms the transfer of information through the personal account on the State Services portal, after which the information is sent to the mobile operator.
The mobile operator enters the data into the Unified Identification and Authentication System.
When should the information be provided?

Data on users of corporate mobile communications under contracts concluded before 01.06.2021 must be entered into the system no later than 30.11.2021. When starting to use corporate mobile communications from June 1, 2021, the information must be transferred to the operator before the start of services.

Corporate users using M2M (Machine to machine) SIM cards for ATMs, POS terminals, video surveillance systems, the deadline for submitting information, according to Government Resolution No. 844 of 05/31/2021, must provide information no later than September 1, 2021.

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!

In case your activity involves processing of personal data by using a website, we recommend that you check compliance with all legal requirements for the protection of personal data.

Starting March 27, 2021 the liability for violation of the processing of personal data became more strict: provisions of the Federal Law dated February 24, 2021 Nr. 19- FZ “On Amending the Russian Federation Code of Administrative Offences” will come into force.

This law increases the following fines:

• Legal entities may face a fine from sixty thousand to one hundred thousand rubles for unlawful and/or non-purpose data processing.
• In the absence of legally required consent to the processing of personal data, legal entities face a fine of thirty thousand to one hundred and fifty thousand rubles.
• Failure to provide users/subjects of personal data with access to the personal data processing policy or information on the personal data protection requirements being met may subject legal entities to a fine of thirty to sixty thousand rubles.

In addition to the fines increase, the warning as a form of administrative responsibility for violation of legislation on personal data is eliminated. According to clause 2 of the mentioned law, the limitation period for that kind of violation is increased to 1 year. Please note that Federal Supervision Service for Communications, Information Technologies and Media (Roskomnadzor) may inspect the compliance of the data collection and processing with Russian law. The first check may take place after three years from the date of registration of a legal entity by the tax authority. The second check will also be possible after the expiration of the three-year period from the date of the last scheduled check of the operator.

We recommend that you check your company for inclusion in the inspection plan on the official website of Roskomnadzor and prepare the necessary documents in case of an inspection. Unscheduled inspection of the company can be initiated if violations on the website are detected or if previously detected violations have not been eliminated. We will be happy to answer your questions!

Contacts:
Maria Matrossowa, Project leader swilar OOO
M: maria.matrossowa@swilar.ru, T: + 7 499 978 37 87 (ext. 308)
Tatiana Ushakova, Project manager swilar OOO
M: tatiana.ushakova@swilar.ru, T: +7 499 978 37 87 (ext. 309)

We would like to inform you that in accordance with the Decree of the President of the Russian Federation dated 23.04.2021 No. 242 non-working days will be established in the period from 1 to 10 May 2021 (in contrast to the initially planned state holidays on 01.05.-03.05., 08.05.-10.05.2021). Herewith 11.05. will be the first working day after the holidays.

However, the decree retained the right for organizations to determine the number of employees to support the functioning of the organization during the specified period.

Our recommendations in connection with this decree:

• to monitor the deadlines for the payment of salaries, taxes and other mandatory payments carefully; better is to proceed these payments before the start of the specified period;
• to analyze and check the working schedule of employees at your Russian branches/subsidiaries during the newly specified non-working period;
• to request in advance information about the working schedule of your Russian business partners on those days.

We are at our disposal in case of any questions or inquiries!

Client Information

In August 2020, the Russian Federal Tax Service issued a Letter detailing the tax authorities’ approach to the analysis of in-house services. In particular, it drew attention to the fact that in-house activity can be considered as service if it provides economic benefit to the company-taxpayer, is not a shareholder activity and similar services can be purchased from the third parties.

In-house services include administrative support, financial services, legal advice, internal control and audit, services related to the development of production and sales, and information technology support.

Nevertheless, taxpayers still have questions regarding shareholder activities.

In February 2021, the Federal Tax Service published another Letter further defining the term “shareholder activity”.

As defined by the Federal Tax Service, shareholder activity:

• is based on the needs of the shareholders themselves, not the individual members of the group of companies;
• economic benefit from such activities is evident for the whole group;
• the members of the group of companies would not engage third independent parties to provide such services against payment.

