"Real Estate and Investments. Legal Regulation", the journal

Issue 2-3 (3-4) 2000

Some Moments of the Formation and Development of Foreign Investments in the Russian Federation

Rukas N.I., division consultant of the Main state-legal administration department of the President of the Russian Federation

The goal of the present article is to comment the rights, duties and possibilities of foreign and Russian investors of accomplishment the investments on territory of Russian Federation on the basis of the provisions of current legislative and normative acts of Russian Federation.

Under the general rule that has been set in the international economic relations, the foreign investors bring on territory of other state not only capital, but also the experience and knowledge, which promote the economic growth of such country. In the economic system of relations recreated Russian Federation, as the economically developed state, is not an exception to the rules and accordingly requires foreign investments. It is necessary to understand that Russian Federation, as the assignee of former Soviet Union, has a first-class education system, scientists and experts of a world level. Due to this it can play a more important role in the world economy. The cooperation with foreign investors is vitally important for the making of market economy in Russian Federation.

In the field of engaging the foreign investments to territory of Russian Federation, the last two years are considered to be the years of the analysis of application and development of the "young" Russian legislation on the foreign investments, and also the years of a canceling, audit, adoption of new legislative, normative legal acts of Russian Federation that regulate the activity of the foreign investments on the territory of Russian Federation. Now lawgivers have formulated a new ideology in the sphere of the external economic cooperation. At the state level the legal essentials of the new concept of engaging the foreign investments on the territory of Russian Federation are made. The accepted legislative and normative legal acts of Russian Federation are directed on improving the investment climate both in country as a whole, and in the separately taken subject of Russian Federation.

As main directions of improving the investment climate in Russian Federation it is possible to consider the following aspects: firstly, it was legislatively established, that the support is received by large direct investments and /or investments in the vital strategic branches of national economy; secondly, the warranties and privileges are given to the direct investments realized in the real sector of Russian economy; thirdly, in the field of perfecting the procedure of export-import and currency operations, payment of main tax and customs tariffs, licensing some kinds of activity and etc., when the foreign investors are legislatively equalized with the domestic investors; in - fourth, the adoption of necessary normative legal acts that regulate different aspects of activity of the foreign capital, in particular, in the field of mining and extraction of natural resources, which acts on the conditions of agreements on the section of production.

***

The adoption of the new Federal act "On the foreign investments in Russian Federation" from 09.07.99 160-FL was stipulated by the fact that the Law of RSFSR "On the foreign investments in RSFSR" from 04.07. 91 1545-1 was formed practically on an empty legal field and by 1999 in the main has carried out the delivered tasks. Besides in connection with the adoption of new legislation of Russian Federation its separate provisions have already missed the usual legal practice of accomplishment of the investment activity on territory of Russian Federation.

During nine years (from 1991 to 2000) in Russian Federation the basic legislative acts that regulate in a series of other problems, the problems of legal regulation of accomplishment of foreign investments on the territory Russian Federation were enacted.

Conceptually the Federal act is directed on engaging and effective exploitation of foreign material and financial resources, advanced technique and technology, administrative experience, on ensuring the repeatability of conditions of the foreign investors activity and keeping the correspondence of the legal regime of the foreign investments to the norms of international law and international practice of investment cooperation in the economy of Russian Federation.

The federal law establishes that the construed Federal law, other federal acts and normative legal acts of Russian Federation, and also international agreements, realizes the legal regulation of foreign investments on the territory of Russian Federation.

To the international agreements of Russian Federation with the foreign states it is necessary to refer the commercial agreements, agreements of encouragement and mutual protection of the investments, agreements on the taxation etc.

The subjects of Russian Federation have the right to accept the laws and other normative legal acts that regulate foreign investments, on the problems of their support, and also of share support of Russian Federation and subjects of Russian Federation.

Nowadays, more than 30 subjects of Russian Federation have enacted the local legislation that regulates the problems of engaging the foreign investments on the territory.

The federal act directly eliminates from the sphere of its regulation the relations, connected with the investments of foreign capital in the banks, credit and insurance organizations, which are regulated now by the legislation of Russian Federation on banks and bank activity and the legislation of Russian Federation on insurance. The federal law is not spread also on the relations connected with the investment of foreign capital in noncommercial organizations for the achievement of definite socially useful purpose, including educational, charitable, scientific or religious, which are regulated by the local law of Russian Federation on noncommercial organizations.

The federal law unlike the Law on the foreign investments does not contain special cases on the obligatory expertise of the investment drafts. However it does not mean, that from the date of execution of the Federal law the expertise of the investment drafts is not required any more.

