The Constitution and the Civil Code of the Russian Federation, as well as laws on joint stock and limited liability companies and securities markets, provide the general legal framework for investment in Russia.
Foreign investments are regulated by Federal Law No. 160-FZ “On Foreign Investments in the Russian Federation” dated 9 July 1999 (the “Foreign Investments Law”).
The Foreign Investments Law defines foreign investors as:
• foreign entities and individuals; and
• foreign states and international organizations, as well as entities under their control.
The Strategic Companies Law expands this definition by extending it to:
• entities (including those registered in Russia) under the control of foreign investors;
• Russian citizens with foreign citizenship.
The Foreign Investments Law guarantees
The Foreign Investments Law guarantees foreign investors the right to invest and to receive revenues and profits from such investments, and sets forth the general terms for foreign investors’ business activity in Russia.
By virtue of this law, foreign investors shall be treated no less favorably than domestic investors, with certain exceptions. These exceptions may be introduced to protect the Russian constitutional system, public morals, health and rights of persons, or for state security and defense purposes. Foreign investments may only be nationalized following the adoption of a federal law and for compensation.
The tax stabilization clause
The tax stabilization clause, also known as the “Grandfather Clause”, is set forth by the Foreign Investments Law and is considered one of its most important features. The Grandfather Clause prohibits increasing the rates of certain federal taxes until initial investments have been recouped (up to a maximum of seven years, unless this period is extended by the Russian Government).
This clause applies to (i) foreign investors that are implementing “priority investment projects”, (ii) Russian companies with more than 25% foreign equity ownership, and (iii) Russian companies with foreign participation that are implementing “priority investment projects”, regardless of the percentage of foreign participation in the company.
According to the Foreign Investments Law, a priority investment project is a project where the amount of foreign investment exceeds RUB 1 billion (approx. USD 17.15 million) or where a foreign investor has purchased an equity interest worth more than RUB 100 million (approx. USD 1.71 million). In both cases, the investment project must also be included in a list of projects approved by the Russian Government.
Key exceptions to the Grandfather Clause are established for excise tax, VAT on domestic goods, and Pension Fund payments. There is also a potentially broad exception for laws protecting public or state interests. Despite all these exceptions and qualifications, it remains unclear if the tax stabilization clause brings any real benefit to foreign investors.
Certain restrictions on foreign investments are imposed by Federal Law No. 57-FZ “On the Procedures for Foreign Investments in Companies of Strategic Significance for National Defense and Security,” dated 29 April 2008 (the “Strategic Companies Law”). The Strategic Companies Law is designed to regulate the acquisition of control over Russian strategic companies by foreign investors or “groups of persons” that include a foreign investor.
Whenever a foreign investor intends to acquire “control” over a Russian company engaged in a strategic activity, the acquisition, depending on the level of such control, requires preliminary approval from the Government Commission on Control over Foreign Investments in the Russian Federation and/or post-transaction notification to the Federal Antimonopoly Service of the Russian Federation (the “FAS”). Importantly, the notion of “control” for these purposes implies not only a certain minimum shareholding, but also rights to appoint governing bodies and otherwise determine the target company’s activity.
The Strategic Companies Law provides a list of more than 40 activities that constitute strategic activities in Russia. Accordingly, any company engaged in such activities is viewed as a strategic company.
From the standpoint of foreign investment, it is crucial to verify all activities the target company is engaged in, to assess whether it qualifies as strategic and would therefore be subject to the restrictions outlined above. Strategic activities include, inter alia, the following:
In July 2017, Russia enacted new rules strengthening government control over transactions involving foreign investors with respect to Russian companies. Starting from 30 July 2017, any acquisitions by foreign investors of shares in any Russian company (not only companies engaged in the above “strategic activities”) may require prior approval of the Government Commission if the chair of the Government Commission (i.e., the Prime Minister of Russia) decides that such transaction may threaten national defense and state security. In this case, FAS shall, within three days from the date of receiving such decision of the Prime Minister, notify the foreign investor that it must submit an application for preliminary approval of the transaction by the Government Commission.
