RUSSIA
must be submitted to the FAS within 45 days from the date of the transaction. In each case, the application or notification should be submitted by the relevant foreign investor or Russian company controlled by the investor acquiring control over a strategic company.
d) What information must be included with notification and what is the review fee; An application for preliminary approval by the FAS, or a notification, must include certain prescribed information and be attached with certain prescribed documents related to the involved companies, including their group shareholdings, their business activities, the terms and conditions of the transaction, and their balance sheets.
The fee for review of an application or a preliminary approval by the FAS is R20,000 ($605). There is no fee for notification reviews.
An application for approval by the Governmental Commission must include certain prescribed information and and be attached with certain prescribed documents (similar to the documents required for an application for a preliminary approval by the FAS). There is no fee for a review of the application by the Governmental Commission.
e)How long does the review and approval process take, and are there any fast-track options; It usually takes up to three months to obtain approval from the FAS and up to six months to obtain approval from the Governmental Commission. Unfortunately, there are no fast-track options.
f) Is there the ability to consult on a named or unnamed basis; It is possible to send a named request to the FAS to get advice regarding the necessity of obtaining preliminary approval (either from the FAS or the Governmental Commission). In practice, it may also be possible to consult on an unamed basis. However, in this case the FAS’s response is not binding.
g) Does notification/review occur pre- or post-closing, and are there any pre- or post filing requirements unique to FDI; The review of an application for approval must occur before closing. The notification (in cases where preliminary approval is not required) must be made after closing. There are no additional pre- or post-filing requirements unique to FDI.
h)What is the position if no response is received on an application for approval and are there any rights of appeal from disapprovals? Decisions of the FAS and the Governmental Commission may be challenged in court. Transactions or other actions which require preliminary approval from the FAS or the Governmental Commission cannot be performed without such approval. Otherwise, the transaction can be considered void, or the newly established company may be liquidated.
3.2 Briefly explain the investment restrictions for any special/restricted sectors. There are certain sectors of the Russian economy to which FDI is subject to specific restrictions. For example, if a foreign investor holds more than 49% of the share capital of an insurance company, the company is prohibited from providing certain types of insurance. Foreign persons or companies (or Russian companies owned 50% by a foreign person or company) cannot establish a television channel, a radio channel, or television or radio programmes. There are also restrictions relating to establishing banks and other credit institutions with foreign investments according to quotes provided by the Bank of Russia.
Russian legislation also limits foreign investors from acquiring control over strategic companies that carry out certain activities (there are 42 such types of activity provided by law), including but not limited to the following: military; fishery; encryption hardware and bugging devices; exploration of subsoil and extraction of mineral resources on land plots of federal significance; aerospace; and, certain activities involving a company with a
50 IFLR REPORT | FOREIGN DIRECT INVESTMENT 2014 dominant position on a market.
Acquiring control over strategic companies, and any increase in such control is also subject to preliminary approval of the Governmental Commission or notification to the FAS.
3.3 Which authority oversees competition clearance, when is notification mandatory, and briefly explain the merger clearance process. Oversight of competition clearance is carried out by the FAS. The merger clearance process generally includes preliminary approval by the FAS, and preliminary approval by the Governmental Commission.
The FAS must be notified in accordance with the Competition Law in cases where certain prescribed thresholds concerning asset value or sales revenue for preliminary approval are not reached, but reached certain lesser thresholds set out by the law.
The FAS notification procedure is also mandatory under the Strategic Investments Law in cases where there is no need to get preliminary approval from the Governmental Commission, but where a foreign investor or its group has acquired five percent or more of a strategic company’s shares.
4. Tax and grants
4.1 Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into the country? Foreign investors in Russia usually use corporate structures involving Cypriot, Dutch or British companies for the purposes of tax optimisation.
FDI in Russia can be conducted by using both typical offshore jurisdictions and through so-called holding jurisdictions.
As to typical offshore jurisdictions (such as the British Virgin Islands, Belize, Nevis, Panama, and the Bahamas), these are exempt from taxes on both internal operations and investments. Thus, FDI into the Russian Federation can be carried out through an offshore company, which invests into a Russian company. In this case, the Russian company is not obliged to pay taxes due to the donating nature of the received capital.
However, according to statistics provided by Russian State Statistics Service, by the end of June 2013 the majority of foreign investment into Russia came from Cyprus, the Netherlands and Luxembourg. This is explained by the fact that holding jurisdictions (such as Cyprus, Hong Kong, Luxembourg, the Netherlands, and Switzerland) have beneficial tax treaties with Russia.
4.2 What are the applicable corporate tax rates? Corporate tax rates in Russia include a corporate profit tax rate at 20%, and a capital gains tax at 20%. Tax rates for dividends include: zero percent tax on dividends paid to a Russian company, if the Russian company owns 50% or more of shares in the dividend payer for at least 365 consecutive days (provided that the dividend payer is not a resident of an offshore jurisdiction); nine percent tax on dividends paid to a Russian company from a Russian or foreign company; and, 15% tax on dividends paid to a foreign company by a Russian company.
4.3 Does the government have any FDI tax incentive schemes in place? Yes. For example, some tax incentives are provided for participants of the Skolkovo project in the Moscow region (otherwise known as the Russian Silicon Valley). Skolkovo participants are exempt from VAT, profits tax and property tax.
There are also some special economic zones (SEZs) in Russia, such as the Lipetsk region, the Sverdlovsk region, Saint-Petersburg, and the Murmansk
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