It is necessary to have in mind that other legislative acts that enact the obligatory conducting of an expertise of the investment drafts, including foreign continue to act. For example, the paragraph 3 article 12 of the federal Act "On the investment activity in Russian Federation realized in the form of capital investments" from 25.02.99 39-FL (in red. of the federal act from 02.01.2000 22-FL) establishes, that all investment drafts are the subject of ecological expertise according to the law of Russian Federation.

The Federal law "On ecological expertise" from 23. 11. 95 174-FL (in red. of the federal act from 15.04. 98 65-FL), and also other legislative acts exacting the conduction of expertise at the accomplishment of foreign investments on the territory of Russian Federation continue to be executed.

The Federal law establishes, that the legal regime of the activity of the foreign investors and exploitation of the earned investment profit can not be less favorable, than the legal regime of the activity and exploitation of the earned investment profit, granted to the Russian investors, for the exemptions established by federal acts.

The exemptions of limitative character for the foreign investors can be established by the federal acts only in the amount that is necessary for the purpose of protection of the basis of constitutional regime, morals, health, rights and legitimate interests of other parties, ensuring of national defense and safety of the state.

The exemptions of the stimulating character as privileges for the foreign investors can be established for the benefit of social and economic development of Russian Federation. The kinds of privileges and the order of granting are established by the law of Russian Federation.

For the foreign investors acting on the territory of Russian Federation, the Federal law establishes the following guarantees and privileges: guarantees of legal protection of their activity; guarantees of using by the foreign investor the different ways of accomplishing the investments on the territory of Russian Federation; guarantees of transition of the rights and duties of the foreign investor to another party and etc.

From many guarantees submitted by the Federal law to the foreign investor, the most significant and earning attention are the guarantees of compensations at the nationalization and requisition of the asset of the foreign investor, guarantees from unfavorable modifications of the legislation and the guarantees of reinvestment and transition of the earned profits.

The state guaranties that the asset of the foreign investor or a commercial organization is not the subject of forced exemption, including the nationalization, requisition, except the cases established by the federal law or the international agreement of Russian Federation.

At requisition, the foreign investor or a commercial organization with the foreign investments is compensated the cost of requisitioned asset.

At nationalization, the foreign investor or a commercial organization with the foreign investments is compensated the cost of nationalized asset, and also other average general costs, suffered by him.

Established by the Federal law the stabilizing stipulation is being the most significant, as for the foreign investors it defines the guarantees from unfavorable modification of the legislation of Russian Federation. The lawgiver has defined the branches of law, which guarantee the foreign investors the conservation of the interests during the investment process on the territory of Russian Federation.

However investors should keep in mind, that the stabilizing stipulation is spread not on all commercial organizations with foreign investments, but only on those, where the share (contribution) of the foreign investors in authorized (shared) capital of the organization constitutes more than 25 %, and also on commercial organizations that execute priority investment drafts, irrespective of the share of foreign investors in authorized (shared) capital.

New passed federal laws and other normative legal acts and their modifications and supplements are not applied in case, when they change the rates of the import customs tariffs (except for the customs tariffs called by the measures of protecting the economic interests of Russian Federation at accomplishment of foreign trade), the rates of federal taxes (except the excises and value added tax on the goods produced on the territory of Russian Federation), rate of contributions in state extra-budgetary funds (except the contributions in the Pension Fund of Russian Federation).

The stability for the foreign investors is guaranteed during the payback period of the investment draft, but not more than for seven years from the date of the beginning of its financing at the expense of foreign investments. In exceptional cases at the realization of the priority investment draft in the field of production or the creation of transport or other infrastructure with a cooperative volume of foreign investments not less than 1bil. roubles (approximately $41mln.), which payback period exceeds seven years, the Government of Russian Federation makes a decision on prolongation of the term of validity and the payback regime of the investment draft.

At the same time it is necessary to say that stabilizing stipulation is not applied if the new federal acts and normative legal acts of Russian Federation, and also the modifications and supplements deposited to the acting federal laws and normative legal acts of Russian Federation, are directed on the protection of the basis of constitutional regime, morals, health, rights and legitimate interests of other parties, ensuring of national defense and safety of the state.

In connection with the adoption of the Federal law the Ministry of Justice of Russian Federation in the letter from July 26, 1999 of 5993- has explained the order of registrating the commercial organizations with the foreign investments, according to which until the introduction of the law on filing the legal entities the law of filing the commercial organizations with the foreign investments is applied. The procedure of filing the commercial organizations with the foreign investments is considered to be finished from the moment of importation of the commercial organization with the foreign investments in the State registry of commercial organizations with the foreign investments, which support is assigned to the State registration chamber at the Ministry of Justice of Russian Federation.