The following transactions and other actions involving the acquisition of control over strategic companies require the preliminary approval of the Russian Government:
a. direct or indirect control over more than 50 % of the total number of votes attached to voting shares;
b. the right to appoint (a) the CEO, and/or (b) more than 50 % of the members of a collegial executive body (i.e., management board) of a strategic company; or
c. the unconditional ability to elect more than 50 % of the members of the board of directors (supervisory council) or other collegial governing body of a strategic company;
a. direct or indirect control of 25% or more of the total number of votes attached to voting shares;
b. the right to appoint (a) the CEO, and/or (b) 25% or more of the members of a collegial executive body of a strategic company; or
c. the unconditional ability to elect 25% or more of the members of the board of directors (supervisory council) or other collegial governing body of a strategic company;
a. 25% of the total number of votes attached to voting shares or other means of blocking decisions of the governing bodies in companies engaged in strategic activities other than the use of strategic subsoil plots; or
b. 5% of the total number of votes attached to voting shares in companies using strategic subsoil plots; and
The foreign investor is responsible for securing transaction approval. An application for preliminary approval must be submitted to the FAS, which checks the application’s compliance with the formal requirements. The application represents a standard form supported by a number of documents relating to both the foreign investor and the strategic company, including a description of their groups, corporate documents, and a draft business plan for the strategic company.
During the preliminary review, the FAS requests the Federal Security Service and the Ministry of Defense to provide their conclusions as to whether the proposed transaction threatens national defense or any other security interest. The FAS may also request additional information from the applicants, state bodies, organizations and individuals.
After the formal check is completed, the FAS submits an application for preliminary approval to the Government Commission. The Government Commission, in turn, decides whether to approve the application and whether any additional conditions established by the Strategic Companies Law shall apply to such approval.
After a foreign investor submits the application, the FAS and the Government Commission have a maximum of three months to issue a final written decision. The Government Commission may extend the review period by another three months (six months in total).
While the FAS’s review of a foreign investor’s application focuses on compliance with the formal requirements, the Government Commission has full discretion to approve or reject the proposed transaction and is not obliged to explain or substantiate its decision.
The Strategic Companies Law sets forth a duty to provide post- transaction notification to the FAS in case of:
The Strategic Companies Law does not apply, inter alia, to:
Transactions executed in breach of the Strategic Companies Law are deemed void. The court may hold that the parties to a void transaction shall return everything received under such transaction. If it is impossible to reverse a deal, or if a foreign investor fails to provide post-transaction notification to the FAS in case of acquisition, directly or indirectly, of 5% or more of shares of a strategic company, a court may rule to deprive the foreign investor of voting rights at the shareholders’ meetings of a strategic company.
Violation of the Strategic Companies Law is also considered an administrative offense, and is subject to the following penalties:
In addition, foreign investments in certain industries, including banking, insurance and mass media, are also subject to certain limitations.
Investments of foreign states, international organizations and offshore companies (i.e., those incorporated in a state or territory providing for beneficial tax treatment and (or) failing to disclose or share information when conducting financial operations, a list of which is adopted by Russian Ministry of entities under their control (a “Restricted Investor”), in any Russian company, whether strategic or not, are subject to additional clearance requirements under the Foreign Investments Law. Any transaction that gives a Restricted Investor the right to directly or indirectly control over more than 25% of the total number of votes attached to voting shares in any Russian company, or otherwise block decisions of a Russian company’s governing bodies, requires preliminary clearance with the Russian Government and the FAS.