In addition to the characteristics, the Letter also included a list of specific functions related to shareholder activity.

Strategic management functions:
1. drafting of the development strategy of the group of companies;
2. market research;
3. evaluating the relevance and costs in implementing investment projects.

Business planning and control functions:
1. strategic planning and budgeting;
2. consolidated financial and management accounting;
3. analysis of the effectiveness of investments in the group of companies;
4. controlling of the financial and business activities of the group;
5. financing of the group of companies;
6. developing standards, methods, guidelines and/or other internal regulations to be applied to group of companies;
7. implementing and controlling compliance with such standards, methods, guidelines and/or other internal regulations;
8. approval of significant decisions and transactions.

However, in practice, some of the functions mentioned above may not be related to shareholder activity. Taxpaying organizations in Russian Federation should take an individual approach to each specific case.

The test to identify shareholder activity includes three questions:

• Has the subsidiary in Russia received a benefit from the service rendered, and if so, what kind of benefit?
• Is the benefit obvious and defined, and how is it expressed?
• Would a subsidiary in Russia pay an independent company to provide a similar service?

Please note that if the nature of payments abroad is disputed, expenses may be excluded from the income tax base and the relevant payments may be reclassified as dividends or other passive income with an additional withholding tax charge in Russia (up to 15% for countries without a signed CIT). It is also possible that fines and penalties of up to 20% of the underpaid tax will be imposed.

Our experts are ready to provide you with expert assistance in analyzing the current situation with regard to in-house services and assessing the need for changes in documents and processes.

On February 24, 2021 the President of Russia signed a law which allows conducting of general meetings (including also annual) in 2021 for JSCs and LLCs by a form of absentee voting.

According paragraphs of Federal Law No. 208-FZ of 26 December 1995 “On Joint Stock Companies” and Federal Law No. 14-FZ of 8 February 1998 “On Limited Liability Companies” which do not allow holding general meetings of shareholders/participants in form of absentee voting on several issues, were herewith suspended till the end of 2021.

Thus, the general meeting of LLC participants, the agenda of which includes approval of annual reports and annual balance sheets, in 2021 can also be held in the form of absentee voting (by questioning).

Meanwhile, the new regulation does not extend the deadline for annual meetings, as it was done in 2020 (at that time the deadline for annual meetings was extended up to September 30).

In this regard, when planning the annual meeting and approval of the financial statements for 2020, standard terms stipulated by the legislation should be taken into account: the general annual meeting shall be held not earlier than 2 months and not later than 4 months after the end of the financial year (i.e. within the period from March 1 to April 30).

Proceeding of the annual meeting by a form of absentee voting shall be approved by the executive body of the LLC. The procedure for convening the meeting and its protocol shall fully comply with the conditions applicable for the year 2021.

 We will be glad to answer your questions and to support you on the issue if needed!

RECOMMENDATIONS

• Due to the continuing restrictions on cross-border travel, we recommend to consider the possibility of holding general meetings (including annual meetings) in 2021 by absentee voting.

• When planning the meeting to approve the results of 2020, please note that the deadline (differently than in 2020), remained standard: from 01.03. to 30.04.2021.

• We also recommend to pay special attention to the execution of the relevant documents when holding the general annual meeting in the form of absentee voting.

Decree № 5-UM of the Mayor of Moscow suspends from January 27, 2021 the obligation of Moscow employers to transfer at least 30% of employees to remote work.

Decree № 5-UM of the Mayor of Moscow dd. January 27, 2021 (hereinafter – the Decree) suspends from January 27, 2021 the obligation of Moscow employers to transfer at least 30% of employees to remote work. Nevertheless, employers are advised to keep in force the measures taken on transferring employees to remote working mode.

Please note that the requirement for Moscow employers to transfer all employees over the age of 65 to remote work, as well as citizens with diseases, the list of which is determined by the Department of Health of Moscow, except for citizens whose presence in the workplace is critical, remains in force.

