Tuesday, November 30, 2010

Lufthansa's Flight To Ekaterinburg

Lufthansa is not planning to make any changes in the route connecting Germany and the Sverdlovsk Region. The airplanes of the German airline company will come to Ekaterinburg from Frankfurt am Main as before.
The airline company turned down the proposal of the management of the Koltsovo airport in Ekaterinburg to replace Frankfurt with Munich, as the main hub of Lufthansa can offer passengers a larger number of destinations through connecting flights. The flight geography of Lufthansa will expand when the new runway is opened in the Frankfurt airport in 2011.
In 2010, Ekaterinburg secured a robust footing among the first three leaders out of eight Russian destinations of Lufthansa, yielding only to Moscow and St. Petersburg. Over January-October the German airline company carried more than 27 thousand passengers from Koltsovo to Frankfurt. Over ten months in 2010, 1.2 million passengers used Lufthansa flights between Russia and Germany.
In winter Lufthansa offers flights from Frankfurt am Main to Ekaterinburg three times a week. In the near future, А320 airbuses servicing the route will be equipped with new and more comfortable chairs. Besides, passengers will be offered more attractive prices for flights in Europe.
According to Aage Duenhaupt, over January-September of 2010, Lufthansa's operating earnings reached 612 million euro; by the end of the current year the earnings are expected to exceed 800 million euro, thus bringing dividends to the shareholders. At the same time, he expects that the earnings will be halved due to the reduced passenger flow from the USA and India as well as due to the payments for the four new А380 airbuses that were purchased in 2010.
By materials of rusbiznews

Chemicals Cluster In The Urals Region Of Russia By 2014

A chemicals cluster will be established on the basis of OAO Uralchimplast by 2014. 

Investment in the project will exceed 13.7 billion roubles.

The project envisages construction of a gas chemicals complex with the capacity of 600 thousand tons of methanol annually. Production of novolac resins will also be organised. 

At the moment the enterprise has two lines producing formaldehyde; another line will be commissioned in 2011.

The project will be implemented in accordance to the tailor-made long term financing through the Czech Export Bank which will provide 70% of the needed resources. Some of the investment will be issued by the Austrian UCP Chemicals AG - the owner of 92% of shares in the Uralchimplast Group

Dmitry Vorobyov, the Financial Director of Uralchimplast  said  that the company is conducting negotiations on cooperation with Sumitomo Bakelite (Japan) and BASF (Germany). 

Friday, November 26, 2010

British Business In Russia

Britain is one of the most important business partners of Russia. According to all available statistics, the UK surely ranks among the top four foreign investors. According to the volume of direct investments and securities Britain shares with Germany and Switzerland in second place, giving way to the U.S. A.

The biggest UK companies are in key sectors including energy, telecommunications, banking, trade and consumer goods, giving long-term commitment to the Russian market.Despite the economic difficulties the British companies continue trade and investment activity in Russia. It has a wide spectrum: from the supply of mining equipment to the sale of children's clothes, they work closely with local partners.

Obviously, in the interests of both countries, Russia and Britain, the volume of trade and investment must grow. For Russia, the UK business is a source of investment and expertise that can make a valuable contribution to reforming and reviving the economy. Britain is also a growing export market for Russian firms. For British companies Russia is potentially a huge market close to the UK.

In the Russian market operate a large number of British companies. Among them, for example are: "British Petroleum", "Rolls-Royce, British Nuclear Fuels", "Cadbury Schweppes".

In recent years British businessmen show interest to the region. Particularly noticeable their presence is in St. Petersburg, Nizhny Novgorod, Yekaterinburg.The British are very carefully watching the development of the financial situation in Russia.

Foreign Relations of St. Petersburg and the UK, for example, are characterized by steady growth. British firms are among the largest investors in the economy of St. Petersburg (4 place after the USA, Finland, Austria).

Throughout Russia British companies are representing a wide range of industries. The UK remains among the biggest investors in the Russian market. Recent financial and economic problems hinder the work of British companies in Russia, but most have not lost confidence in the fact that the Russian market remains difficult and promising in its development is still worth investing capabilities.