Furthermore, a Restricted Investor must obtain preliminary transaction approval pursuant to the Strategic Companies Law when acquiring more than:
In addition to that, Restricted Investors are explicitly prohibited from establishing control over strategic companies, as this term is defined in the Strategic Companies Law. Under the Strategic Companies Law, “control over a strategic company” means:
a. acquisition by a Restricted Investor(s) of direct or indirect control over more than 50% of the total number of votes attached to voting shares;
b. acquisition by a Restricted Investor of the right to appoint: (a) the CEO; and/or (b) more than 50% of the members of a collegial executive body of a strategic company;
c. acquisition by a Restricted Investor of the unconditional ability to elect more than 50% of the members of the board of directors (supervisory council) or other collegial governing bodies of a strategic company; or
d. appointment of a Restricted Investor as an external managing company of a strategic company;
e. acquisition by a Restricted Investor of the right to direct the management of a strategic company on the basis of a contract or otherwise.
a. acquisition by a Restricted Investor of direct or indirect control over 25% or more of the total number of votes attached to voting shares;
b. acquisition by a Restricted Investor of the right to appoint: (a) the CEO; and/or (b) 25% or more of the members of a collegial executive body of a strategic company;
c. acquisition by a Restricted Investor of the unconditional ability to elect 25% or more of the members of the board of directors (supervisory council) or other collegial governing bodies of a strategic company;
d. appointment of a Restricted Investor as an external managing company of a strategic company; or
e. acquisition by a Restricted Investor of the right to direct the management of a strategic company on the basis of a contract or otherwise.
In addition, Russia is a member of the World Trade Organization and, thus, has committed to implement its treaties and regulations.
Although no express provision permits land ownership by foreign nationals (including stateless persons), the Land Code may clearly be interpreted as allowing such ownership, except in cases where it is specifically prohibited. In 2004, the Constitutional Court of the Russian Federation confirmed this liberal and pro-foreign national interpretation of the Land Code. Foreign nationals have the right to acquire into lease or ownership vacant land plots (for construction purposes) or land plots under existing buildings, subject to the following restrictions set out in the Land Code and other federal laws:
Under the Decree, border territories are defined to include municipal districts and cities (in their geographical entireties) adjacent to the border.
Among the border territories are the city of Sochi (and other near- shore municipalities in Krasnodarsky Krai), four districts in Leningrad Oblast (the Lomonosovsky, Kingiseppsky, Slantsevsky and Vyborgsky districts), the Kronshtadtsky District in St. Petersburg, a number of municipal districts in the Bryansk, Tyumen, Rostov, Voronezh and Belgorod Oblasts, most of the municipalities in Kaliningrad Oblast, a great many municipal districts in the Far East, and others.
Pursuant to the Land Code, the prohibition of land ownership in border territories applies to foreign legal entities (including entities acting in Russia through branches or representative offices), foreign individuals and stateless persons, but, unlike in the case of agricultural land, does not apply to Russian legal entities wholly or partially owned by foreign investors.
The Decree provides neither for a transitional period nor a clear indication as to what should be done with land plots within restricted border territories acquired by foreign nationals before the adoption of the Decree. These matters are not addressed by the Land Code or the Land Code Implementation Law either. Arguably, the lack of transitional or implementation rules in the Decree reflects the intention of its authors to prompt foreign owners of lawfully acquired land in border territories to dispose of such land in accordance with general principles envisaged in the Civil Code. In particular, according to Article 238 of the Civil Code, if an owner owns property that may not be owned by that owner by virtue of law, such property must be alienated by the owner within a year from the moment when the ownership right arose unless the law specifies another term for alienation of the property. Court practice, which is very scarce as of the date of this guide, uses this general principle when considering disputes with regard to land plots owned by foreign owners or stateless persons in border areas.
In the context of other provisions of the Land Code that deal with the concept of unity of title to land and facilities (buildings) built thereon, in the absence of any exemptions in the Decree for foreign owners of developed land plots, a foreign person will also have to dispose of all the facilities and buildings developed on all such land plots that it owns. As of the date of this guide, law and court practice are silent on whether this concept will apply and whether a foreign owner should also dispose of the facilities (buildings) located on the land plot or only the land plot.
