January 2004

This material is provided through the support of the US Agency for International Development (USAID) and the Department for International Development (DFID) under agreements with the Russian Microfinance Center and Fund "FOR A." This review is for information purposes only. Neither the authors of this review nor the Russian Microfinance Center shall be liable for any damage to any organization's property due to any use of explanations, conclusions and interpretations of effective legislation contained herein.
Author: LEGEM PERFERRE
Edited by: Russian Microfinance Center

RF Tax System

The opening of the new parliamentary period that will continue until the 19th June was the main focus in January. The State Duma approved the membership and leadership of its committees. The following changes took place in committees relevant to microfinance and MFIs:
- the Committee on Credit Institutions and Financial Markets is now headed by V. Reznik, assisted by V. Zubov, A. Aksakov, P. Medvedev, A. Mitrofanov, N. Sapozhnikov, and A. Shimanov;
- Yu. Vassilyev is at the head of the Committee on Budget and Taxes;
- and V. Draganov heads the Committee on Economic Policy, Entrepreneurship, and Tourism.

The State Duma approved its legislative agenda for the coming parliamentary period of 2004, including bills to be adopted as a matter of priority.

The Ministry of Taxes issued a number of orders concerning:
- new tax reporting forms (exise tax, mining tax, land tax, transportation tax, UST, profit tax);
- amended guidelines for filling the new forms (exise, land and transportation taxes, corporate profit tax, UST, etc.);
- amended Guidelines on the application of certain chapters of the Tax Code (chapter 21). The orders on UST, profit tax, and transportation tax are of special significance to Russian MFIs.

Adopted Normative Legal Acts

• Ministry of Taxes and Levies (MTL) Order of 29 December 2003 No BG-3-02/723 on the second amendment of the Guidelines on the filling of Corporate Profit Tax reporting form, approved by MTL Order of 29.12.2001 No BG-3-02/585
  Registered with the RF Ministry of Justice on 20 January 2004 Registration No 5433.
  Published in Rossiiskaya Gazeta of 28 January 2004 No 13-d.
  
  • The frequency of submitting individual pages of the tax report has been changed:
    - appendix 4 to page 02 must now be submitted for the 1st quarter and the entire taxation period only;
    - pages 5, 6, 7, 8 must only be submitted at the end of the taxation period;
    - the new Section 1 of the form with tax totals must be submitted for each reporting period.
    
• MTL Order of 26 December 2003 No BG-3-03/721 amending the MTL order of 20. 12.2000 No BG-3-03/447
  Published in Ekonomika i Zhizn, issue of January 2004, No 2.
  • The guidelines on the application of Chapter 21 of the Tax Code, Value Added Tax, were amended;
  • namely, VAT is reduced to 18 percent, and starting on 1st January 2004, the delivery of goods (works, services) will be taxed by the 18 percent VAT rate.
  • When hotel and travel expenses are paid in cash, a 'strict reporting' form is required for VAT to be deductible, with a separate line indicating the amount of tax; alternatively, in the absence of 'strict reporting' form, a receipt indicating VAT (schet-factura) and supporting documents with the actual amount of tax paid (including cash register receipts indicating VAT as a separate line) may be used. In the former Guidelines, schet-factura was the only document acceptable for purposes of VAT deduction.
• MTL Order of 22 December 2003 No BG-3-13/705 approving the electronic format of tax report forms, accounting reports, and other documents used for calculation and payments of taxes and duties (version 3.00)
  Published on the Moscow Department of MTL website (http://www.mosnalog.ru)
  • The order approves tax return forms, accounting reports, and other documents used for calculation and payments of taxes and duties in the electronic version; the order defines general requirements of the structure and content of reporting indicators.
  • Reporting forms must be submitted as DOS text files on a diskette or by e-mail.
  • The order applies to documents effective as of 1st January 2004.
• MTL Order of 24 December 2003 No BG-3-05/711 amending MTL Order of 9 October 2002 No BG-3-05/550
  Registered with the RF Ministry of Justice on 20 January 2004 Registration No 5429.
  Published in Rossiiskaya Gazeta of 27 January 2004 No 12.
  • The Unified Social Tax (UST) reporting form and related guidelines were amended to harmonize them with the current law.
• MTL Order of 3d January 2003 No BG-3-05/38 on the annullment of former Guidelines concerning the UST calculation and payment.
  • The former Guidelines explaining the procedure of the UST calculation and payment were annulled.
• MTL Order of 29th December 2003 No BG-3-05/722 approving the UST advance payment form and related Guidelines.
  Registered with the RF Ministry of Justice on 20 January 2004 Registration No 5428.
  Published in Rossiiskaya Gazeta of 27 January 2004 No 12.
  • A new UST advance payment form and related Guidelines were introduced.
  • The form must be filled, including by MFIs, and forwarded to the local tax inspectorate no later than:
    - April 20th (for the first quarter of the current tax period);
    - July 20th (for the first six months of the current tax period);
    - and October 20th (for the nine months of the current tax period).
• MTL Order of 29 December 2003 No BG-3-21/724 approving Transport Tax reporting form and related Guidelines
  Registered with the RF Ministry of Justice on 29 January 2004 No 5501.
  • The new Transport Tax reporting form and related Guidelines were introduced.
  • Both must be used by organizations which are registered as owners of taxable vehicles.
  • The former reporting form and Guidelines were annulled.
• MTL Memo of 13th January 2004 on the procedure for calculating and reporting Corporate Property Tax
  Published in Rossiiskaya Gazeta of 13th January 2004 No 1.
  