Also, the requirement to submit data on changes in the number of employees transferred to remote mode in electronic form using a personal account on the official website of the Mayor and Government of Moscow in accordance with clause 2.4.3. of the Decree remains in force.

In the conditions of the current world crisis and increasingly strict measures to combat the virus, business is much more than usual counting on assistance and support measures from the state.

At the moment, many support measures are being developed and implemented in Russia, starting from the postponement of reporting deadlines and preferential lending up to measures to reduce the tax burden (in particular, insurance premiums). A significant part of these measures is aimed at supporting small and medium-sized businesses.

Briefly, let us remind you that the status of SMEs and the criteria are prescribed in the Federal Law No. 209-FZ dated 07.24.2007 with subsequent amendments.

Meaning has:

the size of the average number of employees for the previous calendar hour (up to 100 people for small enterprises; up to 250 people for medium-sized enterprises);
the amount of income from conducting business activities for the preceding calendar year (up to 800 million rubles for small enterprises; up to 2 billion rubles for medium-sized enterprises);
To obtain SME status, the company must also be entered in the appropriate register (https://rmsp.nalog.ru/).

For a long time, the status of an SME was closed to companies with a large share of foreign capital, since in addition to the threshold values ​​indicated above, there was a restriction on the share of Russian capital at a minimum of 51%.

Does this mean that subsidiaries of foreign founders will not be able to take advantage of the benefits and preferences offered by the government?

We remind you that December 1, 2018 certain clauses of the Federal Law No. 313-FZ “On Amendments to the Federal Law “On the Development of Small and Medium Enterprises in the Russian Federation” entered into force, according to which the criteria for the status of an SME subject were changed. We wrote about this in our review 02/2018 dated 08/22/2018. After the entry into force of these amendments, the status of an SME became available to those companies in which the share of foreign participation exceeds 49%.

At the same time, a necessary condition is the compliance of the parent company with the criteria of small and medium business established in the Russian Federation.

However, Russian companies with more than 49% foreign participation will be able to be entered into the Register (see above), that is, to officially receive SME status, only after the reporting of their parent organizations is checked for compliance with the SME criteria in force in Russia.

Authorized auditing organizations, entered in the control copy of the register of auditors and auditors, carry out similar checks organizations

Olga Grigoryeva, general director of Shternhoff Audit LLC, comments:

“According to part 6.2 of article 4.1 of the Law on SMEs, the source of such data for maintaining a single register of small and medium-sized enterprises are auditor organizations. This authority is implemented in the following order:

1) the auditing organization provides auditing services (at the initiative of the economic entity) to economic entities interested in including information about them in the unified register of SME entities. The service consists in confirmation by the auditing organization of the compliance of the participants of the economic society – foreign legal entities with the above criteria (confirmation is carried out annually).

This audit service is provided by audit organizations in accordance with:

Part 6.2 of Article 4.1 of the Federal Law “On the Development of Small and Medium-Sized Entrepreneurship in the Russian Federation” (as amended by Federal Law dated August 3, 2018 No. 313-ФЗ);
The international standard, which provides confidence (MSZOU) 3000.

2) in order to confirm the indicated compliance, the auditing organization compares the data on the amount of income per hour and the average number of employees of the foreign legal entity with the above criterion. For comparison, the company-customer of the service must present to the auditing organization the report of the foreign legal entity for the corresponding year, submitted to the tax authority of the country where the entity is established;

3) based on the results of the provision of this service, the auditing organization forms a list of companies that were created before December 1 of the year preceding the current calendar year, and whose participants are foreign legal entities that meet the criteria described above;

4) the auditing organization sends a list of such companies to the Federal Tax Service of Russia. The list is presented in the form of an electronic document, signed with an enhanced qualified electronic signature, using the official website of the Federal Tax Service of Russia. The deadline for submitting the list is from July 1 to July 5.”

According to the currently presented explanations and comments, only companies with official status, that is, entered in the register, will be able to take advantage of the proposed preferences for SMEs in the Russian Federation.

It is not yet clear whether this regulation will be clarified. In this regard, we recommend checking the relevance of the procedure described above for your company.

We will be happy to answer your questions on this and other topics!