Russian customs legislation is based on the unified rules of the Eurasian Economic Union (the “EAEU”). The EAEU was launched on 1 January 2015 and includes Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. All Russian foreign trade regulations, including the customs tariff and non-tariff regulations, are primarily based on rules established at the supranational level of the EAEU. The EAEU replaced the Customs Union of Russia, Belarus and Kazakhstan (the “CU”). The CU commenced operation on 1 January 2010 and gained its main legislative framework on 1 July 2011.
Russia officially became the 156th member of the WTO on 22 August 2012. Since Russia is a member of the EAEU, EAEU regulations are based on the WTO rules.
Eurasian Economic Union (“EAEU”)
The EAEU establishes a unified set of rules governing the most important economic sectors that should cover all its member states by 2020.
Creation of the EAEU is the next stage of creation of the unified economic area. In addition to the unified customs territory of the Customs Union (“CU”), which has already been in place since 2010, the EAEU provides for free trade in services, including market access to natural monopolies (e.g., railways, energy), access to financial services, including free movement of capital and workforce, unified competition laws, macroeconomic policy, and unified regulations for taxes and intellectual property. This should also include unified regulations for circulation of medicinal preparations and medical devices, etc. Since the EAEU is the successor of the CU, the regulations implemented at the CU level are referred to below as the “EAEU” regulations.
The classification of goods for customs purposes in Russia is carried out in accordance with the Unified Customs Tariff of the EAEU, which is based on the International Convention on the Harmonized Commodity Description and Coding System, dated 14 June 1983 (the “Harmonized System”), providing that all the goods crossing the customs territory of the EAEU are assigned customs classification codes (HS codes) determined in accordance with the general rules of interpretation of the Harmonized System. Customs authorities control the correctness of the classification of goods.
The Unified Customs Tariff of the EAEU has undergone periodic revision since 2011, with the rates of import customs duties set in accordance with Russia’s obligations within the WTO, which were outlined in the WTO Accession Protocol.
With effect from January 1, 2018, the Customs Code of the Eurasian Economic Union entered into force, replacing the joint customs code of the customs union of 2009 introduced in the customs union of Russia, Belarus and Kazakhstan. Upon joining the Eurasian Economic Union (EAEU) in 2015, the member states – Russia, Belarus, Kazakhstan, Armenia, Kirgizia – are obliged to observe the customs code of the customs union of 2009 and, since January 2018, the EAEU Customs Code.
Basically, customs procedures are simplified thanks to the modifications specified in the EAEU Customs Code of 2018. The new provisions mainly concern
In addition, a large number of national regulations of the member states will be transferred to the unified level of the Eurasian Economic Union. As a consequence, a number of explanatory resolutions of the Eurasian Economic Union will be passed at EAEU level – in addition to the EAEU Customs Code of 2018.
CIS Free Trade Agreement
The CIS FTA provides for the free movement of goods within the territory of the CIS, no import customs duties, non-discrimination, gradual decrease of export customs duties and abolishment of quantitative restrictions in mutual trade between the CIS FTA member states. The CIS FTA covers goods originating from the signee states, and among other points provides that:
Goods originating from the CIS FTA member states are not subject to import customs duties in the country of import except for certain cases.
The CIS FTA fixes the maximum rates of export customs duties that, for Russia, primarily cover raw materials and agricultural products (i.e., cellulose ‒ 10%, oil, coal, etc.). The signees agree not to apply quantitative limitations in trade.
Free transit is established (an exception is made for pipeline transit, which should be separately agreed between the signees).
The CIS FTA establishes that the WTO rules will govern the customs transit of goods, application of special safeguard, anti-dumping and countervailing measures, technical barriers to trade, as well as the provision of subsidies and other measures applied in trade between its signees.
Internal (Home) Consumption
Importation of goods for internal (home) consumption (usually, the synonymous term “release for free circulation” is used in practice) on the Russian territory is the main customs regime for importation with the ensuing free circulation of the goods in Russia without any further customs restrictions or post-clearance customs control, provided that all applicable customs duties and taxes have been paid.