The British government will make efforts for British business in Russia could develope, but Russia itself should able to catch up with world standards of business due to WTO accession.
The latter said Vince Cable, the British Minister of State for Business who visited Moscow on Nov. 25, 2010.

UK companies show interest in the innovation project Skolkovo. As reported by Interfax, the great interest of a number of British firms to participate in this project was discussed at a meeting of Russian President Dmitry Medvedev and British Prime Minister David Cameron in November 2010.

A source in the delegation of the British prime minister told reporters that during the meeting voiced the following phrase: "despite the desire of England to create a similar object, a number of British companies have expressed their desire to participate in the construction of this progect Scolkovo in Russia."

Earlier, British Prime Minister David Cameron said that in east London there will be created an analogue of the U.S Silicon Valley  - a cluster that brings together the giants of IT-industry.

Wednesday, November 24, 2010

British Council In Russia

British Council is a non-ministry UK government department dealing with the spread of British culture from outside the UK. The British Council operates in the UK itself, and in 215 cities in 110 other countries and territories.Personnel engaged around the world includes more than 8,000 people. 


The UK Government is sponsoring council by one third, while another part comes with its own board of revenue (activities, tuition and exams). In a year over a million people are tested for English proficiency at different levels in the council.In Russia there were 15 centers of the British Council, but formally due to the unresolved legal status by January 2008 the Russian authorities had closed all of them except the office in Moscow.

The British Council focuses on training activities and the development of relations of countries, where is based with the UK. It is a public organization created in 1934 by Royal Charter. 


In England the council is listed as a charitable organization. Head of the council and its patron is Queen Elizabeth II, the vice-patron - Prince of Wales, President - Lord Kinnock, former leader of the Labour Party. The financial aspect is regulated by the Foreign Office (Foreign and Commonwealth Office), while in the activity board is independent and self-sufficient. Executive Director - Martin Davidson (took office in April 2007).

Tuesday, November 23, 2010

Foreign Investors In Russian Construction Market


Foreign investors most readily invest in commercial property. They quickly recover (3-4 years) and generate a good profit. Profitability of commercial real estate now stands at 7-11%, depending on the form (shopping centers, warehouses, offices, hotels).

In addition, commercial real estate usually remains developer's active and increases the company's capitalization. Almost all foreign investors invest in objects of class A. The main reason - strict requirements for the project by the shareholders, founders or investors. For the vast majority of foreigners in the first place there is transparency in business. Therefore, the housing market they consider less attractive.

Despite the overall decline in profitability of the warehouse sector, directly in the Moscow region its profitability is twice higher than in most European countries.

The warehouse market is interesting for Western developers and investors, because a large proportion of tenants on it - are big Western companies, such as distributors and retailers. Western companies can choose the storage segment to begin expansion in Russia for the reason that stocks compared with other segments of real estate are simple in design, approval is usually quite simple, and it reduces the time and risks.

While Asian Companies invest in the Russian housing. Market participants do not exclude that in the near future Western investors will follow their example.

According to the consulting company «Jones Lang LaSalle», the share of foreign investment in Russia's construction industry is about 15%. Weekly 6 - 4 foreign companies apply for a license for construction activities in Russia.

The most active companies:

Finnish development company «EKE Group»This company builds a business center Pulkovo Sky.

Austrian concern «Strabag»As reported by «Frankfurter Allgemeine Zeitung» a leading Austrian construction company «Strabag» intends to increase its activity in Russia - great expectations in the first place are assigned to projects related to the Olympic Games to be held in Sochi in 2014.

The French company «Vinci»In Paris  this company and the Ministry of Transport of the Russian Federation signed an agreement for the construction of toll road from Moscow to St. Petersburg.
Turkish company "Casa Stroy"This company may participate in the project for the construction of Orlovsky tunnel in conjunction with the Cypriot company «First Quantum Partners» Today the firm in cooperation with the international hotel operator «Accor» engaged in construction of hotel chains in Russia. Under the plan, they will be 25-30 units in 10 major cities across the country.