The state customs committee of Russian Federation according to its competency by the letter from August 12, 1999 01-15/21733 in connection with the execution of the Federal Law has explained, that the privileges on the payment of the customs duties, taxes (federal taxes) concerning the goods imported as the contribution of the foreign investor in authorized (shared) capital of firms with the foreign investments, are given according to the law of Russian Federation on the taxes and collecting. The laws of Russian Federation "On the customs tariff", "On the value added tax", Federal act "On the excises" refer to such legislative acts.

Up to the importation of the alterations in these legislative acts in connection with adoption of the federal Act "On the foreign investments in Russian Federation" the acting conditions and the order of granting the indicated privileges for the goods imported as the contribution of the foreign investor in authorized (shared) capital of firms with the foreign investments are saved.

Thus, it is possible to say that at the level of federal executive bodies the federal Act has already started working.

In the nearest future the Government of Russian Federation, guided by the federal Act, will define a federal executive body responsible for the coordination of engaging the direct foreign investments into the economy of Russian Federation. In development of separate standards and provisions of this Law, the Government of Russian Federation and the competent federal executive bodies will receive the appropriate normative legal acts on concrete problems.

The major modification occurred in the tax legislation of Russian Federation, was the execution of the first Tax code of Russian Federation from 31.07.98 146-FL (in red. of the federal acts from 09.07.99 154-FL and from 02.01.2000 13-FL), which can be called the main tax law of the Russian state.

The adoption of the first part of the Tax code of Russian Federation has allowed to begin the creation of a system of effective legal guarantees for the taxpayers, including the foreign investors, ensuring of real protection of their interests for the state and its bodies. The first part of the Tax code of Russian Federation restricts the amount of the taxes; their application is simplified. The operation directed on the introduction of the next parts of the Tax code is being conducted, so that in the nearest future instead of tens of the separate legal acts, frequently contradicting, there would have been a unique legislative act regulating all problems of the taxation in the country.

The first part of the Tax code of Russian Federation established the order and conditions of granting the investment tax credit.

Investment tax credit is the modification of the time of the tax payment, at which the organizations are given the possibility to diminish the tax paying with the consequent installment payment of the sum of the credit and calculated percents according to the contract clauses on granting the investment tax credit during the definite period and in definite borders at the presence of appropriate cases The investors and firms with foreign investments being the taxpayer of the appropriate tax can claim for the right of granting the investment tax credit at the presence of the following foundation:

  • Conducting by this organization the research and development either development projects or modernization of their production, also including the direction on the creation of workstations for the invalids or the protection of natural environment from contamination by industrial wastes;
  • Accomplishment by this organization the implementation or innovation activities, including the creation of new or the development of the applied technology, the creation of new kinds of raw material or materials;
  • Executing by this organization of the especially important order on socioeconomic development of locale or grant by it of the especially important services to the population.

Is established that the foundation for receiving the investment tax credit should be documentary reconfirmed by the interested organization.

It is also necessary to mark the fact, that the investment tax credit is given on the basis of the application of the organization and is made out by the agreement of the established form between the appropriate authorized body and this organization.

The form of the contract on the investment tax credit is established by an executive body, which is making a decision on granting the investment tax credit.

The solution on granting of the investment tax credit to the organization is made by the authorized body within one month from the date of receiving the application.

It should be also told that the presence of one or several agreements about the investment tax credit for the organization could not be the encumbrance for settling of another agreement with this organization on the investment tax credit on other foundation.

It is important to mark, that the first part of the Tax code of Russian Federation, establishes the demands of the parties to the agreement on the investment tax credit.

So, the agreement on the investment tax credit should provide the order of the diminution of tax payment, the sum of the credit (with indicating the tax, on which the organization is given the investment tax credit), currency of the contract, calculated percents for the sum of the credit, order of cancellation of the sum of the credit and calculated percents, documents on asset, which is the subject of the deposit, or a guarantee, liability of the parties.

The duplicate of the agreement is represented by the organization to the tax department on the place of its registration in a five-day period from the date of making a contract.

The first part of the Tax code of Russian Federation establishes that by the law of the subject of Russian Federation, and also by normative legal acts received by representative bodies of local home rule on regional and local taxes, can be accordingly established other foundations and conditions of granting the investment tax credit.

