Amendments to Russia’s double tax treaties with Switzerland and Luxembourg Pepeliaev Group advises that the Russian Government has approved draft Protocols amending the Agreement between the Russian Federation and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, and the Agreement between the Russian Federation and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital.

The Russian Supreme Arbitration Court will resolve the issue of whether taxpayers may treat as deductible VAT paid as part of the expenditure on the repair of general infrastructure facilities that are in state ownership Pepeliaev Group advises that, on 25 October 2011, the Presidium of the Russian Supreme Arbitration Court will resolve the issue of whether taxpayers may treat as deductible VAT paid as part of the expenditure on the repair of infrastructure facilities that are in general use and that are not owned by the taxpayer but are required for it to carry out its economic activity (the SAC’s Ruling No.  VAS-3844/11 dated 14 July 2011 – the OOO Tulacement case).

New rules for determining origins of goods in the CIS Pepeliaev Group advises that Federal Law No. 103-FZ dated 1 June 2011 has ratified the Agreement on the Rules for Determining the Origin of Goods in the Commonwealth of Independent States, signed in Yalta on 20 November 2009 (the “Agreement”). According to the CIS Executive Committee, the Agreement came into force for the Russian Federation on 23 July 2011. From this date, the previously applicable Rules for determining the country of origin of goods, approved by the Decision of the CIS Council of Heads of Government dated 30 November 2000, no longer apply to Russia (cl. 2 of the Decision of the CIS Council of Heads of Government dated 20 November 2009).

The Russian financial watchdog has provided guidance on factors that present increased risk of transactions being treated as money laundering or terrorism financing Pepeliaev Group advises that the Russian Financial Monitoring Service has released its Information Letter No. 17 dated 2 August 2011 On factors in transactions, and in types of and terms for activity, that entail an increased risk of clients entering into transactions for the purposes of legalising (laundering) income received through criminal means, and the financing of terrorism.

The Russian Supreme Arbitration Court has confirmed the ban on third parties using trademarks in their advertisments of services Pepeliaev Group advises that the Russian Supreme Arbitration Court supported the stance taken by the Nineteenth Arbitration Court of Appeal and the Federal Arbitration Court for the Central Circuit, according to which provisions of article 1487 of the Russian Civil Code (“Exhaustion of the exclusive right to a trademark”) only apply to the use of the trademark with regard to goods that have been lawfully put into circulation, but not services. Therefore, the use, without the right holder’s permission, of a trademark/ service mark by third parties to advertise services associated with the relevant goods constitutes a violation of the exclusive right to the trademark / service mark (see case No. А64-2744/2010).

What is new in the application of Russian thin capitalisation rules Pepeliaev Group law firm advises that the Presidium of the Supreme Arbitration Court (the “SAC”) will for the first time consider how the non-discrimination provisions of international double tax treaties correlate with Russian thin capitalisation rules, which in certain cases provide for interest accrued on a taxpayer’s debt to be reclassified as dividends.

Labour protection: New rule for assessing individual workplaces and increase of liability Pepeliaev Group advises that a number of laws and regulations have been adopted that amend labour protection rules. In particular, a new procedure for assessing individual workplaces for compliance with labour safety rules has been adopted and a draft law on increasing the criminal and administrative liability for violating the labour protection requirements has been introduced.

HARSHER COURT PRACTICE IN CASES CONCERNING THE FILING OF STATEMENTS WITH BANKS FOR CURRENCY CONTROL PURPOSES Pepeliaev Group advises that court practice has become harsher in cases on filing statements with banks for currency control purposes.

New rules for documenting relationships in the area of investment and construction: tax implications Pepeliaev Group advises that, on 28 July 2011, a Resolution of the Plenum of the Russian Supreme Arbitration Court with direct implications for construction and investment activity was published on the SAC’s website. The Resolution creates substantial tax risks for all those involved in that sector: builders, investors and developers.

NEW LEGISLATION ON INSPECTIONS AND PROVIDING A LEGAL BASIS FOR THE EXTENSION OF AN ADMINISTRATIVE SUSPENSION OF ACTIVITY  Pepeliaev Group advises that 1 August 2011 saw the entry into force (except in relation to specific provisions which are to come into force at other times) of Federal Law No. 242-FZ On amending particular items of the legislation of the Russian Federation concerning issues of carrying out state control (supervision) and municipal control.

Companies that operate in Sakhalin Region and a number of other regions are entitled to use accelerated depreciation of fixed assets and deduct larger amounts as expenses for tax purposes On 5 July 2011, the Federal arbitration Court for the Far Eastern Circuit issued its precedent forming resolution No. F03-2566/2011 which states that companies operating in Sakhalin Region are entitled to apply a special coefficient for their fixed assets depreciation (but not more than 2). The court’s conclusions may also apply to companies operating in other regions of the Far North and areas equivalent to the Far North.

Changes in tax control of transfer pricing

On 8 July 2011 the Russian State Duma adopted in the third reading the law On amending certain legislative items of the Russian Federation in connection with improving the pricing rules for tax purposes.