Текст книги "Правовая поддержка иностранных инвестиций в России"

Автор книги: авторов Коллектив

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Land lease

Owners of land plots, with the exception of plots with which transactions are not permitted (clause 4 article 27 of the LC RF), have the right to lease out their land without restriction. The provisions of the Russian Civil Code concerning leasing, as well as the rules of the LC RF, are fully applicable to the lease of land plots. When concluding a lease agreement for a land plot, the end of the lease term or the agreement’s term of validity must be indicated. If, on expiry of the term of validity of the lease agreement, the parties in fact continue to perform their obligations, the lease agreement is recognised as being concluded for an unlimited period. If the lease term is not determined in the agreement, the lease agreement is recognised as being concluded for an unlimited period. In this case, each of the parties is entitled to withdraw from the agreement by serving a three month notice on the other party, in compliance with the general rule (article 610 of the Russian Civil Code).

Preemptive right (clause 3 article 22 of the LC RF) to sign a new lease agreement is enjoyed by the tenant except in the event of transfer of title to buildings and structures (clause 3 article 35; clause 1 article 36 of the LC RF), in which case it is the owner of the buildings and structures that enjoys this preemptive right.

The land tenant is entitled to assign its rights and obligations under a lease agreement to a third party (sublease), including mortgaging the lease rights, contributing them to the authorised capital of an economic partnership or company or as a an equity contribution to a production co-operative within the term of validity of the lease agreement. At the same time, to do so, it is sufficient to notify the owner of the plot, without having to obtain its permission (unless the lease agreement envisages otherwise). The legislation allows for subleasing of land within the term of validity of the lease agreement without the consent of the land owner, on the condition that it is notified to this effect (unless the lease agreement envisages otherwise).

Lease and sublease agreements for a land plot concluded for a period exceeding one year are subject to state registration (the Federal law may envisage state registration of an agreement for a term of less than one year, article 26 of the LC RF). Information on state registration of a land lease agreement is entered into the Realty Register. The land tenant may be issued a certificate[43]43
  See: Clause 73 of the Rules for Maintaining the Unified State Register of Real Estate Rights and Transactions, approved by Resolution of the Government of the RF No. 219, dated 18 February 1998.


[Закрыть] but, as a rule, this is not the case. On registration of the lease agreement, an entry is made in the Register concerning any lease encumbrance on the title.

Lease of a land plot terminates for the reasons and in the manner established by the civil legislation. Certain specifics of termination of a lease agreement are also envisaged by the LC RF. Thus, the lease may be terminated on the initiative of the landlord in the event that the plot is not used in compliance with its designated purpose and the particular land category to which it belongs; failure to remedy a deliberate land law offence (pollution, contamination of the soil, etc.); failure to use the land plot for a period of three years, unless the Federal Law of the lease agreement establishes otherwise (article 46 of the LC RF).

A. Bespalov, Customs Expert Pepeliaev, Goltsblat & Partners

Customs benefits on transferring production to Russia

From the beginning of the 1990s, in order to create a favourable climate to attract foreign investment into the Russian economy, the Government of the RF passed a number of legislative acts[44]44
  See: Article 37 of Law of the RF No. 5003-I of 21 May 1993 “On Customs Tariffs”; Resolution of the Government of the RF от 23 July 1996 No. 883 “On Concessions on Payment of Customs Import Duties and VAT in Relation to Goods Imported by Foreign Investors as a Contribution to the Authorised (Share) Capital of Foreign-Invested Enterprises”.


[Закрыть] to establish a preferential regime with respect to customs import duties, as well as value added tax, on manufacturing equipment, units and parts imported as a contribution by the foreign investor (founder) to the authorised (share) capital of a Russian foreign-invested enterprises.

Considering that the customs import duty rates charged on different types of manufacturing equipment classified under the corresponding goods items of the Commodity Classification for Foreign Trade of Russia (TN VED RF) fluctuate between 5 and 10 % of the customs value of the equipment and that the unified VAT rate in Russia is set at 18 %, the aggregate sum saved (in the amount of 23–28 % of the customs value of the equipment) makes such projects very attractive from the economic point of view.

