Doing Business in Russia

Doing Business in Russia 13 The decision to grant or deny a licence is generally made within the forty-five days after the authorities receive the application and all of its accompanying documents. Regulations on the licensing of some other activities can allow for shorter processing periods. Generally, licences are issued for indefinite terms. Licences are issued separately for each type of activity. The transfer of a licence to another legal entity or individual is prohibited, except for in cases specifically provided for by law. A licence becomes invalid when an organisation is liquidated or terminates activities as a result of its reorganisation (unless it is reorganised via legal transformation into another form of company) or when a sole proprietor's state registration certificate expires. In accordance with the procedure established by the Administrative Code of the Russian Federation, authorised licensing bodies are entitled to suspend a licence if the licensee violates the licensing requirements and conditions. Performing a regulated activity without the appropriate licence is likely to lead to the imposition of significant penalties, with other consequences that could include a court order requiring enforced liquidation. The penalties and consequences depend on the specific circumstances. For some business activities, instead of receiving a licence, a company is required to become a member of a professional self-regulated organisation that sets its own membership criteria (this for example applies to engineering, construction and valuation services). Some business activities can be conducted only on the basis of a special licence issued by an authorised licensing agency. Land ownership Pursuant to the Constitution of the Russian Federation, land can be owned privately. Land can also be owned by state or municipal authorities or held under other ownership conditions. The Russian Land Code regulates the purchase of land via regional-level legislation. In practice, it is still quite difficult to acquire land in Russia from state or municipal authorities. However, according to Federal Law, the owners of buildings have the exclusive right to purchase or rent the land plots underlying and surrounding their buildings. Typically, land-lease contracts (sometimes with a right to purchase) run for a maximum term of 49 years. Renting or acquiring state property (apart from when executing the aforementioned exclusive right) is likely to require winning a tender/auction. If property is rented or obtained without conducting the obligatory tendering procedures, then the transaction can be invalidated. Certain other restrictions also apply to owning land, e.g. foreign individuals or legal entities do not have the right to own land adjacent to the state border of the Russian Federation. Special laws regulate transactions involving farmland. According to these laws, foreign individuals, legal entities and stateless persons, as well as Russian legal entities (in which more than 50% of the share capital is owned by foreign individuals, legal entities or stateless persons) can only lease - not own farm land. - When acquiring land in Russia, both Federal and local regulations should be considered. Russian regions and Special Economic Zones Most Russian regions have adopted laws that allow tax concessions to be given to investors. Currently, the majority of investment tax concessions relate to profits tax and property tax. Investment tax concessions are normally granted only for the investment project payback period, and the amount of the tax saving gained cannot exceed the amount initially invested in the project. Regional authorities can set additional conditions in return for granting concessions (i.e. employing individuals residing in the region, assisting in the development of infrastructure, etc.). A Special Economic Zone (SEZ) is a clearly defined and limited piece of territory within a particular region of Russia in which business is carried out under special circumstances granting certain tax, customs and other concessions to the residents in that SEZ. The residents in a SEZ can be legal ©2016 KPMG. All rights reserved.

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