  • The MTL informs taxpayers of the following forms to be used for reporting the 2003 Corporate Profit Tax:
    - 1152001 Corporate Profit Tax Calculation must cover the entire organization; it is submitted to the local tax authority;
    - 1152002 Corporate Profit Tax Calculation (separate subdivision) must be submitted to the respective local authority at the location of the company's affiliate.
• MTL Order of 21th December 2003 No BG-3-22/647 approving the UST reporting form to be used as part of the simplified taxation system, and the related procedure.
  Registered by the Ministry of Justice on 08. 01.2004 No 5383.
  • The new UST reporting form applicable under the simplified taxation system, and related Guidelines were introduced.
  • The order specified the reporting schedule and format.
  • These are effective for the 2004 reports.


Banking

In January, the Central Bank issued a number of normative acts pursuant to the Federal Law "On insuring deposits by private individuals with Russian banks" and the adoption of the International Accounting Standards (IAS) by all credit institutions in 2004. In particular, the Central Bank issued the IAS Reporting Guidelines.

The most important document for MFIs is the Central Bank Instruction reducing its rate from 16 to 14 percent on 15th February 2004 - the change may affect MFI's obligations, as well as those of their borrowers.

On 11th February 2004, the Government plans to discuss the new Strategy for the Banking Sector Development. Deputy Minister of Finance A. Ulukayev and Deputy Minister of Economic Development and Trade A. Dvorkovich are expected to make presentations. Our next report will cover this Government meeting.

Adopted Normative Legal Acts


• RF CB Telegram of 14th January 2004 No 1372-U
  • On 15th January 2004, the Bank of Russia refinancement rate was changed from 16 to 14 percent.
  • This change will affect the calculation of Corporate Profit Tax (with regard to maximum amounts of interests on borrowed funds recognized as expenses). So, the reduction of the Central Bank rate may affect MFIs which either borrow or make cash loans.
• RF CB Telegram of 31st December 2003 No 1372-T
  Published in Vestnik Banka Rossii of 9th January 2004 No 1.
  • The regulation establishes, as of the 1st quarter of 2004, the following equity capital requirements for new credit institutions:
    - for banks and credit institutions affiliated with foreign banks, a minimum of 184,120,000 rubles;
    - for non-bank credit institutions, a minimum of 18,412,000 rubles.
  • A bank applying for a general license or a non-bank credit institution applying for the status of a bank must have a minimum of 184,120,000 in equity in the 1st quarter of 2004.
• RF CB Regulation of 16th January 2004 No 1379-U on the assessment of a bank's financial sustainability for the purpose of participation in the system of deposit insurance
  Published in Vestnik Banka Rossii of 27 January 2004 No 5.
  Registered by the Ministry of Justice on 23.01.2004 No 5485.
  • The regulation specifies indicators, methods of calculation, and total amouts, to assess whether a bank is sustainable enough to participate in the deposit insurance system.
  • In particular, the following groups of indicators are used:
    - capital indicators;
    - asset indicators;
    - management indicators, including overall bank management, operational and risk management;
    - liquidity indicators, etc.
  • A bank is considered financially sustainable with satisfactory indicators in all groups.
• RF CB Regulation of 16th December 2003 No 242-P on internal control in credit institution and banking groups
  Registered by the Ministry of Justice on 27.01.2004 No 5489.
  Published in Vestnik Banka Rossii of 4th February 2004 No 7.
  • The regulation established rules of internal control in credit institution and banking groups, and the way the Bank of Russia will supervise compliance.
  • It gives a definition of internal control and its main components, explains the establishment of an internal control service and its functions, and indicates responsible officers.


