Russia Briefing News

Using the Hong Kong Double Tax Treaty with Russia

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russia-hong-kongThe Russia-Hong Kong Double Tax Treaty (DTA) has been in effect since April 1, this year, and has begun to prove itself as a useful tool for foreign companies investing in Russia. Our firm, Dezan Shira & Associates has successfully implemented business structures in Russia, using Hong Kong corporations as an ownership vehicle for a foreign owned company in Russia.

The background and benefits of the DTA are that such agreements are concluded by and between two states (in this case, Hong Kong and Russia) and are aimed at eliminating taxation-related obstacles to the movement of capital, goods or income, at preventing tax evasion and discrimination, and also at establishing procedures for interaction between the states when collecting taxes.

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Russia Focusing on Blockchain Supply Chain Technologies

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russia-blockchainRussian First Deputy Prime Minister Igor Shuvalov has stated that Russia will be concentrating in legalizing blockchain from the viewpoint of it as a mechanism to register data so that the information stored in blockchain will have the same legal force as information stored in other forms. The Russian move places it, along with China and the Northern European countries such as Finland and the Baltic States, ahead of the technology game when it comes to handling supply chains across Eurasia, with specific long term implications for China’s Belt & Road initiative.

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Indonesia Latest Asian Nation to Discuss EAEU Free Trade

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indonesia_eurasia_flagIndonesia has requested to open negotiations for a Free Trade Agreement (FTA) with the Eurasian Economic Union, Russian Foreign Minister Sergey Lavrov said this week. Speaking in the follow-up to the negotiations with his Indonesian counterpart, Retno Marsudi, Lavrov said that the proposal on creating an EAUE-Indonesia free trade zone is under consideration. “Indonesia shows interest in starting negotiations on creating a free trade zone with this union [EAEU]. The relevant proposal has been introduced and is now being considered. Russia backs it.”

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The Kerch Strait Bridge – Europe’s Longest – Nears Completion

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kerch-strait-bridgeWhat is the longest bridge in Europe? It’s a good trivial pursuit question, but not one most will be able to answer. In fact, its existence is partially down to Western sanctions on Russia following the decision to bring the Crimean Peninsula back into Russia. (Historians will know that apart from the period 1991-2014, Crimea was part of either the Soviet Union or Russia from 1783, and had previously been part of the Ottoman Empire along with Turkey, Bulgaria, and Romania before then).

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Russian E-Commerce Up 22 Percent to Expected US$20 Billion in 2017 – Online Purchases from EU “Among Most Valuable”

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russian-ecommerceRussia’s e-commerce market is growing at a rapid pace, and is indicative of a major shift in how Russians are purchasing products. “Domestic e-commerce expenditure hit 498 billion rubles (US$8.6 billion) in the first half of this year, a 22 percent increase year-on-year”, Russian Post and the Association of Internet Trade Companies  (AITC) said in a joint statement on Tuesday.

AITC expects the market to exceed 1.1 trillion rubles (US$19.1 billion) by the end of 2017, while cross-border e-commerce trade increased 34 percent in the first half of 2017 year-on-year to 178 billion rubles (US$3 billion), meaning the share of cross-border tax free trade grew 35.7 percent in the first half of the year. Russian Post’s share of this accounted for 67.5 percent of the country’s online market in the first half of the year. “If cross-border trade keeps those growth rates it will squeeze out Russia’s online sales of small appliances and apparel within a couple of years,” AITC CEO Alexey Fedorov said in response to the results.

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Back Cryptocurrencies with Natural Resources – Russian Venture Capitalist Alexander Borodich

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ruble-bitcoinCryptocurrencies backed by natural resources would be more trusted than ones backed by banks, Alexander Borodich, the founder of the Universa block-platform and a venture capital investor, has suggested at the Third Eastern Economic Forum (EEF) in Vladivostok.

Borodich said that as a country rich in natural resources, Russia is able to convert electricity to cryptocurrencies through mining, thus generating as much cryptocurrencies as possible to trade with on the market. “With the status of cryptocurrencies in Russia not yet clear even to the government, there are certainly some projects that are more or less related to cryptocurrency. Several mining companies have presented their solutions on mining cryptocurrencies. Actually, they are more about mining than cryptocurrencies,” he noted.

