December 2002

This material is provided for information purposes by Development Alternatives Inc. and The Russian Microfinance Center under an agreement with US Agency for International Development. Neither Development Alternatives Inc. nor USAID shall be liable for any damage caused due to the use of explanations, conclusions and interpretations of legislation contained herein.
Author: Legem Perferre
Edited by: The Russian Microfinance Center

RF Tax System

December 2002 was a very active month for new legislation: several new tax laws were finally passed by the State Duma, approved by the Federal Council, and signed by the President of the Russian Federation (RF), all in a short period of time. A special edition of Rossiiskaya Gazeta was released on December 31, 2002 for their official publication. This edition, according to the existing tradition, appeared in official distribution only on January 8, 2003.

The most important law among those passed is a government law which was originally designed to correct mistakes made in previously enacted articles of the Tax Code governing special tax regulations for small business. However, in the process of passing this government law, amendments and changes to other articles of the Tax Code of the RF were included. For microfinance organizations, the most important change to this law is the introduction of a limit on the maximum amount of interest paid on loans which can be deducted from tax payments according to the simplified tax system. As we already reported our July 2002 report, due to a technical error the original approved version of article 26.2 did not include such a limitation. However such a limitation was established in article 25 of the tax code of the RF for remaining organizations.

Accordingly, the above-mentioned limit significantly worsens the position of small businesses which have transferred to the simplified tax system and attract borrowed funds. According to the first part of the tax code of the RF, such norms should be applied no earlier than one month after the publication of the law and no earlier than on the 1st day of the next taxation period. In this case this limitation should be applied only from the 1st of January 2004 (according to the simplified tax system the calendar year is considered a taxation period). Despite this tax authorities will use this limitation starting from 1st of January 2003.

Another notable event in tax legislation is the abolishment of the tax on the purchase of foreign currency and payment instruments indicated in foreign currency as of 1st of January 2003.

During the past month, the Ministry of Taxation of the RF also approved a large number of normative acts, the majority of which are connected with the enactment of new articles of the tax code from 1st of January 2003 (articles 26.2 and 26.3 with special tax regulation and article 28 "Transportation Tax").