Accounting and reporting

Adopted Normative Legal Acts


• Ministry of Finances Order of 11th December 2003 No 115n amending the Instruction on the application of the budget classification approved by the Ministry of Finances on 11th December 2002, No 127n
  Published in Finansovaya Gazeta, issue of January 2004, No 5.
  • The amendment concerns a number of budget classification codes used in tax payment orders, namely:
    - Corporate Property Tax (introduced on 01.01.2004) - 1040210;
    - Corporate Property Tax paid before 2004 - 1040600;
    - Corporate Transport Tax - 1400421;
    - Individual Transport Tax - 1400422.
• RF Ministry of Finances Order of 24th November 2003 No 105n - approving the Accounting Regulation 'Information on participation in cooperative activity' PBU 20/03
  Registered with the RF Ministry of Justice on 22th January 2004 Registration No 5457.
  Published in Rossiiskaya Gazeta of 28th January 2004 No 13
  • The order established how this information must be disclosed by Russian companies in their accounting reports.
  • Information on participation in cooperative activity is defined as disclosure of a part of the organization's activity aimed at generating profit or other economic benefits and undertaken jointly with other organizations and/or individual entrepreneurs through combining their contributions or through joint actions without establishing a legal entity.
  • The regulation requires that an organization - party to a cooperation agreement should disclose the following information in its accounting reports:
    - the purpose of, and the party's contribution to, cooperative activity;
    - the method of generating profit or economic benefit;
    - the cost of assets and liabilities involved in the cooperation;
    - amounts of income, expense, profit or loss generated by the cooperation, etc.
• Ministry of Labor Regulation of 24th October 2003 No 89 approving the clarification of the method of calculating average wages for the purpose of sick leave and maternity payments in 2004 Registered with the RF Ministry of Justice on 15 January 2004 Registration No 5408.Published in Rossiiskaya Gazeta of 20 January 2004 No 7.
  • In 2004, the method of calculating sick leave and maternity payments was changed. They should be based on the employee's average salary in her/his main place of work over the 12 month preceding the month of the sick leave or the maternity leave.
  • If an employee worked for a total duration of less than three months in the 12 months prior to the sick leave/maternity leave, the amount paid must not exceed the minimum wage.
• Regulation of the Russian Social Insurance Fund of 1st December 2003 No 130 approving the Social Insurance Form (Form 4-FSS RF)
  Published in the Journal of Normative Acts for Accountants of 6th January 2004 No 1
  • The regulation approved the new Social Insurance Form (Form 4-FSS RF)
  • To be used in relevant reports starting in the 1st quarter of 2004.
  
  
  Laws on entrepreneurship and entrepreneurial activities
  
  Adopted Normative Legal Acts
  
  
• Federal Law of 23 December 2003 No 185-FZ amending Russian laws with regard to state registration of legal entities and individual entrepreneurs.
  Published in Rossiiskaya Gazeta of 27th December 2003 No 261
  • The amended acts are the Tax Code, the Laws on Medical Insurance, on Mandatory Social Insurance concerning Workplace Accidents and Occupational Diseases, on Mandatory Pension Insurance, on the State Registration of Legal Entities and Individual Entrepreneurs, etc., establing a one-stop-shop approach to incorporation, registration with tax authorities and with state non-budgetary funds (public insurance funds).
  • The registration with the Medical Insurance Fund, Social Insurance Fund, and Pension Insurance Fund does not require a separate application - the state agency registering a legal entity or an individual entrepreneur must automatically forward the registration information to the said funds, and the latter must put the entity/individual on their records within five days.
  • Individuals who are not entrepreneurs will be registered with tax authorities based on their residence registration.