Local branches and representative offices of foreign companies can release goods for internal consumption in Russia, subject to certain conditions.
Temporary import is considered a special “economic” customs regime, pursuant to which foreign goods are used for a certain period of time (the term of the temporary import) on Russian customs territory with full or partial exemption from import customs duties and taxes (i.e., import VAT and excise taxes, where applicable).
Temporarily imported goods must remain unchanged, except for changes due to natural wear and tear or natural loss given normal transportation, shipment, storage, and use conditions. Russian importers are allowed to perform operations with temporarily imported goods required for their preservation, maintenance of products’ consumer features, and keeping the products in the condition they were in before they were cleared at customs for temporary importation into Russia.
Certain products (e.g., pallets and other types of returnable packaging for goods temporarily imported to further international trade, tourism, science, culture, cinema and sporting relations, etc.) may be temporarily imported with full exemption from import customs payments.
Where partial (rather than full) exemption from import customs payments is granted, the temporary import regime contemplates that 3% of the total amount of import customs payments (that would have been paid if the goods had been fully imported for free circulation) must be paid for each month the goods stay in Russia under this regime.
The generally permitted term for temporary import is two years. Some statutory requirements should be met in order to be eligible for exemption from customs duties. In particular, temporarily imported goods may not be sold or otherwise transferred to any third party. The customs authorities could also request security for import customs payments (most likely a bank guarantee or cash deposit) from the importer of record before applying the temporary import regime.
Under the bonded warehouse customs regime, goods imported into the EAEU are stored at special places (bonded warehouses) under customs control without an obligation to pay import customs duties and taxes. Storage at a bonded warehouse is subject to regular non- refundable storage fees as contractually agreed with the bonded warehouse’s owner. Goods so imported and put under this customs regime (pursuant to the permission of the customs authorities) have the status of foreign goods.
The maximum term for the storage of imported goods at a bonded warehouse is three years, with an option to extend this term with the permission of the customs authorities. Goods with a shorter useful life and/or sale terms must be assigned to other customs regimes and shipped from such bonded warehouses at least 180 days prior to the expiration of such term (except for products subject to accelerated deterioration with respect to which the term for storage at a bonded warehouse could be reduced).
The importer of record or other interested parties having placed imported goods in a bonded warehouse can sell or otherwise transfer them to third parties, with preservation of the same customs status and with the prior consent of the customs authorities, followed by a legal substitution of the importer of record by the third party that acquired these goods. Please note, however, that such a sale or transfer might be subject to local Russian taxation, since apart from the special customs regime a bonded warehouse is no different from any other warehouse located in Russian territory.
Goods placed in a bonded warehouse can be further exported, placed under another customs regime, including importation for internal (home) consumption. When sold to Russian customers for free circulation on the local market, such goods should be declared for the “internal consumption” customs regime subject to payment of the relevant import customs duties and taxes.
Under the customs transit regime, goods cross the customs border of the EAEU and are under customs control during their movement across Russian customs territory without an obligation to pay import customs duties and taxes. Only foreign goods can be subject to this customs regime, which is granted only based on the permission of the customs authorities. The regime is normally granted either to a carrier or an expediter if it is a Russian legal entity or an entity of the EAEU. The transit customs regime is terminated when the goods are actually shipped out of Russia. A special transit customs declaration is required for declaration of the transit customs regime.
Security for payment of customs duties and taxes is usually required before the goods are placed under the customs transit procedure. However, TIR carnets are still accepted by Russian customs as an exemption from the obligation to provide such security. Notably, the use of TIR carnets was allowed until 28 February 2015 and then renewed on 22 January 2016.
