Insights, Legal alerts / 18.05.2020

COVID-19 epidemic: Overview of state measures to support business

The coronavirus epidemic has provoked a surge of rulemaking activity. Parliament and the government are considering many varied measures to eliminate the consequences of the epidemic. Among the most important business measures are:

Some of these measures have already come into force, while the legislature is still considering others. In this alert, we have systematized all significant new developments. For readability, the measures are grouped according to the introduction of their bills with their current status.

 

Measures provided for by Federal law No. 98-FZ dated 1 April 2020 “On amendments to certain legislative acts of the Russian Federation for the prevention and elimination of emergency situations”

Status: a Federal law signed by the President that has entered into force.

 

New provision Modified law
1.The Government of the Russian Federation under its new powers to introduce an emergency and high alert mode has the right to set mandatory rules of conduct for organizations. In addition, so do executive authorities of a constituent entity of the Russian Federation. The Federal law “On the protection of the public and territories from natural and man-made emergencies”
2. The personal liability fund of a tour operator can be used to reimburse the expenses of tourists and other customers of tourist products if foreign states adopt restrictions on the entry of tourists into the state in question. The Federal law “On the fundamentals of tourist activity in the Russian Federation”
3. To ensure the stability of the economy, in exceptional cases the Government of the Russian Federation may impose a moratorium on the initiation of bankruptcy at the request of creditors. The Government of the Russian Federation has the right to determine certain categories of persons who are entitled to the moratorium. The Federal law “On insolvency (bankruptcy)”
4. It is not permissible to conduct inspections of small and medium-sized businesses, information about which is included in the unified register of small and medium-sized businesses, for the period from 1 April 2020 to 31 December 2020. There is an exception for inspections the basis for which is a threat to life and health, or the occurrence of natural and man-made emergencies. The Federal law “On the protection of the rights of legal entities and individual entrepreneurs in the exercise of state control (supervision) and municipal control”
5. The Government of the Russian Federation has established the specifics for the state registration of medicines that are intended for emergency conditions. Federal law “On the circulation of medicines”
6. The Government of the Russian Federation is to determine the specifics of the circulation of medicines intended for emergency situations. The Federal law “On the fundamentals of protecting public health in the Russian Federation”
7. There have been amendments to the legislation on public procurement, for example, regarding the permissibility of changing the deadline for the performance of the contract and the price of the contract in connection with COVID-19. However, a written justification is required for such changes based on a decision of a public authority if the amendment results in new obligations of the supplier that are not secured by the security previously provided. The Federal law “On the contract system in the field of the procurement of goods, works, and services for ensuring state and municipal needs”
8. There is support for medical organizations in terms of compensation for lost income. The Federal law “On mandatory medical insurance in the Russian Federation”
9. The Government of the Russian Federation has the right to expand the grounds for purchasing from a single supplier. Federal law No. 98-FZ dated 1 April 2020 “On amendments to certain legislative acts of the Russian Federation for the prevention and elimination of emergency situations”
10. The Government of the Russian Federation has the right to make decisions on the establishment of specific aspects for the application of financial sanctions for the non-performance or improper performance of obligations under contracts for participation in shared construction, as well as the inclusion of properties in the registry of problem facilities for a violation of the terms and conditions for the transfer of a shared construction facility. These powers may be delegated to other executive authorities. Federal law No. 98-FZ dated 1 April 2020 “On amendments to certain legislative acts of the Russian Federation for the prevention and elimination of emergency situations”
11. Until 1 January 2021 the Government of the Russian Federation has the right to impose penalties for the late performance and/or incomplete performance of obligations by legal entities to pay for services provided under contracts in accordance with the legislation of the Russian Federation for gas supply, electricity, heat supply, water supply and sanitation. Federal law No. 98-FZ dated 1 April 2020 “On amendments to certain legislative acts of the Russian Federation for the prevention and elimination of emergency situations”
12. 1.For those real estate lease agreements that were concluded before the regional government made a decision in 2020 to introduce an emergency or high-alert mode within the relevant constituent entity of the Russian Federation, the tenant has the right to request that the landlord conclude an additional agreement on the deferred payment of rent for 2020. The landlord must enter into such agreement within 30 days of the tenant’s request. The Government of the Russian Federation determines requirements for the terms and conditions of deferral.2.The amount of rent can change at any time during 2020 under real estate lease agreements that were concluded before the decision of the regional government in 2020 to introduce a state of emergency or high alert within the relevant constituent entity of the Russian Federation.
3.The tenant under real estate lease agreements has the right to demand a reduction of rent for the period of 2020 due to inability to use the property because of the introduction of a state of emergency or high alert.
Federal law No. 98-FZ dated 1 April 2020 “On amendments to certain legislative acts of the Russian Federation for the prevention and elimination of emergency situations”
13. The law allows the Government of the Russian Federation to restrict wholesale and retail trade in medicines according to the list that the Government itself will make for a period of no more than 90 days. Federal law No. 98-FZ dated 1 April 2020 “On amendments to certain legislative acts of the Russian Federation for the prevention and elimination of emergency situations”