Adopted Normative Legal Acts

• Federal Law No 191-FZ from 31 December 2002, amending the Federal Law on the introduction of changes and additions to articles 22, 24, 25, 26.2, 26.3 and 27 of the second part of the Tax Code of the Russian Federation and some other acts of Russian Federation legislation.
  The text of the law is published in Rossiiskaya Gazeta on 4 January 2003, No 1.
  • The following changes and additions were introduced to articles 26.2 and 26.3:
    - the establishment of the maximum percentage for using credits and loans, which are accepted for deduction in tax payments according to the simplified taxation system:
    • for obligations in Rubles - the rate of refinancing, established by the Bank of Russia, increased by 1.1 times;
    • for obligations in foreign currency - 15 percent;
    - individuals, who were transferred to special tax treatment, are considered as VAT tax payers in importation of goods to the customs territory of the RF;
    - additions were made to the list of expenditures, which are applied to the deduction in unified tax payment according to the simplified taxation system. In particular, the expenditure for payments for goods, which were acquired for further realization, could be accepted for deduction;
    - the taxation system, as a unified tax for the imputed income for some types of activities, can be applied to the distributive trades carried out in shops where the size of the trading halls is not more than 150 square meters (the earlier given criteria was 70 square meters) etc.
  • The following changes were introduced to other articles of the Tax Code of the RF:
    - In article 22 "Excise duties", specifications are made to the order of excise duties payments for the operations with petroleum products;
    - Article 24 "Unified social tax" is brought into accordance with special tax treatments for small business;
    - Article 25 establishes the order of tax base determination for income tax on income from products with long, technical cycles.
  • Changes are also introduced to the Law of the RF on the basic tenets of the tax system in the Russian Federation: a limitation is introduced to the maximum size of fees for the cleaning of the territory in inhabited localities (these fees can be taken only from those subjects of the RF, who did not introduce tax on sales on their territory). From 1 January 2003 these fees for juridical persons can not be higher than 1.5% of the funds for labor payments.
  • Organizations using the simplified tax system are freed from obligations to carry out mandatory accounting.
• Federal Law No 183-FZ from 27 December 2002 on insurance rates for obligatory social insurance for incidents at work and professional illnesses for 2003.
  The text of the law is published in Rossiiskaya Gazeta on 31 December 2002, No 245.
  • The Law prolongs the proportions of insurance rates, and the order of their payments, which were active for 2001-2002 and for 2003.
• Federal Law No 182-FZ from 27 December 2002 on amending the second part of the Tax Code of the Russian Federation and some other acts of the legislation of the Russian Federation on taxes and duties.
  The text of the Law is published in Rossiiskaya Gazeta on 31 December 2002, No 245.
  • The new article 29 "Tax on Gambling Business" is added to the second part of the Tax Code of the RF.
• Federal Law No 193-FZ from 31 December 2002 on acknowledgement of the lapse of several acts of legislation of the Russian Federation for taxes on procurement of foreign currency and payment documents in foreign currency.
  The text of the Law is published in Rossiiskaya Gazeta on 4 January 2003, No 1.
  • The tax for obtaining foreign currency and payment documents in foreign currency is cancelled as from 1 January 2003.
• Decree of the Government of the RF No 923 from 24 December 2002 on the list of foreign and international organizations whose grants are not considered for taxation in the income of Russian organizations - receivers of the grants.
  The text of the Decree is published in Rossiiskaya Gazeta on 31 December 2002, No 245.
  • The government of the RF approved the list of foreign and international organizations, whose grants are not considered for taxation on income of Russian organizations - receivers of the grants. The grants free from taxation are those which are provided for carrying out specific programs in education, art, culture, protection of environment, and also for carrying out certain scientific research.
• Order of MTL RF No BG-3-04/686 from 2 December 2002 establishing the new individual income tax return forms for 2002.
  Registered with the Russian Ministry of Justice on 20 December 2002. Registration No 4058.
  This text was not published officially.
  • The following is established for the use of tax agents, who pay taxes for individuals (including employers):
    - form No 1-NDFL "The tax form for accounting income and tax on the income of individuals for 2002" and guidelines on filling in the tax forms.
    - form No 2-NDFL "The certificate on individual income for 2002" and guidelines on filling in and submitting this certificate.
  • The tax form No 1-NDFL is administered for every individual receiving income.
  • The form No 2-NDFL, to the tax authorities, contains information about the amount of income received and tax paid. In addition, this form is recommended for the tax agents for providing information, to the indicated tax authorities, about the inability to charge tax on income received (for example, when an individual receives income in natural form).
• " Order of MTL RF from 20 December 2002 No BG-3-02/729 establishing Methodological recommendations for using article 25 "The tax on organizations' income" of the second part of the Tax Code of the Russian Federation.
  This text was not published officially.
  • The new version, of the Methodological recommendations for using article 25 of the Tax Code of the RF, considers "technical" changes and amendments introduced to article 25 of the Tax Code of the RF by the Federal Law No 57-FZ from 29.05.02.
  • The presentation of recommendations was changed: instead of commentaries for each article the explanations are given according to the theme. The document contains more examples than earlier.
  • Paragraph 5.4.1 of the Methodological recommendations examines the questions connected to declaring percentage on liabilities as expenditure. In determination of percentage on liabilities considered for deduction, the tax payer has a choice to use one of two methods for calculating the marginal size of expenditure:
    - by taking into account the percentage rate, taken for liabilities, which were given out in the same accounting period on comparable bases;
    - by taking into account the refinancing rate of the Bank of Russia, increased by 1.1 times, on liabilities in Rubles, or 15 percent on liabilities in foreign currency.
  • The same paragraph of the recommendations contains the formula for calculating the average percent on comparable liabilities. There is also an example for determination of percentage taken for deduction for those cases when the lender is a foreign organization.
• Order of MTL RF No BG-3-04/641 from 10 November 2002 establishing information forms for transportation vehicles and individuals for whom these vehicles are registered, provided by organizations which carry out the state registration of transportation vehicles.
  Registered with the Russian Ministry of Justice on 18 December 2002. Registration No 4038.
  The text of the order is published in Rossiiskaya Gazeta on 26 December 2002, No 242.
  • The MTL RF approves the forms for the organization which carry out state registration of transportation vehicles for submission of information about transportation vehicles and individuals for whom these vehicles are registered. The detailed guidelines for filling in these forms are attached to the order.
  • The information is submitted in printed or electronic version (in the form of text files completed in DOS).
• Order of MTL RF No BG-3-32/705@ from 10 December 2002 on the organization and functioning of the submission system for tax forms and accounting, in electronic version, through telecommunication channels.
  This text was not published officially.
  • According to the established earlier Order (1), tax reporting is submitted in electronic version by the initiative of the tax payer, and if the tax payer and tax authorities have compatible technical equipment and the possibility to receive and process this information according to the standard formats and procedures established by the MTL RF.
  • For realization of this Order the MTL RF has established in its order:
    - the requirements for the programs and equipment, which are used for submitting reports, in electronic version, through telecommunication channels;
    - the requirements for specialized communication statements which are used for carrying out information exchange between tax authorities and tax payers;
    - the regulations for using the means of electronic digital signature (EDS) and means of encryption;
    - the rules for electronic exchange of documents etc.
• Apart from the documents mentioned above, in December the MTL RF passed several orders concerning small businesses. In particular the MTL RF established the following:
  • For special tax treatments for small businesses:
    - methodical recommendations on using articles 26.2 TC RF (2) and 26.3 TC RF (3);
    - tax forms and guidelines on filling in the forms (4).
  • For unified social tax (articles 24 TC RF) for the use of individual entrepreneurs (5):
    - tax form and guidelines on filling in the form;
    - tax form for expected income liable to the Unified Social Tax (UST) and guidelines on filling in the form.
    The methodical recommendations on using articles 26.2 and 26.3 of the TC RF were established without taking into account the last changes in tax legislation, and they are likely to be amended by the MTL RF in the near future.
• Decree of the Social Insurance Fund of the RF No 113, from 29 October 2002, establishing the format of a pay-sheet for the assets of the Social Insurance Fund of the Russian Federation (form 4-FSS RF).
  The text of the decree is published in the journal "Normativnye akty dlya buhgaltera" (Normative Acts for the Accountant) on 19 December 2002, No 24.
  • The new version of the form 4-FSS reflects innovations to the tax legislation, which will be in force from 1 January 2003 (new articles of the TC RF with special tax treatments for small businesses). The approved format of the pay-sheet for assets of the SIF RF will be used from the 1st reporting period of 2003.
• Decree of the Russian Pension Fund (RPF) No 89p from 16 August 2002 establishing the registration order, in the territorial authorities of the RPF, for insurers who pay insurance subscriptions into the Pension Fund of the Russian Federation in the form of fixed payments.Registered with the Russian Ministry of Justice on 28 November 2002. Registration No 3971.
  The text of the decree is published in Rossiiskaya Gazeta on 10 December 2002, No 233.
  • The Approved Order is considered for insurers - individual entrepreneurs.
  • There is a format of application for registration and guidelines on filling in this application.