It should be noted that the rate concessions mentioned are granted provided a number of requirements are observed, namely:

• the imported goods are not excisable;

• the imported goods relate to fixed productive assets;

• the goods are imported during the period of formation of the authorised capital of the Russian foreign-invested enterprise.

The imported goods also belong to the category of manufacturing equipment, units and parts thereto and are classified under corresponding TN VED goods groups on the list of manufacturing equipment (Appendix 1 to Order No. 131 of the State Customs Committee of the RF, dated 7 February 2001)[45]45
  See: Appendix 1 to Order № 131 of the State Customs Committee of the RF of 7 February 2001 “On Approval of the Instructions on the Procedure for Customs Authorities of the Russian Federation to Apply Value Added Tax in Relation to Goods Imported on to the Territory of the Russian Federation”.


[Закрыть].

As already noted, payment concessions in relation to customs import duties are granted to the entire complex of goods classed as fixed productive assets and included on the List of fixed assets in the All-Russia Classification of Fixed Assets OK 013-94 (OKOF)[46]46
  The All-Russia Classification of Fixed Assets (OK 013-94 (OKOF), approved by Resolution No. 359 of the State Standards Committee of the RF of 16 December 1994 (with amendments of 1998).


[Закрыть].

Goods released into free circulation with the application of concessions on the payment of customs charges (duty and VAT) acquire the status of conditionally released goods and are considered as foreign goods with a virtually unlimited term for possible inspections and audits by the customs authorities responsible for confirming the designated use of the goods by the foreign-invested enterprises that imported the goods under the preferential regime.

The volume of the tasks the project manager needs to resolve in preparing and performing the transfer to Russia of the entire complex of manufacturing equipment in the form of fixed production lines, auxiliary equipment and devices, as well as sets of assembly units, is quite considerable and requires more detailed investigation.

Let us, therefore, confine ourselves to considering the four main tasks, meticulous and precise fulfilment of which determines the success of the entire project:

1) preparation and drawing up of the list of equipment for inclusion in the constituent documents of the foreign-invested Russian enterprise and determination of the concept for the import of said equipment;

2) organisation and resolution of the problems of transportation logistics;

3) customs clearance;

4) receipt of permission documents.

Let us assume that there exists some manufacturing complex in the form of a manufacturing line, set of auxiliary devices and set of spare parts, to be imported to Russia.

The main tasks are to:

• organise the importation and customs clearance of the given manufacturing complex with application of concessions with respect to customs payments;

• obtain the permission documents necessary for implementation of such a project;

• minimise the costs involved.

It should be noted that, over the last decade, dozens of foreign enterprises have been built and started up in Russia with application of the preferential tax regime and that this has, in turn, engendered a stable demand for such projects on the customs services market.

Even though there are many brokerage and consulting companies offering a broad range of legal, customs, logistics and certification services, this does not always promote a rational balance between their price and quality.

In writing this material, in order to minimise the costs of such projects we used standard customs procedures not envisaging additional applications to the Russian customs authorities at various levels for clarifications and decisions with respect to the preliminary classification, determination of the country of origin and application of a special declaration procedure.

I. Drawing up the equipment list: classification of the goods, determination of the country of origin and customs value; determination of the importation concept; introduction of amendments into the constituent documents of the Russian company.

It would appear to be much simpler to transfer existing and operating production from one production base to another (be it in another country) than to set up a new production facility by obtaining various equipment directly from individual suppliers: the equipment set is already complete and formed, linked by a unified manufacturing process, and organised – just disassemble it, pack it up and send it to Russia.

The current Russian customs legislation lays on an equipment importer (which is, in the case described and in accordance with the Customs Code of the RF, the foreign-invested Russian enterprise) a sort of obligation with respect to classification of the goods, determination of their country of origin and customs value.

