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In December 2011, adjustments were made to the Russian Federal Law On customs tariffs, the changes coming into force in the same month. Despite the fact that this law was supposed to be of a merely technical nature, bringing a range of laws into compliance with Customs Union terminology, it contains a number of substantial amendments that increase risks for persons involved in cross-border trade.

This article looks at the trends and prospects of the automotive industry from the standpoint of customs and foreign trade regulation. In particular, it provides an overview of the most significant issues in customs and foreign trade regulation that may impact the automotive sector.

The Russian President and Government have recently been talking more about the need to optimise groups of taxes, with high-quality economic growth depending on this. In particular, Vladimir Putin recently stressed that Russia must make its tax system more attractive for investors and competitive in comparison with the other countries of the Customs Union, even despite a risk of a shortfall in budget revenues. Without doubt, such initiatives of the Russian authorities cannot fail to cause investors to be optimistic. However, to evaluate whether the initiatives are realistic, and to assess the tax risks of business in the current year, it is helpful to look at the results of the past year.

Alongside actively developing cross-border economic, trade and customs law and adjusting to European standards and the WTO principles, Russia is seeing the adoption of rulings actually hampering foreign capital flow into the country. In January 2012, Russia’s Supreme Arbitration Court (SAC) published a ruling prohibiting taxpayers with foreign capital from deducting interest they pay on loans ‘with a foreign element’. Apart from the prospect of reducing foreign investments, this ruling may already entail considerable taxes being additionally assessed on Russian borrowers when tax audits are held.

This summer, the Russian Supreme Arbitration Court drew a line under a promissory note dispute that had dragged on since 2009. By its Resolution No. 16623/10 dated 21 June 2011  in case No. A40-120754/09-55-921, it corrected the lower courts which had considered the only lawful basis for issuing a promissory note to be, in essence, a loan relationship and which had stated that a promissory note may not be paid if issued to secure a third party’s obligation.

Property tax is levied on property treated as fixed assets for accounting purposes. However, the Russian accounting regulations (PBU 6/01) do not specify when property should be classified as fixed assets.