 

Credit holidays (Federal Law No. 106-FZ dated 3 April 2020 “On amendments to the Federal Law “On the Central Bank of the Russian Federation (the Bank of Russia)” and certain legislative acts of the Russian Federation with regard to change of terms of credit agreement, loan agreement”)

Status: a Federal law signed by the President that has entered into force.

 

Who can apply?   Description of request   Conditions for the loan   What benefits or other legal consequences are there?
A physical person or an individual entrepreneur Suspension of the performance of an obligation; reducing the amount of payments during the grace period.

 

The grace period cannot be longer than 6 months.

 

1. The credit agreement (loan agreement) was concluded before the draft law came into being.

2. You must contact the lender during the term of the agreement but no later than 30 September 2020.

3. The amount of credit transferred under the agreement does not exceed the limit established by the Government of the Russian Federation.

4. Income has decreased by more than 30% compared with the average monthly income of the borrower.

5. Credit holidays are not valid for other reasons.

During the grace period, the following are not allowed:

 

1. the accrual of a penalty (fine, penalty fee) for the non-fulfillment or improper fulfillment of the borrower’s obligations to repay the loan (credit) and/or pay interest on the loan (credit) amount);

2. submitting a request for early performance of an obligation under a loan agreement (credit agreement);

3. foreclosure on a pledged or mortgaged item that secures obligations under the relevant loan agreement (credit agreement), and/or filing a claim with the guarantor.

The amount of penalties not paid by the borrower before the grace period was established is fixed on the day when the grace period is established.

After the grace period is established, the lender’s obligations to provide funds to the borrower are suspended for the entire duration of the grace period.

During the grace period interest is accrued at a preferential rate set by the Central Bank of the Russian Federation.

After the end of the grace period the loan agreement continues to operate on the terms that were in effect before the grace period was granted.

Small and medium-sized businesses Suspension of performance of an obligation; reducing the amount of payments during the grace period.

 

The grace period cannot be longer than 6 months.

 

1.The credit agreement was concluded before the draft law came into force.

 

2. You must contact the lender during the term of the agreement but no later than September 30, 2020.

 

During the grace period, the following are not allowed:

 

1.  the accrual of a penalty (fine, penalty fee) for the non-fulfillment or improper fulfillment of the borrower’s obligations to repay the loan (credit) and/or pay interest on the loan (credit) amount);

2. submitting a request for early performance of an obligation under a loan agreement (credit agreement);

3. foreclosure on a pledged or mortgaged item that secures obligations under the relevant loan agreement (credit agreement), and/or filing a claim with the guarantor.

The amount of penalties not paid by the borrower before the establishment of the grace period is fixed and paid after the end of the grace period.

After the grace period is established, the lender’s obligations to provide funds to the borrower are suspended for the entire duration of the grace period.

At the end of the grace period the principal amount includes the amount of interest that should have been paid by the borrower during the grace period based on the terms of the credit agreement that were in effect before the grace period was granted but were not paid by the borrower in connection with the granting of the grace period.

If the borrower has exercised the right to reduce payments, the amount of interest obligations included in the amount of the borrower’s principal obligations is reduced by the amount of interest obligations fulfilled due to payments made by the borrower during the grace period based on the borrower’s request.

 

Taxes and social contributions (the Federal Law No. 102-FZ dated 1 April 2020 “On amendments to parts 1 and 2 of the Tax Code of the Russian Federation and certain legislative acts of the Russian Federation”)

Status: a Federal law signed by the President that has entered into force

 

Benefits / modification Subject of benefits Modified law
 

1. Lowering the amount of insurance premiums for wages that exceed the minimum wage. The total rate of reduced contributions will be 15%.

 

Small and medium-sized businesses

 

The Tax Code of the Russian Federation, the Federal law “On compulsory pension insurance”, the Federal law “On obligatory social insurance against work-based accidents and occupational diseases”, the new law “On amendments to the parts one and two of the Tax Code of the Russian Federation and certain legislative acts of the Russian Federation”.