• Decree of the State Duma and the Federal Assembly of the Russian Federation No 3364-III GD from 11 December 2002 on the general course of the unified state monetary and credit politics for 2003.
  • By this decree the State Duma approved a General course of the unified state monetary and credit politics, which were presented by the Central Bank of the RF. In this document the Bank of Russia determines the priorities of their politics for the nearest future.
  • The main aim of the unified state monetary and credit politics carried out by the Central Bank of Russia, in cooperation with the Government of the RF, is to decrease the rate of inflation. For the nearest three years the plans to reduce inflation are set on less than 8 percent. For 2003 the target for inflation is determined by the Bank of Russia, in the region of 10-12 percent.
  • Next year the Bank of Russia will continue to carry out the policy for using the treatment of a floating exchange rate. The reinforcement of the Ruble is proposed in the region of 4-6 percent.
  • The following objectives were set by the Bank of Russia for the banking sector for 2003:
    - the creation of the underwriting (insuring) of investments;
    - the completion of preparation for the transfer of credit organizations to the international standards for accounting and financial reporting from 1 January 2004;
    - the preparation and adoption of a package of legal amendments aimed at the creation of more favorable conditions for banking;
    - the optimization of regulative and control procedures of the Bank of Russia.
  • In particular for 2003, the Central Bank of Russia planned the following measures for improving the banking system in Russia:
    - participation in the preparation of federal laws, which simplify the access for small and middle-sized businesses to sources of bank crediting, the development of appropriate normative acts by the Central Bank of Russia;
    - the development of normative acts aimed at establishing conditions for decreasing the costs, simplification and reduction of the procedures connected with the receipt of permission for carrying out certain banking operations, and opening branches etc.
• Regulation of the Central Bank of Russia No 2-P from 3 October 2002 establishing clearing settlements in the Russian Federation.
  Registered with the Russian Ministry of Justice on 23 December 2002. Registration No 4068.
  The text of the regulation is published in Vestnik Banka Rossii on 28 December 2002, No 74.
  • The new version of the Regulation takes into account the decision of the Supreme Court on considering the norm p.10.10, which allows the writing off of cash assets from the settlement account of the client, without his/her direction, as contradictive to federal legislation.
  • The new regulation is still not extended to carrying out clearing settlements with individuals.
  • The regulation on collection orders to be used for recovery according to the executive act is still in force.
  • The format of the payment order is left without any changes.
  • In contrast to the former regulation, the new document went through the registration procedure in the Ministry of Justice of the RF.
  • The Central Bank of Russia, with its direction No 1230-U from 27 December 2002, cancelled the prior Regulation on clearing settlements in the Russian Federation No 2-P from 12 April 2002.