It is of considerable importance to decide these issues, since they are directly linked with the formation of the tax base and subsequent calculation of the customs charges due for payment (even in the event that the preferential regime is applied).

First of all, a list must be drawn up of the equipment to be imported into the Russian Federation as a contribution in kind to authorised capital and each item on this list must be checked as being classifiable as manufacturing equipment and fixed productive assets, allowing application of concessions on payment of customs duties and VAT.

When drawing up the list, basic and auxiliary manufacturing equipment must be identified separately.

Manufacturing equipment of the main production cycle includes individual functionally complete machines (mechanisms) or a chain (combination) of sequential and interlinked similar machines (manufacturing production line), fulfilling one or several operations involved in the processing of materials and (or) manufacturing finished output, within the framework of a unified manufacturing process (cycle).

Manufacturing equipment of an auxiliary production cycle might include various types of machine (mechanism) that do not produce finished output, but provide for due performance of the main production process, such as:

• installations for producing and supplying to the manufacturing equipment: steam (steam generators and industrial boilers), compressed and purified air or gas (compressor units; air purifiers; air and gas filters), utility water (water preparation equipment) and so on;

• installations for cleaning and processing industrial waste water;

• installations for energy supply and protecting electric circuits (power transformers and substations, generators, distribution boards, converters, inverters, etc.);

• laboratory equipment for studying the characteristics of both primary materials and finished products;

• electric and automatic loaders, stackers, hoists and other mechanical warehouse equipment;

• industrial air conditioners regulating the micro-climate in industrial premises, as well as industrial ventilating equipment.

Having drawn up the list of equipment, the concept for importing the equipment and assembling the goods batches needs to be determined.

There exist two concepts for the importation, customs clearance and certification of a set of manufacturing equipment:

• simultaneous deliveries of functionally complete machines and (or) production lines, applying the standard (generally accepted) declaration procedure;

• individual components of machines and (or) production lines, applying the classification decision of the Federal Customs Service of the RF and a special declaration procedure.

Without considering the technology specially elaborated by the State Customs Committee of Russia (now known as the Federal Customs Service of the RF) for importation and customs clearance of equipment in the form of individual components[47]47
  Order of the State Customs Committee of the RF No. 388 of 23 April 2001 “On Approval of the Instructions on the Procedure for Classification in Accordance with the Commodity Classification for Foreign Trade, Customs Clearance and Customs Control over Machinery Delivered in the Form of Individual Components” (with amendments of 28 June 2002 and 22 April 2003).


[Закрыть] (concept No. 2), let us confine ourselves to looking at the two main methods (concept No. 1) envisaging the assembly and importation of goods batches, certification and customs clearance of equipment:

• individual assembled machines fulfilling specifically defined functions;

• production lines (combinations of machines and mechanisms interlinked by a single, continuous manufacturing process).

These methods are based on Rule 2а) and Clarifications V, VI and VII to the Main Rules for interpretation, as well as Clarifications V, VI and VII to section XVI of the Russian Commodity Classification for Foreign Trade, explaining how to classify incomplete, multifunctional facilities (machines), disassembled for transportation convenience.

The person declaring foreign trade cargoes has the right, in accordance with the Customs Code of the RF, to classify goods itself and to ask the customs authorities to give a provisional decision on classification of the goods.

In order to assign correct TN VED codes to equipment, the project manager has to use one of the given practical classification methods based on Rule 2а).

The first method presupposes classification in a corresponding goods item of the TN VED, shipping, transportation, certification and subsequent customs clearance of all the components of each individual, functionally complete machine, including if disassembled for transportation convenience, within the scope of a single goods batch.

This method is applicable for small units and devices, delivered in a set by a single or small number of vehicles. For example, an industrial facility for producing and supplying steam to a production area (based on a steam generator) might include the steam generator itself, a set of safety cut-off and pressure fittings, a set of controlling and measuring apparatus, expansion bottles, etc. In accordance with Clarifications VII to Rule 2а) of the main rules for interpretation of the TN VED RF, such a facility, even if disassembled, may be classified and consequently presented for customs clearance according to its main function – production of steam (i.e., the commodity code for steam boilers and steam generators).

