April 1999

This report is provided courtesy of the American Chamber of Commerce in Moscow.

Temporary import privileges for cars and office equipment of foreign companies in Russia will be repealed according to the State Customs Committee Instruction #01-14/233 dated February 19, 1999, effective from April 1, 1999. This Instruction abolishes the RF State Customs Committee Ruling No. 01-12/1276 of October 11, 1994 "On special considerations for applying customs temporary import (export) rules to goods temporarily imported into the territory of the Russian Federation by the representative offices of foreign companies, banks, and organizations."

Marina Volkova, Tax Manager at PwC summarized the issue. Privileges have been allowed since 1988, when they were granted by the Council of Ministers. One of the reasons for privileges was that the Russian market could not provide foreigners with the goods they needed in order to operate their businesses in Russia.

According to the new Instruction the temporary import regime remains in effect for the length of the accreditation of goods imported by March 31, 1999 under temporary import regime.

Goods or vehicles imported under the 1994 Instruction should be re-exported before the end of their temporary import period or released into free circulation based on their original customs value. Depreciation will not be taken into account. However, it will also not be necessary to pay interest for deferral of customs payments.

II Specific Issues Related to the Change in Temporary Import

Ms. Volkova pointed out that the import regime changes in question apply only to goods imported for use by companies and not to personal possessions.

Committee members noted that companies are often forced to pay fines because they are unable to re-export stolen or lost goods. In such cases, it is often advisable to pay the requisite free circulation customs duties and taxes on the missing goods, as these will most likely cost less than the fines for failure to pay.

When goods are released into free circulation the rates of customs duties and taxes and the foreign-currency exchange rates will be determined as of the date when the customs authority accepted the declaration of free circulation. Ms. Volkova explained that if the price of a object was determined in rubles at the time of import, than it remains valued in rubles.

Committee members inquired whether the Customs Service is obligated to give notice that a company's temporary import period is coming to an end. Ms. Volkova responded that it is technically obliged to do so. At the same time she cautioned members that if Customs Service officials come across a document that was submitted 8 or 10 years ago, they may demand that the signatory of the document either fulfill the stipulations of that document or pay a fine, regardless of the fact that a significant amount of time has passed.

All companies must make monthly payments on goods imported under temporary regime, equal to 3% of the amount of taxes and duties which would have been paid if the goods were released into free circulation.

The issue was raised of how to best dispose of old equipment that is no longer in use, without having to re-export it or pay customs duties. A satisfactory solution has yet to be arrived at. Ms. Volkova explained that PricewaterhouseCoopers had gone through the process of re-exporting large quantities of computers and other equipment.

This report is provided courtesy of the American Chamber of Commerce in Moscow