***

Among the legislative and normative legal acts received in Russian Federation in 1998, on the rights and interests of the investors, it is necessary to select the federal Act "On the leasing" from October 29, 1998 164-FL.

The federal act "On the leasing" defines the concept of leasing as an aspect of investment activity on acquiring the asset and it transmission on the basis of the leasing agreements to physical or legal entities for the definite payment, on the definite period and on certain conditions stipulated by the agreement, with the call future of asset by the leasing receiver.

Formally the Federal act "On the leasing" does not contain direct privileges for the foreign investors - participants of the share drafts. However this Federal act contains the standards and provisions establishing the possibility of introduction of the measures of state support of the investment activity of leasing organizations (of the companies, corporations).

So, in the federal Act it is said that the measures of state support of the activity of leasing organizations (companies, corporations), are considered are considered to be the measures which are established by the laws of Russian Federation and the decisions of the government of Russian Federation, and also the solutions of public authorities of the subjects of Russian Federation within the limits of their competency. To the measures of the state support of the activity of leasing organizations (companies, corporations) the federal Act refers the following measures:

  • Engineering and realization of a federal development program of leasing activity in Russian Federation or in a separate region as the parts of the program of intermediate term and long-term socioeconomic development of Russian Federation or a region;
  • The creation of mortgage funds for ensuring the bank investments in leasing with the use of the state-owned property;
  • Individual share of the state capital in the creation of an infrastructure of leasing activity in separate target investment- leasing drafts;
  • the selection of state orders for the delivery of goods for the state needs by the leasing firms;
  • the measures of state protectionism in the sphere of engineering, execution and usage of high technology equipment;
  • the financing from the federal budget and granting the state warranties with the purposes of realization of the leasing drafts (Budget of development of Russian Federation), including the involvement of the corporations - non-residents;
  • Granting of the investment credits for the realization of the leasing drafts;
  • Granting to the banks and other credit institutions in the order established by the local law of Russian Federation, the release of payment of the profit tax earned from the granting of the credits to the subjects of leasing, for the term of not less than three years for the realization of the leasing agreement;
  • Granting by legislative action the tax and credit privileges to the leasing companies (corporations) with the purposes of creation of favorable economic conditions for their activity;
  • Creation, development, shaping and perfecting of normative - legal base that provides the protection of legal and the valuable interests of the participants of the leasing transactions;
  • Granting to the leasing givers with the purposes of inducing of the renewal of machines and equipment extra alongside with the application of the mechanism of the expedited amortization of the right of charging-off as amortization deductions up to 35 % of the first cost of the fix capital, which life expectancy is more than three years, in the first year of maintenance of the indicated funds;
  • Granting to the leasing receivers, transacting the processing or the provision of agricultural production, the right to realize leasing payments by deliveries of production on the conditions, foreseen by the leasing agreements;
  • Reference of the breeding animals to the subject of leasing at the accomplishment of leasing operations in agriculture;
  • Creation of fund of state warranties on export at the accomplishment of international leasing of domestic machines and equipment.

According to the construed Federal act the Government of Russian Federation has issued an order the Government of Russian Federation from February 26, 1999 228 "On the leasing of mechanical production in agriculture of Russian Federation with the use of the resources of the federal budget". The main purpose of this decree is the amplification of state regulation of the agriculture production, effective exploitation of the finance of the federal budget and perfecting of leasing activity in agriculture.

By this decree the Government of Russian Federation has declared, that the leasing givers on ensuring agricultural goods- producers of the mechanical production on the basis of financial rent (leasing) at the expense of the resources of federal leasing fund can be leasing companies (corporations), which control stake of shares is consolidated in the federal property and is not the subject of disposal and transmission on other rights to the alien organizations.

In Russian Federation the federal leasing fund is being formed; the financial assets from its activity are given to the customers on a reflexive interest-free basis with the purpose of acquiring agricultural machinery. As a structure invoked to organize and coordinate the leasing activity in the villages, the Government of Russian Federation defined "Rosagrosnab".

In the indicated order of the Government of Russian Federation the administrative "line-up" is precisely tracked, according to which "Rosagrosnab" undertakes to transmit to the federal property its control stake of the shares, having carried out thus one of main conditions of the order of the Government of Russian Federation. After the transmission to the federal property the control stake of the shares "Rosagrosnab" will become the initiator of engaging to the leasing activity those regional providing agriculture organizations (leasing companies), which will yield it the control stakes.