• Introduction of the amendments and additions to the Federal Law on the inability (bankruptcy) of credit organizations.
  A legislation draft was introduced by the members of the State Duma V.A. Tarachev, I.Y. Artemiev, N.P. Zalepukhin, V.I. Zorkaltsev, V.M. Zubov, G.V. Kulikov, P.A. Medvedev, Y.G. Medvedev, A.V. Mitrofanov, A.G. Chershintsev, M.L. Shakkum, A.N. Shokhin.
  Passed in first reading in December 2002.
  • The new version of the draft of legislation sets forth the law on the inability (bankruptcy) of credit organizations.
  • The general amendments proposed in the new version of the law are aimed to increase the effectiveness of the measures for the prevention of bankruptcy of credit organizations, and to introduce the procedures providing the immediate realization and development of the bankruptcy procedures for the banks.
  • The norms of the law regulating pre-trial procedures for the prevention of bankruptcy of credit organizations underwent a significant improvement.
  • The Bank of Russia is given the right to demand, from the credit organization, a call for a general assembly of share-holders or directors' board, for taking appropriate decisions for the prevention of bankruptcy, and to delegate its representative to participate in the work of indicated managing authorities of the credit organization.
  • The draft of the legislation contains more strict conditions for determining the signs of inability in credit organizations: the terms for delay in fulfilling the obligations by a credit organization to the creditors, which is considered to be a sign of its inability to satisfy the indicated requirements, are reduced from one month to 14 days.
  • In the process, the preparation of the draft of legislation for the second reading is likely to be significantly amended.

• Order of the Ministry of Finance of the RF No 115n from 19 November 2002 establishing Regulations for accounting RA 17/02 "Expenditure records for scientific, experimental and technological research".
  Registered with the Russian Ministry of Justice on 11 December 2002. Registration No 4022.
  The text of the order is published in Rossiiskaya Gazeta on 17 December 2002, No 236.
  • ¢ The new RA is designed for organizations, which carry out scientific, experimental and technological research (further - SETR) using their own resources and, according to the agreement, are the customers of the indicated research. The RA regulations are not applied to unfinished work, and also to work with results considered for accounting as intangible assets.
  • ¢ The information about expenditure for SETR is reflected in accounting as investments to irreversible assets. The expenditure for SETR is considered in accounting in compliance with the following conditions:
    - the amount of expenditure can be determined and confirmed;
    - there is documentary proof of work fulfillment (for example, acceptance report for completed work);
    - the results of the work can be used for production or managerial needs, and can lead to the obtaining of income in the future;
    - the use of the results of SETR can be displayed.
  • If one of the indicated above provisions is not fulfilled, the expenditure of the organization connected to the implementation of SETR is considered non-realization expenditure for the reporting period, and is reflected in account 91 "Other income and expenditure". The same account is used for accounting the costs for work, which did not produce positive results.