Products having the status of foreign goods can be declared for destruction before the customs authorities, which would imply that such destruction must be completed under customs control and the importer would not be subject to import customs duties and taxes with respect to the destroyed products. However, the cost of destruction must be fully covered by the importer claiming the regime. Moreover, the waste generated as a result of such destruction would be subject to customs clearance requirements, import customs duties and taxes under general rules. Customs clearance requirements do not apply to waste that cannot be further used for commercial purposes or is subject to burial, neutralization, utilization or removal in another way. Such waste has the status of goods of the EAEU and is not subject to customs control.
Abandonment to the State
Foreign goods imported into Russia may be abandoned to the Russian state, which is a special customs regime that the importer of record can select. Under this regime, the title to the imported goods is gratuitously transferred to the state without an obligation on the importer to pay any import customs duties and taxes, including the customs processing fee. Imported products may be cleared under this regime with a permit from the customs authorities. This regime may be a convenient way to avoid unreasonable customs clearance costs if they become applicable to goods for any reason (e.g., customs have classified the goods under a code entailing a substantially higher import duty than the importer is ready to pay, or customs request a permit/license that the importer does not possess, and it is too costly/burdensome to ship the goods back from Russia).
Export of goods is the main customs regime for definitive exportation of goods out of the customs territory of Russia. Export of certain types of goods is subject to export customs duties. Export of any goods is also subject to Russian VAT with a special 0% rate (see below).
Re-export is the customs regime when goods initially delivered into the Russian territory may be taken out with the right to exemption from customs duties, fees and taxes or refund of customs duties, fees and taxes (if any paid). Generally, the re-export regime applies only to “foreign goods,” i.e., goods that were delivered into the Russian territory but have not undergone the entire customs clearance procedure and have not been released under a particular customs regime.
Generally, the re-export customs regime is not applicable to goods that were imported into Russia and released for free circulation in Russia. The re-export regime can be applied to goods released into free circulation in relation to which it has been established that when they crossed the Russian customs border they had defects or in some other way did not conform to the provisions of the foreign trade contract in terms of quality, quantity, description or packaging, and for this reason were returned to the supplier or another nominated person. Such goods may be placed under the customs regime of re- export, if they: (i) have not been used or modified, except if such use or modification was required for detection of defects; (ii) may be identified by the Russian customs authorities; (iii) have been re- exported within one year from the date of release into Russia; (iv) have been supported with the required documents that confirm the existence of lawful grounds for such re-export and observance of restrictions and prohibitions for import of goods as established by the legislation of Russia/the EAEU.
Re-import is the opposite of the re-export customs regime and is designed to exempt goods that were initially exported from the customs territory of Russia from the payment of import customs duties and taxes, without the application of any economic restrictions provided by Russian laws and the laws of the EAEU.
Customs regimes introduced by the new Customs Code of the EAEU
The new Customs Code of the EAEU formalized three customs regimes that were previously established and regulated by the legislation of the EAEU member states, namely special customs regime, free customs zone and free bonded warehouse regimes.
Special customs regime applies to certain types of foreign goods, i.e., goods that were imported into the EAEU territory, located and/or used within/or outside the EAEU territory. Free bonded warehouse is a customs regime, under which foreign goods and the goods originating from the EAEU are located and used in a free bonded warehouse without paying customs payments and observance of anti-dumping, countervailing and special safeguard measures. Under the customs free customs zone regime, foreign goods and the goods originating from the EAEU are located and used within a free economic zone. This customs regime allows such operations as local processing, manufacturing and repairing with respect to such goods to be performed within a certain period of time.
Under all the above customs regimes, the importers of record are exempt from paying customs payments and observance of anti- dumping, countervailing and special safeguard measures (provided that all requirements of this regime are fulfilled and goods are used in accordance with the regime).
Goods that are moved into Russia through the territory of EAEU member states are placed under the transit customs regime at the external border of the EAEU and are finally released for free circulation by the Russian customs authorities. In Russia, imported goods are legally released for free circulation after the Russian customs authorities confirm this by notifying the declarant electronically that the goods have been released. Imported goods are normally cleared at customs either before their shipment to Russia or when the goods reach the designated customs house/post (and are placed in a special temporary customs warehouse if necessary).