By the order of the Government of Russian Federation it is also established that the finance of the federal leasing fund are the federal property, are counted in the budget accounts of the leasing company in the authorized bank admitted to the upkeep of the accounts of special fund of crediting the firms and organizations of agriculture on favorable terms. The return of the finance is realized in the established order and in appropriate periods through the special accounts, opened by the federal leasing fund in the Senior department of federal treasury of the Ministry of the finance of Russian Federation and its territorial bodies.

With the purposes of raising material and technical equipment status of agriculture of Russian Federation and the development of domestic agricultural machine industry the Government of Russian Federation has also accepted the decree from April, 27, 1999 467 "On the measures of the state support of leasing of agricultural machinery and equipment", by which has approved the investment draft prepared by the Ministry of agriculture and food of Russian Federation and the Ministry of economy of Russian Federation by the total cost up to 10 bil. roubles with engaging the credits of the Savings bank of Russian Federation under the state warranties on buying by the leasing companies the agricultural machinery and equipment for the organizations of agriculture, and also has approved the measures directed on executing the investment draft.

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In 1999 the modifications and supplements to the federal act "On the agreements on section of production" from 30. 12. 96 225-FL were made. The lawgivers have accepted two federal acts: "On the modification and supplements of the Federal Law "On the agreements on section of production" from 07.01.99 19-FL and the Federal act "On the importation in the legislative acts of Russian Federation of the modifications and supplements implying from the Federal Law "On the agreements on section of production" from 10.02.99 32-FL.

The most significant legal novels, brought by the first Federal law, consist of the following:

1. The right of use of the subsoil a on the conditions can be granted to the investors not only on the basis of the federal acts, but also on the basis of adoption of an appropriate decision by the government of Russian Federation, and also on the basis of the decision of public authorities of the appropriate subject of Russian Federation.

2. At an settling of the priority will be given to those deposits, concerning the engineering of which Russian Federation has the bonds on conducting appropriate negotiation on the conditions of the agreements, and also there are the results of conducting the competitions or auctions on granting of sites of subsoil to the use on the conditions of .

3. The Russian legal entities have the priority right to participate in as the original contractors, carriers, suppliers and etc. on the basis of the appropriate agreements with the investors.

The following modifications and supplements were brought in to the Federal law from 10.02.99 32-FL:

1. The participants of the operations under the agreements on division of production, including the foreign investors, are released from the payment of the customs duties, excises, value added tax at import / export of the goods, including submitted on the leasing and necessary for executing the operations under such agreements.

2. The collection of the federal taxes and levies is superseded with the valid time of the agreement by division of the output between the state and investor. The investor is released from the levy and taxes except: the profit tax, payment for the use subsoil, payment on social and medical insurance of the workers - citizens of Russia, payment in the State fund of the population employment and payment in the Pension Fund of Russian Federation. The investors are released from the payment of the excise taxes at importing on the customs territory of Russia of excisable goods (except for cars). The excises are not paid also with the excisable kinds of mineral raw material and yields of its processing, foreseen to receiving under the agreement and in the property of the investors.

The additional motive for the mining of natural resources on the territory of Russian Federation, obviously, will be the published laws that extend the lists of deposits, which can be developed on the conditions of .

In the number of the important normative legal acts that have the immediate relation to , it is necessary to refer the order of the Government of Russian Federation from July 3, 1999 740 "On the affirmation of the Provision on the composition and the order of the refund of expenditures at the realization of the agreements on division of production".

This decree was published according to the Federal law "On the agreements on the division of production" with the purpose of monitoring the composition and order of refunding the expenditures at realization of the agreements on the division of production.

By the evocative decree it is established that the Provision is applied at the preparing, inference and execution of the agreements on the division of production being executed after its affirmation. It is intended for the installation at the inference and execution of the agreements of the following compositions of expenditures: a composition of compensated expenditures; a composition of not compensated expenditures; on the refund of expenditures of the investor and (or) operator of the agreement.

The compensated expenditures are affirmed by the managing committee according to the program of operations and the estimate of expenditures in the order, foreseen by the agreement.

It is necessary to keep in mind that at executing the agreements concluded before the effectiveness of the Federal Law "On the agreements on the division of production", the conditions of definition of compensated expenditures and expenditures are applied, subtrahends during the definition of the taxable base on the profit tax established by the indicated agreements.

The composition of compensated expenditures include the following expenditures:

  • Expenditures suffered by the investor up to the effectiveness of the agreement;
  • Expenditures suffered by the investor and (or) the operator from the date of effectiveness of the agreement and during the whole phase of its operation;
  • The expenditures suffered by the investor up to the effectiveness of the agreement, are reimbursed in the order and size, foreseen by the agreement, and should be reflected in the estimate of expenditures for the first year of operations under the agreement.