• Federal Law No 176-FZ from 24 December 2002 on federal budget for 2003.
  The text of the law is published in Rossiiskaya Gazeta on 28 December 2002, No 244.
  • The federal budget for 2003 is passed with the following parameters:
    - Gross national product (GNP) - 13050.0 billion Rubles;
    - income - 2417.79 billion Rubles;
    - expenditure - 2345.64 billion Rubles;
    - the rate of inflation - 10-12 percent.
  • 100.0 million Rubles are considered for financing the creation of an infrastructure of state support for small businesses in 2003.

• Federal Law No 164-FZ from 9 December 2002 amending article 17 of the Federal law on licensing certain activities.
  The text of the law is published in Rossiiskaya Gazeta on 14 December 2002, No 235.
  • The list of licensed activities will be reduced - the realization of oil, gas and their products is excluded from the list.

• Federal Law No 179-FZ from 24 December 2002 amending certain legislative acts of the Russian Federation aimed for the development of a farm-mortgage lending system (borrowing).
  The text of the law is published in Rossiiskaya Gazeta on 27 December 2002, No 243.
  The law will be in force in three months after its official publication.
  • The following amendments and additions are introduced by the Law to the Housing Code of the RSFSR, to the Law of the RF on the basis of federal housing policy and to the Federal Law on mortgages (housing collateral):
    - the establishment of the basis for the termination of the right to use accommodations considered for providing recovery of the credit or loan taken for buying these accommodations;
    - the determination of the foundation and order for eviction of the former owner of a mortgaged house or flat, and the members of his/her family in case of recovery of the mortgaged accommodations, and also the order for providing them with temporary accommodations;
    - the establishment of the basis for the appearance, due to the law, of a mortgage for a house or a flat, acquired for the means of a loan, provided by the legal entities for this purpose (earlier the mortgage of the house or flat appeared only due to the credit agreement).
• Federal Law No 166-FZ from 11 December 2002 amending the Law of the Russian federation on trademarks, service marks and the indication of the origin of goods.
  The text of the law is published in Rossiiskaya Gazeta on 17 December 2002, No 236.
  • The law is generally directed at strengthening the protection of the rights of the trademark owners.
  • The law contains a list of actions, which lead to the violation of the exclusive rights of a trademark. In particular, the placement of a trademark, or a sign closely resembling it, without the permission of the owner of the right, is considered to be an illegal use of that trademark:
    - on the goods, labels, packages for these goods, which are produced, offered for sale, being sold, displayed on exhibitions and at fairs, or otherwise introduced into the civil circulation on the territory of Russia, or kept and (or) transported with this aim, or imported onto the territory of Russia;
    - in fulfilling work, providing services;
    - in the documentation connected to the introduction of goods into civil circulation;
    - in offers for sale of goods;
    - on the Internet, in particular in the ID domain, or other means of address.
    The goods, labels, packages for these goods, where the trademark, or a very similar sign, is illegally used, are considered to be piratical.
  • The amendments are introduced to the order of registration for trademarks. For example, the list of basis for refusal in registration as trademark is significantly expanded.
  • The Chamber of Appeals and The Supreme Patenting Chamber are abolished. The functions of these chambers are passed to the Patent Disputation Chamber.
  • The law is complemented with the new article 2.1, "The common trademark and its legal protection", according to which certain trademarks and symbols can be considered as common trademarks. Such a name is given on the application of legal entities or individuals to the trademarks or symbols, which became widely known in the Russian Federation amongst the appropriate consumers due to their intensive use in relation to the goods of these persons. The common trademark is introduced into the List of common trademarks, in the Russian Federation, by the federal authorities for intellectual property.