Павел Герасимов – Doing business in Russia (страница 5)

The possibility of applying restrictions on the import of seeds of certain types of agricultural crops from unfriendly countries is extended until the end of 2025. This concerns seeds of potatoes, wheat, rye, barley, corn, soybeans, rapeseed, sunflower and sugar beet.

The lists of goods and equipment temporarily prohibited from export from Russia were determined by the Government in March 2022. The decision was made in pursuance of the Presidential Decree «On the application of special economic measures in the sphere of foreign economic activity in order to ensure the security of the Russian Federation» and is necessary to protect the domestic market.

Investment and Finance

General

It is Russian policy to welcome foreign investments. Generally, as Russia is a WTO Member State, the regime for foreign companies and the use of the received profit by them cannot be less favourable than the legal regime which is applied to Russian companies. The withdrawals limiting the rights of the foreign companies may be established by federal laws in public interests (e. g. foreigners are prohibited from acquisition of land close to the border).

The federal law «On foreign investments», enforced from 9 July 1999 provides guarantees from any adverse changes to Russian legislation. In particular, new laws increasing tax burdens do not extend to Russian companies with foreign participation of 10% or more of their capital or to any Russian company with foreign capital if such a company is engaged on a «priority project»; that is, one with a total amount of investments of at least RUR 1 billion (approximately €10,970,900) or where a foreign company purchases an equity interest of at least RUR 100 million (approximately €1,097,090). The exemption is granted during the project's yield period, of no longer than seven years.

Russia also warmly welcomes investment in its several Special Economic Zones (SEZs) across the country. Those zones are differentiated by types of preferred economy sector for investments – be it tourism, logistics, industry or technology. Even warmer the welcome is for investors from BRICS Member States.

Acquisition of control over Russianenterprise by foreign companies

Generally the acquisition of a Russian company by a foreign entity is regulated by the same rules as those applicable to domestic acquisitions. There are, obviously, some restrictions to the access of foreign entities to areas of national interest, such as cryptography, national security, trading in certain products and technologies etc. At the same time Russian law as it stands at the moment assumes the necessity for state protection over domestic companies in certain areas such as exploration of natural resources, banking, insurance and some others.

The amount of participation (quotas) of foreign capital in the banking system is fixed. The quota is calculated as a ratio of the total capital belonging to non-residents in the registered capitals of credit organisations with foreign investments and the capital of branches of foreign banks to the aggregate registered capital of credit organisations registered on the territory of the Russian Federation. Upon reaching the quota the Bank of Russia suspends the issue of licences for banking operations to banks with foreign investments and branches of foreign banks. Currently the quota is 50%, a maximum level allowed by Russia's WTO membership.

A credit organisation must obtain the preliminary permission of the Bank of Russia for:

· placement of its shares among non-residents; or

· for an alienation of its shares to non-residents.

Resident shareholders of a credit organisation must also obtain consent from the Central Bank for an alienation of their share to non-residents. Failure to obtain such permission will lead to the invalidity of the transaction.

Similarly, an insurance company must obtain prior consent from the Federal Service for Insurance Supervision to increase their share of the registered capital formed out of non-resident resources, for an alienation of their stocks to non-residents, and resident participants for an alienation of their stocks to non-residents. Such consent will not be given to insurance companies, the subsidiaries of foreign entities, or those with more than 49% foreign shareholding, or those who obtain such participation as a result of the transaction if the quota of foreign capital in the insurance system has been reached. Currently the quota is 25%.

The Russian legislation restricts the purchase by foreign persons of the shares of domestic enterprises in certain areas. For example, no more than 20% of ordinary shares of gas companies can be sold to foreign entities. Foreign companies and individuals or Russian companies with more than 50% of foreign shareholders may not own agricultural land. Federal Law No.57 of 29 April 2008 restricts foreign investments in those Russian companies operating in certain «strategic» areas, such as construction, production and the trade of arms and military equipment, and technologies and space related activities. Strategic areas also include construction, manufacturing and the repair of aircraft, TV and radio broadcasting and other telecommunication services (excluding the internet), research and exploration of natural resources (on lands of «federal significance»), printing if the enterprise in question can print more than 200 million pages per month and publishing houses with a circulation of over 1 million copies per edition.

On the other hand, Russian legislation provides that a foreign company, at least 25% of shares in which is possessed by a Russian resident (10% if Russian residents are in possession of total 50% of its shares) is deemed to be a controlled foreign entity. The income generated by a controlled foreign entity is subject to taxation in Russia if such income exceeds RUR 10 million (€109,140). Nevertheless, such companies may be relieved from taxation in Russia if tax rates for corporate income tax in country of domicile of such entity exceeds 75% effective average rate of Russian CIT, the entity is an active foreign company, holding or sub holding company, operates a new marine hydrocarbon field, participates in mining projects under product-sharing agreements, concession agreements, licensing agreements or other risk-based agreements (contracts) and in some other cases.

Financial services

There are a number of legal Acts regulating the stock market, banking and investments. The principal legal Act for the stock market and securities is the federal law on the securities market of 22 April 1996, and the federal law on protection of rights and legitimate interests of investors on the securities market of 5 March 1999. Investment funds are regulated by the federal law on the investment funds of 29 November 2001.

In Russia the regulation of banking, insurance and investment is carried out by Central Bank of Russia. Until 1 September 2013, the Federal Service for Financial Markets of the Russian Federation (FSFM) (formerly the Federal Commission for Securities and Stock Market) was the state agency responsible for the regulation of stock market and investment business.

Russian law as it stands at the moment regulates collective investment schemes organised in the form of a joint stock investment fund or in the form of a unit trust.

A joint stock investment fund is, generally speaking, a Joint-Stock Company (JSC) whose exclusive activity is investments. The name of an investment company must contain the words «joint stock investment fund» or «investment fund». A joint stock investment fund is regulated by general legislation on joint stock companies with amendments and exceptions applicable to the investment companies.

A joint stock investment fund must be licenced by the Central Bank. At the time of filing an application for the licence the fund must have own capital in the amount aligning with the Central Bank Directives, of no less than RUR 5 million (approximately €54,000). The fund's property used for its own purposes and assets to be invested must be accounted for separately. Investment assets must be held in trust by a management company. The management can be a limited liability or a JSC and it must be licenced by the Central Bank. The fund's activity must comply with the investment mandate approved, normally, by the meeting of stockholders, and be registered with the Central Bank. This form of investment, however, is rather unpopular.

A unit trust does not comprise a legal entity. The participants of a unit trust pool their contributions into a property complex held in trust by a management company. The participants lose ownership over their contributions, and the trust's property is owned jointly by all trust members. The management company acts in its name but it must make it known that it acts as a trustee, otherwise the participants will be personal liable.

Again a management company and the trustee of a unit trust, must be authorised by the Central Bank.