***

The indicated expenditures suffered by the investor and (or) an operator act from the date of effectiveness of the agreement during the whole period of its execution.

In the construed decree the Government of Russian Federation has defined the exhausting enumeration of non compensated expenditures, and also has installed that this enumeration can not be supplemented by any other expenditures.

The additional endorsement for investing in natural resources development of Russian Federation will be the executed federal acts significally extending the lists of deposits, which will be developed on conditions 2.

On the territory of Russian Federation there is a plurality of free economic areas, which activity is governed by the different normative acts received during the last 10 years by different bodies of legislative and executive authority of Russian Federation and the subjects of Russian Federation.

However until recently in Russian Federation there was only one special economic area in the Kaliningrad region founded according to the Federal Act "On the special economic area of the Kaliningrad region" from 22.01.96 13-FL.

Not long ago, the Federal Act "On the special economic area in the Magadan region" from 31. 05. 99 104-FL founded the second special economic area the Magadan region, which is the territory disposed within the administrative boundaries of the Magadan city.

The main purposes of creation of the Special economic area are the development of productive forces, financial and commodity markets of the Magadan region.

The participants of the Special economic area can be legal entities recorded according to the local law of Russian Federation on the territory of the Special economic area, and also the citizens recorded as the individual businessmen on the territory of the Special economic area. The indicated entities should have the registration certificates on the right of accomplishment of main economic activities, and also to have not less than 75 percents of the fix capital on the territory of the Magadan region.

The activity of the Special economic area is realized on the basis of the development Program affirmed by the law of the Magadan region.

The participants of the Special economic area use a definite tax condition.

At the accomplishment of economic activities on the territory of the Special economic area and within the limits of the Magadan region the participants of the Special economic area are released from the payment of taxes in a part coming to the federal budget (except the deductions to the Pension Fund of Russian Federation and Fund of social insurance of Russian Federation). This provision acts till December 31, 2005.

During the period from January 1, till December 31, 2014 the participants of the Special economic area at the accomplishment of the economic activities on the territory of the Special economic area and within the limits of the Magadan region are released from the payment of the profit tax invested in the development of production and social sphere on the territory of the Magadan region.

The privileges established by the present article are given under the condition of supporting by the participants of the Special economic area the separate registration of operations of financial-economic activities realized within the limits of the Special economic area and the Magadan region.

The federal act establishes that with the purpose of ensuring protection of economic interests of Russian Federation, the execution of its international bonds, the keeping of the local law of Russian Federation, and also with a consideration of the national safety interests and economic interests on accomplishment of industrial and other commercial operations, including the retail trade, on the territory of the Special economic area separate exclusions and limitations can be established. The Government of Russian Federation with the agreement of the authorities of the Magadan region establishes such exclusions and limitations.

The federal act also establishes that the prescheduled liquidation of the Special economic area is realized on the basis of the federal act.

The investors acting on the territory of the Magadan Special economic area should keep in mind that its activity is stipulated by terms. So, the Magadan Special economic area acts from the date of effectiveness of the Federal Act (from 07.07. 99) and acts till December 31, 2014.

In the case of adoption of the federal act on prescheduled liquidation of the Special economic area the Government of Russian Federation establishes the order and terms of liquidation of the Special economic area. The Government of Russian Federation and the authority of the Magadan region create a liquidating commission, plenipotentiary to solve the problems connected with the liquidation of the Special economic area.

With the adoption of two above named federal acts that are legislatively regulating the activity of the special economic areas in the Kaliningrad and Magadan regions, the legislative process in this direction does not cease.

This way the long and laborious work on the draft of the federal law "On the free economic areas" comes to the perfecting moment which was received by the State Duma 09.06. 2000 in edition offered by the conciliation commission.

***

It is well-known that the August crisis of the 1998 which has led to the partial insolvency of the Russian state under the bonds connected with the emission of the financial credit instruments (SCS -), the non-residents had the accounts with actually frozen appreciable sums of finance.

As a result, the financial assets of the non-residents were frozen and remained deposited on the special accounts such as "".

For the direction of additional investment resources into the economy of Russian Federation of November 20, 1999 under the initiative of the Ministry of finance of Russian Federation the order of the Government of Russian Federation "On accomplishment of the foreign investments into the economy of Russian Federation with the use of finance finding on the special accounts of non-residents such as "C" 1272 was accepted.