 

2. . In the period up to 31 December 2020, the Government of the Russian Federation may establish regulations that differ from the provisions of the Tax Code of the Russian Federation. In particular, the Government of the Russian Federation will be able to suspend, cancel or postpone tax inspections, extend the deadline for paying taxes and fees, for submitting documents and reporting to tax authorities, and may introduce additional grounds for an exemption from liability for violations of the legislation on taxes and fees. The highest executive authorities of the Russian Federation are vested with similar powers with regard to regional and local taxes.

 

 

The new law “On amendments to the parts one and two of the Tax Code of the Russian Federation and certain legislative acts of the Russian Federation”

 

3. Taxing personal income tax on interest on bank deposits.

 

 

The Tax Code of the Russian Federation (tax is charged on the taxpayer’s income that exceeds the income that he would have received if he had opened a deposit of 1,000,000 rubles at the key rate of the Central Bank of the Russian Federation. The calculation of the new tax does not take into account the taxpayer’s income from savings accounts, i.e. accounts whose rate does not exceed 1 percent per annum. For both residents and non-residents, the tax rate will be 13 percent per annum).


4.
Organizations and individual entrepreneurs who have switched from the unified tax on imputed income (UTI) to the Simplified Taxation System (STS, income minus expenses) are able to account for the costs incurred on purchasing goods while they were in the UTI.


The Tax Code of the Russian Federation.

 

Measures of the Government of the Russian Federation (Resolution of the Government of the Russian Federation No. 409 dated 2 April 2020 “On measures to ensure sustainable economic development”)

Status:a Resolution signed by the Prime Minister that has entered into force.

 

 

Those eligible for benefits

  Benefits
 

Small and medium-sized businesses that have been severely affected by the pandemic

 

The deadline for the payment of income tax, taxes under the Simplified Taxation System and uniform agricultural tax for 2019 has been extended by six months, while the deadline for the payment of all taxes (except VAT) for reporting periods falling in the first quarter of 2020 has been extended by six months, and for reporting periods falling in the –first six months (second quarter) of 2020 by 4 months.

 

Small and medium-sized businesses and microenterprises that have been severely affected by the pandemic

 

The deadline for the payment of insurance premiums has been extended by six months for the period March-May 2020; the deadline for the payment of insurance premiums calculated on payments and other remuneration in favor of individuals for June and July 2020, and insurance premiums payable no later than 1 July 2020, calculated on the amount of income of a payer who is an individual entrepreneur exceeding 300,000 rubles has been extended by 4 months.

 

All taxpayers

 

1.Suspension of on-site tax inspections and making decisions for the suspension of operations on the accounts of corporate taxpayers until 1 June 2020.

2. An extension of the deadline for submitting declarations (other than VAT declarations), advanced payments and accounting (financial) statements due in March-May 2020 by 3 months.

3. Non-application of sanctions for committing tax offenses for the period from 1 March to 1 June 2020.

 

Support measures proposed by the President of Russia during the Meeting on the sanitary and epidemiological situation

Status: normative acts are under development

 

Tax write-off: during the Meeting on the sanitary and epidemiological situation held on 11 May 2020, the President of Russia proposed to completely write off taxes (except for VAT) and insurance contributions for Q2 of the current year. This measure will apply to individual entrepreneurs and to small- and medium-sized enterprises from the sectors of the economy that have been most affected by the spread of COVID-19 (the “Affected Sectors), as well as to socially-oriented not-for-profit organizations.

Preferential loans: The President of Russia further proposed that a special lending programme should be launched starting from 1 June 2020 to support employment. All enterprises from Affected Sectors and socially-oriented not-for-profit organizations will be able to tap into it. The volume of credit will be calculated by the formula of the monthly minimum wage[1] per employee based on a 6-month period. The loan maturity will be 1 April 2021. The final rate for recipients of a loan will be a preferential rate of 2%, the other part will be subsidized by the state. The interest will be capitalized and will not require monthly payments. Moreover, the loan will be secured by a state guarantee up to 85%.

 

[1] RUB 20,195 in Moscow as approved by the Moscow Trilateral Agreement for 2019-2021 between the Moscow Government and Moscow associations of trade unions and Moscow associations of employers and the Moscow Government’s Resolution No. 1177-PP dated 10 September 2019; and RUB 19,000 in St Petersburg as approved by the Regional Agreement on the Minimum Wage in St Petersburg for 2020

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