Turkish company "Renessas Construction "This is one of the largest construction and engineering companies in the world. Headquarteres is in Turkey. In Russia the company is implementing projects in Moscow, St. Petersburg, Perm, Voronezh and other cities.
Chinese construction companies. Now there are a large number of projects related to the creation of the productions. 

The British company «Raven Russia». Company «Raven Russia» has 1 million square meters of warehouse space of Class A in Moscow, St. Petersburg, Rostov-on-Don and Novosibirsk, of which 60% are already leased. Approximately 400 thousand square meters are free to rent out in these three regions.

Swedish concern «NCC Real Estate»NCC Real Estate is building the first "green" house in St. Petersburg, which is being built with European energy-efficient technologies and from environmentally friendly materials.

Monday, November 22, 2010

Market Of Premium Supermarkets In Russia

Appearance in Russia of the first premium food supermarkets happened in 90-s. Pioneers of the segment were foreign players. Naturally urban-based facilities of luxury food retailers were in Moscow and St. Petersburg.

Opening of the first Russian player in the premium supermarkets segment were in 1997. In Moscow on Valovaya street appeared the first store of the network "Azbuka Vkusa".

Over the past 14 years the capital market filled with new powerful players and managed to reach the stage of medium saturation. The basis of the capital market of premium form constitute the networks: "Seventh Continent - 5 stars", "Azbuka Vkusa" and "Red Sails" (totaly 78,5% of the market or 73 supermarkets). The smallest number of stores are represented by "Globus Gourmet" (10,6% of the market), "Kalinka Stockmann - Grocery" (4,3%)," Bahetle" (4,3%) and "Green Crossing"(3,2%). 

The period from 2006 to 2009 was characterized by 14.7% average annual growth in market  in quantitative terms. The maximum increase was observed in the market in 2007 - 29,3%. Activators of growth were the network "Azbuka Vkusa," "Red Sails" and "Globus Gourmet".

Note that the data network as a whole are the main driving force of the market in quantitative terms: the other networks have either low (Bahetle "," Green Crossing ") or high ("Seven Continent - 5 stars") home base, or develop only as a companion core business ("Kalinka-Stockmann - Grocery"). 

Sunday, November 21, 2010

Nissan Will Buy 10% Of AvtoVaz In 2011

Japan's Nissan Motors in the first half of 2011 will buy 10% of Russia's leading car maker - AvtoVAZ.  4% stake will sell Russian Technologies, and 6% - Troika Dialog.
Maybe in the short term Troika Dialog will sell all its shares.
Russian Technologies estimates the value of AvtoVAZ in 2011in $2,8-2,9 billion. Such an assessment is made based on the EBITDA of the company. In 2010 value of the company by EBITDA is $2.4 billion.
The transaction will be implemented during the I half of 2011. Approximate cost of the transaction is $260-280 million, based on an assessment of 
AvtoVAZ capitalization  by the state corporation. 

Saturday, November 20, 2010

St Petersburg International Economic Forum 2011 (June 16-18)