By this decree the Government of Russian Federation has approved the Main conditions of accomplishment of the investments into the economy of Russian Federation with the use of the finance finding on the special accounts of non-residents such as "". The Ministry of finance of Russian Federation prepared the main conditions. To this decree the Government of Russian Federation has offered the foreign investors to transform the finance finding on the special accounts of non-residents such as "" into the direct foreign investments with the purpose of development of organizations and firms, registered on the territory of Russia, and also the creation of potencies for the production of export goods. It is especially necessary to underline, that in case of positive adoption of the solution on the transmission of the resources from the accounts such as "" the investors of the capital use all rights and warranties concerning the protection of the investments, foreseen by the legislation of Russian Federation, including the Federal Act "On the foreign investments in Russian Federation".

By the main document, on which basis the Ministry of economy of Russian Federation, the Ministry of finance of Russian Federation and authorities of the subjects of Russian Federation, on which territories the drafts will be realized, and also according to which the Central bank of Russian Federation will allow the transmission of the finance from the special accounts of non-residents such as "", is the plan of the investments.

The foreign investor under the form established by the construed decree prepares the plan of realization of the foreign investments.

The plan obligatory includes the application for the reviewing of the plan of realization of foreign investments prepared properly, preliminary contracts; the exposition of the foreign investments or a business - plan, and also the information on the directions and terms of usage of money resources finding on the accounts such as "".

The prepared plan of investments is taken into cognizance on the terms that it contains the bond to direct the investments for the development of the Russian firms and organizations, and also for the increase of export production.

The foreign investor should warrant that not less than 70 % from the sum intended for buying of equipment, technical means and materials produced on the territory of Russian Federation, necessary for the accomplishment of the investment draft, will be spent on the acquiring of such goods from the Russian good-producers. If the share of the purchased resources amounts to 100 %, then such investment draft admits the prior and will be considered in the prime order.

The third condition of the plan of realization of foreign investments is that the foreign investor incurs the bond that in the case of sale (concession) of transferred from the accounts such as "" the direct investments in roubles or cancellations of the credit, granted in roubles, before the expiration of 3 years from the date of usage of these resources from the special account of non-resident such as "", he undertakes to transfer the money resources in roubles in the amount of not less originally used sum on the special account of the non-resident such as "".

For considering the plan of realization of the foreign investments, except for enumerated, other conditions are not required.

The investment draft is considered in 15-day's period from the date of applying the documents, during which the plan is either accepted, and the foreign investor is given a notice by the direction of the appropriate note constituted on according to the decree, or he is given the motivated refusal.

On some occasions the time of an expert rating of the plan of realization of foreign investments can be extended for 30 days.

The definitive admittance on the transferring of the resources from the special non-residents account such as "" is accepted by the Central bank of Russian Federation.

It is important to keep in mind that the Central bank of Russian Federation will issue the admittance, according to the correspondence of the draft to the normative acts of Central bank of Russian Federation, and also the limits of the amounts of the foreign investments established for the transition of the resources of the non-residents from the accounts such as "". It is meant, that the normative acts of Central bank of Russian Federation are presented as the acts, which will be accepted in the nearest future by the Central bank of Russian Federation according to the paragraph 2 of the order of the Government of Russian Federation from November 20, 1999 1272. It is well known, that the departmental normative acts regulate the problems stated by the Government of Russian Federation.

Now to the address decrees of the President of Russian Federation in the field of issuing by the executive bodies of the subjects of Russian Federation of the exterior bonded loans is changed by the Federal Act "On the singularities of the emission and circulation of the state and municipal financial credit instruments" from July, 29, 1998 136-FL.

With the adoption of the Federal Act "On the singularities of emission and circulation of the state and municipal financial credit instruments" the Decree of the President of Russian Federation from June 09, 1998 696 "On the order of issuing by the executive bodies of the subjects of Russian Federation of the exterior bonded loans "was cancelled which has earlier given to some subjects of Russian Federation to release their own exterior bonded loans 3.

With the purpose of perfecting the registration of issues of the state financial credit instruments, and also unification of the order on the giving the state registration numbers to the issues of state financial credit instruments of the subjects of Russian Federation and municipal financial credit instruments, the order of the Ministry of finance of Russian Federation from 21.09.99 2n affirms the order of forming the state registration number appropriated to the issues of the state financial credit instruments of the subjects of Russian Federation and the municipal financial credit instruments.

The order of forming the state registration number that is given to the issues of the state financial credit instruments of the subjects of Russian Federation and the municipal financial credit instruments was accepted according to the mentioned Federal act.

The state registration number to the issues of the state financial credit instruments of the subjects of Russian Federation and municipal financial credit instruments is given by the emitter of the indicated financial credit instruments.