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North Korea “Should be Economically Rehabilitated” – Eastern Economic Forum

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dprk-folderNorth Korea should be brought in from isolation and be economically rehabilitated into North East Asia, it has been suggested by Russian President Vladimir Putin at the Eastern Economic Forum, currently being held in Vladivostok. At the plenary session, the leaders of Russia, Japan, Mongolia, and South Korea discussed in an open forum the issues facing North East Asia. When it came to the situation involving North Korea’s nuclear program, Vladimir Putin called for a peaceful solution to raising tensions, and for North Korea to be involved in common economic cooperation. The leaders of Japan and South Korea put more emphasis on forceful measures against North Korea.

“There is some merit for this concept”, comments Chris Devonshire-Ellis, who served as Vice Chair of Business Development at the United Nations Greater Tumen Initiative at a time when North Korea was a member. “I personally believe that sanctions do not work, have not worked, and are making matters worse. It would be far more preferable for the DPRK to be gradually weaned off their isolationism, and be shown that the road to progress and peace is in fact via mutual trade. It is a policy that has been working very well in Central Asia, and should be returned to in the North East”

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Understanding Russian Regional Tax Incentives

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An employee counts Russian ruble banknotes at a private company's office in KrasnoyarskForeign investors in Russia can work with regional authorities in Russia to actively reduce their tax bills. Although there are regional differences, such authorities in Russia have the right to reduce their regional allocation of profit tax of 18 percent to 13.5 percent (a minimum overall tax rate of 15.5 percent, including the 2 percent federal portion), and provide a reduced rate or exemption from property tax chargeable at the maximum rate of 2.2 percent of the cadastral or residual value of fixed assets (depending on regional legislation).

Other incentives and grants are also available in a variety of regions (e.g. land tax incentives and subsidies for interest on loans). Such exemptions are normally conditional on specific investment criteria in the region being met.

Movable property recorded in statutory books as fixed assets starting from January 1, 2013 is not subject to property tax (except for the movable property that has been acquired as a result of the reorganization or the liquidation of legal entities, as well as a result of the transfer thereof between affiliated parties). Therefore, regional incentives might bring benefits in the event of significant investments being made in immovable property or sufficient taxable profit during the period that the incentives are applied (usually the first three to eight years). Continue reading…

Sanctions, Tanks, and Low GDP Growth: Not Russia, but China in 1989

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sanctionsThis year, Dezan Shira & Associates celebrates its 25th anniversary; I started the practice as a small, three person outfit, operating out of my bedroom in Shenzhen in November 1992. Just two and a half years prior to this, China had gone through the convulsions of the Tiananmen Square “incident”, where tanks had entered Beijing and faced down a student population demanding democratic rights. For a few days, the entire destiny of what is now modern China was in the balance. The Communist Party of China (CPC) ordered a crackdown on the unrest and the window for revolution passed. An initially uneasy, but then progressive peace returned. Today’s China is largely built on those few days, and it is worth – in historical context – to recall that the Soviet Union had collapsed just two years earlier. While many were supportive of the unfortunate, democratic wishing students, no one was ever able to suggest what the alternative to the CPC would be. China had teetered on the verge of splitting apart, and there have been provinces in China’s history that have at one time or another declared independence. China today would look very different had the CPC fallen in 1989.

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Russian Ministerial Support For The “KryptoRuble” & Blockchain Technologies

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ruble-bitcoinRussian First Deputy Prime Minister Igor Shuvalov said on Wednesday that he supported cryptocurrencies and would welcome the appearance of the Russian “Kryptoruble”.

“I am a supporter of cryptocurrencies, I think that there should be the Kryptoruble. But this is a complicated issue. At a working group on the blockchain we agreed that we would proceed with caution, but would not drag out the process.”

Shuvalov added that the Russian government, the Central Bank, and the Federal Security Service were working on the security implications of the introduction of this currency, and added that the advance of cryptocurrencies could not be stopped, but they had to be introduced in such a way that would boost the national economy rather than weaken it. Russian President Vladimir Putin said in late July he was “cautious” about the usage of cryptocurrencies since the area was not well regulated.

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