The Saint Petersburg International Economic Forum (SPIEF) is a leading international business event, held under the patronage of the President of the Russian Federation.  SPIEF attracts over 4000 international and Russian participants representing government and business leaders from around the world, joined by leading voices from academia, media and civil society. SPIEF gathers the world’s leading decision makers to identify and deliberate the key challenges facing Russia, emerging markets and the world and engage communities to find common purpose and establish frameworks to forge solutions.
The St. Petersburg International Economic Forum has three governing and executive bodies:
• The Organizing Committee
• The Coordination Committee
• The St. Petersburg International Economic Forum Foundation
The Forum’ s annual event is held in St. Petersburg. The main venue of SPIEF 2011 is LenExpo exhibition centre. Address: LenExpo, Bolshoi Prospekt 103, Vasillievsky Ostrov, St. Petersburg.
Participation at SPIEF 2011 is upon a personal invitation by the SPIEF Organizing Committee. Should you be interested to participate at the Forum you are invited to express your interest by registering at the official Forum website. Upon review and approval by the Forum Organizing Committee, you will receive an electronic copy of the invitation and a newsletter with a login and password to complete the registration at the Personal Web Office.
The endorsement procedure can take up to ten (10) working days.
The Organizing Committee reserves the right to decline the request to extend the invitation to participate of which you will be duly notified.
The Personal Web Office is a private section on the official Forum website reserved for the participants, where the participant can edit personal information, register an assistant, upload a badge photo, submit requests for additional services (accommodation, transportation, tourism and interpretation services), as well as pay for the participation at the Forum, submit a request for the accreditation of a personal vehicle, and print out an electronic ticket.
To access the Personal Web Office you must enter the login and password included in the letter you have received together with the invitation to the Forum.
The Forum uses a certified ERP platform “Forum” developed by Monomax and the base of the Personal Web Office, which apply SSL data encryption technology providing maximum security.
You can be registered for the participation at SPIEF 2011 as either:
• Official Forum Programme Participant (Package No 1)
• Official Forum Programme Participant (Package No 2)
• Assistant/Accompanying person of the Official Forum Programme Participant
Package No 1
Participation in all Forum business and cultural programme events with the exception of receptions and events by special invitation, informational activities, Forum handout materials, transport service, and visiting exhibitions and business zones (without restriction on access to the “red zone”) is provided for Official Forum Programme Participants (Package No 1). Moreover, Official Forum Programme Participants (Package No 1) are also entitled to register Assistant/Accompanying persons for the Forum.
Package No 2
Participation in all Forum business and cultural programme events with the exception of receptions and events by special invitation, informational activities, Forum handout materials, transport service, and visiting exhibitions and business zones (with a restriction on access to the “red zone” during the plenary session) is provided for Official Forum Programme Participants (Package No 2). Official Forum Programme Participants (Package No 2) may not register Assistants/Accompanying persons for the Forum.
In the event when an invitee by the Organizing Committee cannot accept the personal invitation to participate in the Forum a request can be made to the Organizing Committee to nominate another representative of the organization, by contacting the Participants’ Management Department and sending a written request to the Chair of the Organizing Committee.
Assistants and Accompanying persons
A person can be registered as an Assistant/Accompanying Person of the Participant of the Official Business Programme upon the request by the Participant. Each Official Forum programme participant (Package No 1) may register one Assistant or Accompanying person. Participation in business programme events excluding plenary sessions and special invitation events, informational activities, and visiting exhibitions and business zones is provided for assistants. Assistant/Accompanying person can be registered only in conjunction and upon a request by the official Forum programme participant (Package No 1) by filling out a request in the Personal Web Office (the "Registration of Assistant/Accompanying person" tab). A participation fee can be paid following the approval by the Forum Organizing Committee.
You may register a security person as an assistant, who can be granted access to the Forum venue following the endorsement by the Organizing Committee. We would like to remind you that entry into the Forum venue with a weapon is strictly prohibited.
The partnership/sponsorship opportunities of SPIEF 2011 are by invitation only. Should your company be interested to become a Partner (Sponsor) of SPIEF 2011 you are invited to contact the St. Petersburg International Economic Forum Foundation, Ms Nadezhda Sinitsyna, Head of Partner Relations, and Mr Alexandr Stuglev, Foundation Director.
Head of the SPIEF Foundation Partner Relations Department
Nadezhda SinitsynaTel. +7 (812) 635 80 21, fax: +7 (812) 680 00 34, e-mail: ns@forumspb.com
Participants, representatives of the Partner companies, are granted the same status as the Official Forum programme Participants (Package No. 1).


Internet Shopping In Russia

Work Permits: New Rules

According to the World Bank, the Russian economy will need more than 12 million immigrants in the nearest future to offset the natural decline in the population. 
 
The highest requirement in foreign labor is demonstrated in the mining, construction and erection as well as in construction and repair sectors. 

Demand is also high for executive positions at institutions, organizations, companies and their structural subdivisions as well as for unskilled labor. 

The lowest demand is for sales personnel and merchandize promoters. In the retail sector, the quota for foreign labor falls down to 0%.

Obtaining work permits includes several stages and can take quite a long time. We recommend that in order to optimize time and labor resources employers should resort to professional services of the companies that are competent in these issues. 
 
On May 20th 2010 the President of Russia approved amendments to the Law "Concerning the legal status of foreign citizens in the Russian Federation" that significantly simplifies the procedure for work permit required by highly skilled employees.

