Banking
Banks to increase their internal funds (capital)
On January 1, 2012, new internal funds (capital) requirements came into force, requiring the amount of internal funds (capital) to open a new bank to be 300 million rubles. In addition, to obtain a license to perform banking operations with rubles and foreign currencies, as well as to raise funds in rubles and foreign currency, banks will be required to have not less than 900 million rubles in internal funds (capital).
Comments: operating banks may gradually increase internal funds (capital) to 300 million rubles, but must meet the new requirements by January 1, 2015.
Financial Reporting
Russian companies to report their financial figures in accordance with international financial reporting standards (IFRS)
From January 1, 2012, certain Russian companies are required to report their financial results according to international standards.
On December 12, 2011, the Ministry of Finance officially recognized IFRS. All public joint stock companies, insurance companies and banks must report under IFRS starting from January 1, 2012.
All companies in Russia will be subject to IFRS starting from 2015.
This is a positive step for Russian companies, given that IFRS is recognized around the world and is perceived as an important indicator of management transparency, credibility and stability. Local standards are often ignored by investors and foreign credit institutions as they are considered uncertain and sometimes irrelevant. Using international standards should improve the investment climate and make it easier for companies to attract financing.
Franchising Regulations
Franchising regulations have undergone major changes. The stated goal of these changes is to remove barriers to development of franchising operations in Russia.
Main changes:
- granting the franchisor the right to determine the resale price and the territory on which the franchisee is entitled to sell goods, perform work or render services;
Under Russian competition law, the franchisor already has this right, but prior to the amendments, such right was not recognized by the RF Civil Code. The amendments to the RF Civil Code have eliminated the discrepancy between antitrust and civil law regulation of franchise agreements.
- providing parties the right to alter the terms and conditions of a franchise agreement when executing an agreement for a new term;
Prior to the amendments, parties were entitled to execute an agreement on new terms using only the same terms and conditions, although in practice amendments were often re-negotiated.
- providing for the possibility of unilateral termination of the franchise agreement executed for a fixed term by either party;
Such right may be applied by the parties at any time, subject to the following conditions: 1) prior notification of the counterparty in writing, no later than 30 (thirty) days before termination; 2) franchise agreement shall provide parties the right to terminate an agreement by paying a termination fee ("otstypnoe").
Taxation
Amendments to transfer pricing rules
On January 1, 2012, new transfer pricing rules came into force requiring taxpayers to notify the tax authorities of all controlled transactions, including cross-border transactions involving oil, oil products, certain metals, fertilizers, as well as transactions involving foreign entities registered in special-tax districts (as determined by the Finance Ministry).
The purpose of such rules is to prevent the loss of taxable earnings from transactions when earnings and expenses are reallocated between the parties to a transaction, which are interdependent only for the purposes of tax savings.
Transactions that don't exceed 3 billion rubles ($100 million) in 2012 and 2 billion rubles ($71 million) in 2013 will be exempt from reporting rules. Starting from 2014, the threshold will be 1 billion rubles ($35 million) in a calendar year.
* Elvira Danilova is a paralegal in Dechert's Moscow office.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.