Customs clearance is normally completed by the importer of record (or a customs representative acting on its behalf) filing the customs declaration (the main document) and the required set of documents. The list of documents required for customs clearance in each particular case depends on the type and characteristics of the goods and terms of their importation (e.g., the customs regime chosen). Notably, the new Customs Code of the EAEU stipulates a general rule according to which importers/exporters are not required to enclose supportive documents with the customs declaration. Any documents supporting declared information may be separately requested by the customs authorities. This move is aimed at simplifying customs declarations for the business community and eliminates burdensome responsibilities and formalities.
The timing for the customs clearance procedure is one business day after the date when a customs declaration was registered by the Russian customs authorities, provided that all the required documentation was submitted. However, in practice, the customs clearance process may take longer than the statutory term. Under the new Customs Code of the EAEU, the standard term of release of goods by the customs authorities will be reduced to four hours (subject to certain conditions).
The legislation gives a customs inspector the right to extend that term by up to 10 business days at the discretion of the chief of a customs terminal. Under the new Customs Code of the EAEU, the term can only be extended if a customs inspector requires additional supporting documentation for the imported goods, or if a declarant decides to amend information provided in the customs declaration during customs clearance. Furthermore, the new customs legislation also envisages the right of customs authorities to further extend the 10- business-day term for customs clearance in exceptional cases (e.g., for the period of a customs expertise if such period exceeds the 10-day limitation).
According to the new Customs Code of the EAEU, almost all customs clearance formalities should be performed electronically. Hard copies will likely be allowed only in the following exceptional cases: (i) customs transit of goods; (ii) importing/exporting goods designated for personal use by individuals; (iii) goods sent by international mail; (iv) declaration of vehicles of international transportation; (v) the use of transport (carriage), commercial and/or other documents (including those envisaged under international treaties entered into between the EAEU members and third parties) as a customs declaration; and (vi) other cases determined by the Eurasian Economic Commission.
In addition, pursuant to the new Customs Code of the EAEU, the release of goods by the customs authorities should be performed automatically (currently, customs release is executed by customs officers). Relevant reports issued by customs should be sent by electronic mail.
Customs duties are imposed on top of the declared customs value confirmed and accepted by the Russian customs authorities. The rates of import customs duties in Russia are normally established as an ad valorem (interest) rate ranging from 0% to 80% or a specific rate (in euros depending on the physical features of imported goods) based on the Unified Customs Tariff of the CU/EAEU. The unified rates of import customs duties apply to goods originating from all countries outside the CU/EAEU, except when tariff preferences or the free trade regime are applied (e.g., the CIS FTA).
As of 1 July 2010, import customs duties are paid to the unified budget of the CU/EAEU and are subsequently distributed among the members of the CU/EAEU. As mentioned above, the rates of import customs duties are based on Russia’s commitments to the WTO.
A utilization fee must be paid for all imported or locally manufactured vehicles, which aims to protect the environment and contribute to the state budget. Certain types of vehicles are exempt from the utilization fee, including vehicles imported (i) as personal belongings of refugees and certain categories of immigrating persons; (ii) by diplomatic and consular missions and international organizations; and (iii) that are over 30 years old and are not designated for commercial transportation (i.e., “retro-vehicles”). The utilization fee is calculated by multiplying the base rate (RUB 20,000 for cars and RUB 150,000 for commercial vehicles) by increasing coefficients, depending on certain technical characteristics of the vehicle (e.g., engine capacity and age).
In addition to the utilization fee on vehicles, starting from 1 January 2015 the Russian government introduced an ecological fee. Importers and manufacturers of certain goods are obliged to use waste from such goods in accordance with utilization limits. If such manufacturers and importers fail to use the waste they will have to pay an ecological fee calculated on the basis of a specific formula. The list of goods subject to such utilization (including their packaging), as well as the applicable rates of ecological fees and utilization limits are currently established by the Russian government in April 2016 and then revised in 2016. Utilization limits apply starting from 2016 and depend on the particular type of used goods.