First, to receive a residence permit, professional workers will not have to live within the Russian territory during one year.

The residence permit can be issued for the period up to 5 years (both for the employee and his family), depending on the contract made with the employer. 

Second, the most important amendment specifies that the employers who engage highly qualified personnel will not be restricted by the established quotas and they will not have to receive a permit for employment of foreign workers. However, the employer will be responsible for compulsory health insurance of such workers.

Besides, the provision has been made for the criteria, based on which an employee can be qualified as highly skilled: the employee must be a foreign citizen who has work experience, skills or achievements in the subject field, and the annual remuneration for work must be minimum 2 million rubles.

The income of a foreign citizen will be taxed at a 13% rate, which is equal to the rate set for the citizens of the Russian Federation. In comparison with many European countries, this rate is quite low. 

Quotas for employment of foreign workers do not apply to general directors of joint stock companies, associations, enterprises, etc., chairpersons of management boards and their deputies, directors of affiliates, factories, departments and some other executives, provided that these positions are included in the payroll schedule of an organization. 

Friday, November 19, 2010

Special Economic Zone In Sverdlovsk Region of Russia: Titanium Valley

In the Sverdlovsk region there will be created a special economic zone (SEZ) "Titanium Valley".


Russian Prime Minister Vladimir Putin visited the region on a working visit on Nov. 18, 2010, said that the government will take the necessary measures within the next two weeks.

The basis of the SEZ will be Verkhnaya Salda Metallurgical Production Association (Corporation VSPMPO-Avisma). 


Arvi, SR Systematics, MAG, United Aircraft Corporation (UAC) have already claimed for resident status. They will be able to enjoy preferential tax treatment within five years.

Internet Trading Market Potential In Russia

Russian shoppers are eyeing virtual shop windows with great interest, considering their promise to save time, money, and stress. 


According to the Data Insight agency, the volume of e-commerce in Russia will reach 240 billion rubles in 2010. 


However, this is only a tiny fraction of retail trade. Internet sales comprise less than 2% of total sales in Russia - these numbers are 3½ to 4 times as high in the US and EU. 


Most of online shopping in Russia is done in Moscow and St. Petersburg - Ekaterinburg has only a quarter or a fifth of St. Petersburg's Internet market. 


Given that e-trade in Russia is expected to increase by 250% in the next five years.

Thursday, November 18, 2010

Tax Exemptions For Skolkovo Residents In Russia

President Dmitry Medvedev proposed exemption from taxes for residents of the Center for commercialization of innovative technologies in Skolkovo (Analogue of the USA Silicon Valley in Russia). 

In particular, the Russian lPresident offered to exempt residents from income tax and VAT

According to the president of Russia, project participants should be exempted from profit tax, VAT, corporate property tax and land tax. Mandatory insurance premiums amount to 14%, tax on personal income will be levied in accordance with the law. The head of Russia stressed that it was "sufficiently serious decision, which is yet to come".

Personal Income Tax In Russia

Tax on wages and salaries is withheld by employer, thus the taxpayers whose only taxable income was paid by employer do not need to file tax return – unless they elect to claim refund for itemized deductions. 

An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance, due from a salaried worker. 

An individual whose income is only from a wage is not obligated to file an annual return. 

Non-resident individuals are subject to tax on their Russian-sourced income.

A foreign resident who is employed in Russia pays tax only on income earned in Russia. Married couples are taxed separately.

Tax due date 
Self-employed is obligated to make 3 advanced payments: on 15 of July, on 15 of August, on 15 of November. The balance of the tax due, after filing the annual return, is to be paid on 15 of July.

Tax rate
Normally tax rate is 13 %, it is for resident. To be considered a Russian resident, residence must be established of at least 183 days in Russia during any calendar tax year. Non-residents are liable to tax a flat rate of 30 %, generally withheld at source. No deduction or allowances are available for non-resident.

Deductions
Most important deductions are allowed for home purchase (once a life), education and medical expenses. All deductions require scrupulous backup paperwork and are subject to various limitations.