The second method presupposes classification of all the components (machines) of a production line that are interlinked by a continuous manufacturing process (as well as pipelines and (or) electricity cables), shipping, transportation, standard certification within the safety and quality system and subsequent customs clearance of all the components (machines) of the unified production line within the scope of a single and inseparable goods batch under a single commodity code:

corresponding to the goods item of the TN VED for the machine that has the maximum customs duty rate compared to the other goods items (machines);

corresponding to the goods item of the TN VED for the machine that fulfils the main function in the course of the production or processing cycle.

As an example of the second method, we will take a production line for the manufacture of mechanical parts using cutting, stamping and flanging operations on metal.

Let us suppose that there is a production line with the following manufacturing process: payoff and preparation of a metal sheet – batch cutting of the sheet – dummy blanking – moulding of the item by stamping – finishing grinding operations – automatic painting of the finished item – drying of the finished item in an oven – packaging of the item in the primary packaging – placement of a set of primary packages on a pallet, covered in a plastic sheet.

This manufacturing process can be divided into two main components: production operations and packaging operations.

Practical experience has shown that, for such cases, the customs usually take a provisional decision on classification (at the importer’s request) of such a production line according to three commodity codes: commodity code 8462 – for the entire production process (the most suitable here is the code for pressing equipment, since the 10 % duty rate for presses/blanking machines exceeds the 5 % duty rate for the other types of equipment, such as pay-off machines, cutting and grinding machine tools, painting equipment), excluding drying of painted items; commodity code 8419 – for the drying oven; commodity code 8422 – for the packaging equipment.

Let us note that, given a substantial number of conveyors for transporting both parts and finished goods from one stage of the manufacturing process to another, the customs authorities insist on separating out the conveying devices into separate goods item 8428.

In an effort to minimise the number of commodity codes, however, each conveyor may be regarded as the logical end of one machine (outgoing conveyors) and, correspondingly, the beginning of another (incoming conveyors), classifying the transmitting unit and the machine as a single facility within the scope of one and the same goods item.

Each method has its advantages: the first is ideal for individual small industrial units and appliances of an auxiliary manufacturing cycle and the second for combinations of machines and appliances of the main manufacturing process (production lines, sectors and stages) with a substantial number of vehicleas involved.

The principal and determining distinction is the volume of goods batches formed (i.e., the number of vehicles loaded and dispatched), leading by the first method to a simplification of the transport and logistics component, and in the second to minimisation of the number of TN VED commodity codes applied and, as a consequence, to a minimum number of permission documents required (for example, standards for certificates of compliance).

In the case under consideration of transferring a production line to Russia, it is the second method that is ideal. There are several reasons for this:

• equipment of the existing production line can quite conveniently be broken down into major commodity groups (codes) by applying the principle of minimising the total number of commodity codes and, as a consequence, obtaining a minimum number of formed goods batches;

• the foreign plant where the given equipment was previously used may, on instructions from the foreign investor (supplier), act as the consignor (general contractor) by assuming responsibility for fulfilling all the operations involved in disassembling, packing and labelling the goods, forming goods batches, undergoing export formalities and so on. The number of consignors is thus minimised and the form of shipping documents unified;

• the country where the equipment was located and used may be regarded not only as the country of dispatch but also, if certain efforts are applied by the consignor, as the country of origin of the equipment;

• the number of permission documents (certificates of compliance and sanitary-epidemiological reports) is also minimised and corresponds to the number of goods batches formed.

Each item on the equipment list must be assigned a code of the All-Russia Classifier of Fixed Assets (ОК 013-94) for the purpose of checking the validity of applying import customs duty concessions. It is not essential to indicate the code in the constituent documents.

It should be noted that there is no precise correspondence between the 10-figure TN VED code and the 9-figure ОК 013-94 code, so attention should be paid to the descriptive part with respect to a particular type of equipment, reflecting most fully the functional purpose of the item of equipment sought.