Importation of goods as an in-kind contribution into the charter capital of a Russian legal entity is duty free. After importing the goods, the importer of record is required to prove that the goods were recorded on its balance sheet and were not disposed of.
Goods imported with no import duty as in-kind contributions into charter capital are treated as conditionally released. If the goods are alienated by the importer in any manner, the importer will be required to pay the import customs duties (and, in some cases, import VAT) together with applicable fines and late payment interest for the whole term during which the duty exemption applied to the goods.
The legal basis for the import licensing system is the EAEU legislation on non-tariff measures. The purpose of the licensing measures is to monitor and control imports and exports of goods classified as sensitive by the EAEU member states or by the international community. Import/export licenses are required: (i) in the event of temporary quantitative restrictions on imports of certain types of goods; (ii) to regulate the importation of certain goods for reasons of national security, health, safety or environmental protection; (iii) to grant an exclusive right to import or export certain goods; or (iv) to carry out international obligations. A unified list of goods to which import and export limitations and prohibitions are applied was established at the EAEU level, based on which certain categories of goods (e.g., fertilizers, rare animals and plants, goods with a high level of cryptographic protection, hazardous waste, drugs, items of cultural value, precious stones and metals, etc.) require an import or export license for their movement across the EAEU border. In Russia, licenses are issued by the Ministry of Industry and Trade in accordance with the unified licensing rules of the EAEU. Products containing any cryptographic devices or functions and not requiring an import license (which covers the majority of IT hardware and software goods, such as electronics, phones, computers, laptops, modems, software, etc.) are subject to mandatory notification with the Russian Federal Security Service. A Russian licensee may import licensed goods into Russia only and has the right to transit such goods through the territory of the other EAEU member states. In 2013, the Eurasian Economic Commission issued regulations on the procedure for providing licenses and notifications.
In accordance with the WTO requirements on non-discrimination in foreign trade, the import licensing of medicinal preparations was abolished in the CU in 2011. The import licensing of alcohol products was also abolished automatically in the CU the moment Russia became a member of the WTO.
Even after the formation of the CU/the EAEU, setting of export customs duties still remains within the competence of the member states. Generally, Russian mineral resources and raw materials (such as oil, petrochemicals, gas, wood, metals, etc.) are subject to export customs duties. There is no unified list of export customs duties and the Russian government separately establishes export customs duties for particular types of products. The Russian government establishes export customs duties rates for oil and petrochemicals at one-month intervals. Export customs duties may be deducted for corporate profit tax purposes. Oil supplied to Belarus starting 1 January 2011 is duty free, and the export customs duties are levied when it leaves the external border of Belarus.
Exportation of goods from Russian customs territory is subject to 0% VAT. Russian exporters of record must comply with a special statutory procedure in order to apply the 0% VAT rate to exports.
Russia is a party to the 1998 Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, but still has certain peculiarities.
Russia established and currently maintains several lists of controlled items that are based on the Wassenaar Arrangement. The lists of controlled items are established by Presidential Decrees. Apart from the List of Dual Use Items, there are relevant lists of controlled chemicals, nuclear-related items, military items, etc.
Should the products fall under the Russian lists of products subject to export control (the so-called “Russian Dual-Use List”), exportation of such products out of Russia would be subject to a special export control clearance (i.e., an export control license or permit issued by the Russian Federal Service for Technical and Export Control (the “FSTEC”)). In certain cases, importation of dual-use products might be subject to export control requirements.
If a product by its HS code, description, or designation, may potentially fall under Russian export control regulations, it must undergo a special export control identification and testing in order to determine whether a special export control clearance is required (i.e., export control license, permit, or end-use certificate issued by the FSTEC for the importation/exportation of the products). In certain cases, the Russian importers/exporters of record need to undergo an independent identification export control testing performed by testing laboratories accredited by the FSTEC.