Capital gains for individuals
The standard tax rate in Russia is 13 % for a resident and 30 % for a foreign resident. Taxable gains are the gross proceeds or selling price, without deductions for acquisition costs or other expenses. The profit on the sale of real estate or other asset that has been held for 3 years is exempt from tax. Maximum deduction is 1 million rubles. 

Wednesday, November 17, 2010

Assets Tax In Russia

Assets tax is one of the most important among the regional taxes. If a Representative Office, or a foreign organization, or its branch, or subdivision has the assets on the territory of the  Russian Federation, it should pay assets tax.
 
The legislative body of each region of the Russian Federation determines (fixes) the final size of assets tax rate, but the latter can't exceed 2% of the tax base (which equals the annual average  value of the assets). 

From January, 1, 2004 a new chapter to Tax Code that governs assets tax came into force. The following main provisions of this chapter should be mentioned:
 
1. The maximum size of assets tax rate will not exceed 2.2%
 
2. Representative Offices that don’t conduct commercial activity, i.e. not create “permanent establishment” on the territory of the Russian Federation, will not pay assets tax on the assets/property other than real estate that it owns.

How To Negotiate With Russian Holdings Effectively

There are vast numbers of  holding companies in Russia. Some of them combine companies of similar profile forming highly efficient integrated structures. Others may include companies of the most peculiar combination of various industries.

Each company seems to have an independent management and the fact that the company belongs to a holding is known to very few people. And the holding management - real decision makers - may be in a city thousands of kilometres away from the production facility itself.

This is why prior to negotiations or in the very beginning it would be useful to understand clearly the decision making structure and who are the people you have to negotiate with.

Monday, November 15, 2010

Value Added Tax (VAT) In Russia

VAT (Value added tax) is a sales tax levied on the sale of goods and services. 

In some countries this tax is known as goods and services tax or GST.

In Russia VAT is to be paid by Russian legal entities, including those with foreign investments, foreign legal entities and legal entities involved in import-export transactions.

Russian VAT legislation provides that turnovers from the sale of goods, works and services in Russia, and goods imported to Russia are to be included in the tax base for VAT purposes.

Rates of VAT in Russia are the following - 0%, 10% and 18%. 
 
The general tax rate is 18%. 

Tax rate of 10% applies to a wide range of food products, goods for children, periodical press and some medical goods.

Tax rate of 0% is a kind of a tax benefit, and the right to its application has to be proved by certain documents. The tax rate of 0% applies, for example, for exported goods, technological equipment imported.

There are certain kinds of activity that are exempt from VAT,   e.g. insurance, banking operations. 

There are also some tax exemptions and tax benefits concerning activity of foreign organizations and Representative Offices on the territory of the Russian Federation:

Lease of premises by foreign citizens and foreign organizations that have accreditation on the territory of the Russian Federation is exempt from VAT on the reciprocity base, provided that all necessary requirements of the tax legislation are met.

Foreign organizations and Representative Offices may also have abatement of VAT assessment even conducting commercial activity but keeping in mind certain legislative conditions and practical issues.

As for foreign legal entities that are not registered with Tax Authorities, VAT payments for sale of goods, works and services by these organizations shall be withheld by tax agents.

Generally speaking, VAT returns are required to be filed and remittances (payments of VAT) paid no later than the 20th day of the month which is the tax period for VAT.

Responsibility for the timely submission of VAT returns and remittances (payments of VAT) lies entirely on the taxpayer.

Small businesses (Russian companies, not foreign Representative Offices) can apply for a "simplified accounting system" at the local tax office and, thus, become exempt from paying VAT if their turnover does not exceed a certain amount per annum.

Sunday, November 14, 2010

Profit Tax In Russia

Russia has a uniform rate of tax on the income of individuals.
It is payable at the rate of 13% for an individual on most income. 30% for non-residents.


Russian residents pay 9% on dividend income. (Deduction at source).


Non-residents pay 15% on dividend income.


Certain income earners are granted some exemptions.


The standard rate of Russia corporate profit tax is 20%.


Companies pay 9% tax on dividend income.


Under certain terms dividend income received by companies with holding of 50% or more is entitled to participation exemption.