After assessing the volume of the equipment proposed for importation and its classification in accordance with the selected import concept (by individual machine or production line), a list may be drawn up of the equipment to be included in the amended constituent documents of the foreign-invested Russian company.

The list should include:

• the name of the equipment, indicating the quantity, type, mark or model;

• the name of the manufacturer;

• the name of the country of origin (economic unions of states, such as the European Union, may be indicated);

• the value of the unit of equipment and the total value in foreign currency (indicate which currency) and its equivalent in Roubles.

The constituent documents shall include information on:

• the time schedule for formation of the authorised capital from the time the decision it made to increase it by means of an in-kind contribution;

• the time schedule for importing the equipment into Russia;

• the date of the exchange rate set by the Bank of Russia in relation to the foreign currency in which the value of the imported equipment is declared (usually the date of the decision by the foreign investor (founder) to increase the authorised capital of the foreign-invested Russian company);

• the terms for delivery of the equipment to Russia, determined by one of the in.l trade terms INCOTERMS 2000.

Duly drawn up and certified amendments to the constituent documents of the Russian foreign-invested company, reflecting the increase in the authorised capital through an in-kind contribution by the foreign investor, are submitted to the territorial division of the tax service of Russia for state registration.

Let us consider separately the question of determining the customs value of the equipment, this constituting the tax base for customs clearance purposes. Even though the imported equipment will only have customs clearance charges levied on it, and no customs duty or VAT, the customs authorities focus particular attention on determination and confirmation of the customs value.

The customs value is determined on the basis of the invoice value of the goods and all overhead costs in accordance with the selected goods delivery terms (INCOTERMS 2000) and must correspond to the calculated value in the written report of an independent appraiser authorised by the Property Ministry of Russia.

A report is issued according to the results of an independent expert price examination at the request of the foreign investor or its authorised representative; this is the document required to confirm the estimated value of the property contribution to the authorised capital of the foreign-invested enterprise; it serves for the purposes of state registration with the tax authorities of amendments to the constituent documents and for confirmation of the declared customs value (if the customs authorities should entertain doubts about the selected methods for determining the customs value).

The next stage is a written application to the Federal Customs Service of the Russian Federation (FCS RF) for concessions to be granted with respect to payment of VAT on the manufacturing equipment imported as a contribution to authorised capital.

The application should include:

• a detailed description of the equipment, indicating its value;

• information on the manufacturing company and country of origin of the equipment,

• the TN VED code for each item on the equipment list;

• the ОК 013–094 code for each item on the equipment list;

• the name of the structural subdivision of the customs authority where customs clearance is to be performed.

Notarised copies of state-registered constituent documents, as well as the report of the independent appraiser confirming the market value of the in-kind contribution to the authorised capital, should be attached to the application.

Thus, in our example, the following steps were taken:

• the list of equipment and the concept for its importation were determined proceeding from the principle of minimising the number of customs commodity codes and in accordance with the rules for interpreting the TN VED RF;

• each customs goods code was checked as belonging to fixed productive assets and manufacturing equipment;

• the country of origin of the equipment was determined;

• the customs value of the production complex was determined in accordance with the chosen delivery terms of INCOTERMS 2000;

• the list of equipment of the production complex to be imported as an in-kind contribution was included in the amendments to the constituent documents of the Russian foreign-invested enterprise;

• the amendments to the constituent documents underwent state registration;

• an independent appraisal was performed of the production complex;

• an application to the FCS RF was drawn up for concessions with respect to VAT paid on the imported equipment at the time of customs clearance;

• the set of constituent documents and a positive opinion from the FCS RF on VAT concessions were registered with the relevant customs authorities;

• a positive opinion was obtained from the relevant customs authorities on the possibility of applying customs duty benefits and concessions on VAT paid on the imported equipment at the time of customs clearance.

This concludes the first and, probably, the most significant stage in preparing the project and paves the way for proceeding to the second stage.