By the indicated Order from 21.09.99 2 it is offered for the emitters of the state financial credit instruments of the subjects of Russian Federation to correspond the order of giving the state registration numbers of securities issues, emitted according to the conditions of the emission registrated in a due order according to the mentioned Order.

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It is necessary to mark, that the operation of perfecting the tax system of Russian Federation proceeds in the direction of increasing its equity and challenging influence on the development of the national economy in the sphere of elimination of ungrounded privileges.

In particular, in 1999 the privileges submitted by the Law of Russian Federation "On the Closed administrative and territorial formation" from 14.07.92 3297-1 (in edition of the federal acts from 28.11.96 144-FL, from 31.07.98 144-FL, from 02.04.99 67-FL), were abolished concerning so-called closed administrative and territorial formations (CATF), actively used as "interior offshore zones" with the purpose of deviation from the taxation (the losses of the budgets of all levels from these privileges in 1999 have amounted to more than 70bil.rub.).

From the date of effectiveness of the Federal Act "On the modification of the legislative acts of Russian Federation on the closed administrative and territorial formations" from 02.04.99 67-FL were ceased the earlier granted fringe benefits under the taxes and levies to the organizations registrated as the taxpayers in the tax bodies of CATF. For the organizations registrated as the taxpayers in the tax bodies of CATF before and after the effectiveness of the Federal Act from 02.04. 99 67-FL, the fringe benefits under the taxes and levies in the order established by this Law act.

The right on receiving the fringe benefits under the taxes and levies submitted by the appropriate local authorities according to the Law on CATF, have only the organizations registrated as the taxpayers in the tax bodies of CATF.

To receive the right on the fringe benefits under the taxes and levies the indicated organizations should correspond to the following demands:

  • The presence of not less than 90% of the fixed assets of the organizations on the territory of CATF, where they are registrated as the taxpayers;
  • The accomplishment of not less than 70% of the organizations activities on the territory of CATF, where they are registrated as the taxpayers.

It should be also marked, that the recently accepted federal acts decrease a series of the acting tax rates, in particular, the limiting rate on the profit tax is decreased from 35 to 30%. Despite it, the physical amount of receptions into the budget on the profit tax on statistical data has noticeably increased. The limiting rate of the income tax is also decreased from 45 to 30%.

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Finishing the analysis of the main legislative and normative legal acts of Russian Federation, which regulate the investments on the territory of Russian Federation it is necessary to mark that the established warranties and privileges to the foreign and domestic investors, which were absent in the Russian local law earlier, will undoubtedly influence the improvement of the investment climate in Russian Federation.

As to the further prospects of the development of the local law that regulates the investments on the territory of Russian Federation there should be quoted the answer of the President of Russian Federation V.V.Putin in an interview to the newspaper "Welt am zontag" (Germany).

On the problem concerning the legal ensuring of economic cooperation in the field of the foreign investments the President of Russian Federation has told the following: "Russia should do much for improving the investment climate. Our goal is to reduce the risk factors for the Russian and foreign investors to the minimum, to provide the transparency and clearness of the economic policy for many years. With this purpose we improve the economic legislation. So, the modifications and supplements to legislative and normative acts implying from the Federal Act "On the foreign investments" are being prepared. The operation on the Contract draft on state concession concluded with the Russian and foreign investors is proceeding. The engineering of the normative legal acts providing the practical application of the Federal Act "On the agreements on the division of production" is carried on. The operation on the draft of the second part of the Tax code of Russia is accomplishing, its effectiveness is invoked to provide a stable and predicted tax regime in the country. Besides the installment of step-by-step transition to the collection of the profit tax, step-by-step solution of the problem of the residue of necessary business expenses from the taxable base, creation of an effective system of the tax appeals is planned.

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Taking into account the worded, it is necessary to mark, that the practice of granting the address privileges and preferences to the large drafts favored by the intergovernmental investment agreements with the priority status that corresponds to the modern Russian legislation will be undoubtedly continued. It is important, however, that all legal novels, fringe benefits and etc. will be stowed in the frameworks of the appropriate laws.

The solutions on simplification of customs processing of the goods and granting of privileges to the foreign investors are developed. In a whole, the serious operation on developing the system securing the rights of the investors, insuring the foreign investments in Russian Federation with the involvement of the state, Russian and foreign financial and credit organizations, international institutes" is carried on.

On the expiration of definite term the law enforcement practice will show, what federal acts, standards and the provisions work, also it will become explicit, what modifications and supplements are required to bring to the "young" investment legislation of Russian Federation.