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Dear Readers, in the new edition of our newsletters, we have compiled an overview of recent changes in the field of labor, administrative and tax law.
If you have more questions don't hesitate to contact the experts of our company.

The entity or person performing construction (developer) is in all cases obliged to discharge the function of construction control (Construction Code of Russia, Art. 53.2). In case a contractor undertakes to perform construction – under a construction contract – then the obligation of construction control lies also upon the developer, the contractor, the party responsible for building operation or upon a third party (sole entrepreneur or entity) brought in by the persons above.

The person performing construction has to be a member of a self-regulated organization (SRO), while the discharge of the developer`s function of construction control does not necessitate a membership in an SRO. However, importantly, the employees of the developer shall be the ones who undertake the above function. If third parties are involved to discharge the developer's function, then they are obligated to have a membership in a SRO, except if the construction contract price does not exceed three million rubles. It is hereby highlighted that such third parties may not be individuals, because only sole entrepreneurs and entities are eligible to become members in a SRO. Consequently, a contract with an individual (which is not an employment agreement) for the performance of construction control will be seen as not conforming to the construction law, as it allows the conclusion that the obligation of construction control was not (or not duly) discharged.

Personal income tax is levied on insurance premiums paid by the employer for the individuals (Tax Code, Art. 213.3). Exceptions include e.g. insurance contracts which are obligatory according to law.
The director's liability insurance is a type of property insurance according to the classification in the Federal Statute dd. 24.08.2018 N 03-04-06/60574 "On insurance activity in Russia".
The insurance of civil liability of directors is not obligatory according to Russia law. Consequently, the insured individual (a general director or a directing manager) receives a taxable gain. On the part of the employer there is an obligation to withdraw the respective personal income tax from any other subsequent payments to the employee, as salary, bonus etc.

The inheriting of a percentage ownership (membership interest) in a LLC may be conditioned upon consent of the other participant (Federal Statute on LLC N 14-FZ art. 23.5 in conjunction with art. 23.8). The consent requirement must be provided for in the Articles of Association of the Company.

Should the other participants object thereto, then the LLC has to pay to the heir the value of the percentage ownership which shall be determined pursuant to the financial statements for the preceding year.

Gains which are received by way of inheriting are not subject to personal income tax, except in case of fees paid to the heirs (successors) of authors of scientific, literary, artistic works as well as inventions and samples (art. 217.18 Tax Code of Russia). Consequently, the transfer of percentage ownership by way of inheritance is free of tax.

Nevertheless, in case the heir is paid the value of the participation in a LLC (as a substitute for percentage ownership itself) there is a gain, which, according to the Ministry of Finance, is received otherwise than by way of inheritance and is generally subject to personal income tax. Also the Supreme Court of Russia came to this conclusion.

The profit tax liabilities and the applicability of the Double Taxation Avoidance Agreements (DTAA) are determined, inter alia, by the tax residence status of the taxpayer. The residence certificate (certificate of tax residence) is issued by a competent tax authority of the foreign state. The form in which a residence certificate has to be executed is regulated by DTAAs and national law.

Not all of the DTAAs expressly set out requirements as to the form of a residence certificate. The DTAA between Russia and Germany, for example, does not contain a provision that the tax residence certificate is valid even without an apostille. On the opposite, such a provision is embodied in the DTAA between Russia and Switzerland.

The Ministry of Finance issued two letters where it says that neither an apostille, nor a notarized translation are necessary, even in case the respective DTAA contains no provision here to.

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