Doing Business 2017 Russian Federation Economy Profile 2017 Russian Federation Doing Business 2017 Russian Federation 2 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2017 Russian Federation 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 17 Dealing with construction permits ........................................................................................... 27 Getting electricity ....................................................................................................................... 44 Registering property .................................................................................................................. 56 Getting credit .............................................................................................................................. 71 Protecting minority investors ................................................................................................... 78 Paying taxes ................................................................................................................................ 85 Trading across borders .............................................................................................................. 92 Enforcing contracts .................................................................................................................. 100 Resolving insolvency ................................................................................................................ 110 Labor market regulation ......................................................................................................... 119 Distance to frontier and ease of doing business ranking .................................................... 125 Resources on the Doing Business website ............................................................................ 128 Doing Business 2017 Russian Federation 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is comparison, it also provides data for other selected for a local entrepreneur to open and run a small to economies (comparator economies) for each indicator. medium-size business when complying with relevant The data in this report are current as of June 1, 2016 regulations. It measures and tracks changes in (except for the paying taxes indicators, which cover the regulations affecting 11 areas in the life cycle of a period January–December 2015). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2017 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 190 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 48 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2017 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2017, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for Russian Federation. To allow useful Doing Business 2017 Russian Federation 5 CHANGES IN DOING BUSINESS 2017 As part of a three-year update in methodology, Doing having equal evidentiary weight of women’s testimony in Business 2017 expands further by adding postfiling court. processes to the paying taxes indicator, including a Also for the first time this year Doing Business collects gender component in three of the indicators and data on Somalia, bringing the total number of developing a new pilot indicator on selling to the economies covered to 190. government. Also, for the first time this year Doing Business collects data on Somalia, bringing the total For more details on the changes, see the “”Old and new number of economies covered to 190. factors covered in Doing Business” section in the The paying taxes indicator is expanded this year to Overview chapter starting on page 1 of the Doing include postfiling processes – those processes that occur Business 2017 report. For more details on the data and after a firm complies with its regular tax obligations. methodology, please see the “Data Notes” chapter These include tax refunds, tax audits and tax appeals. In starting on page 114 of the Doing Business 2017 report. particular, Doing Business measures the time it takes to For more details on the distance to frontier metric, get a value added tax (VAT) refund, deal with a simple please see the “Distance to frontier and ease of doing mistake on a corporate tax return that can potentially business ranking” chapter in this profile. trigger an audit and good practices with administrative appeals process. This year’s Doing Business report presents a gender dimension in four of the indicator sets: starting a business, registering property, enforcing contracts and labor market regulation. Three of these areas are included in the distance to frontier score and in the ease of doing business ranking, while the fourth —labor market regulation—is not. Doing Business has traditionally assumed that the entrepreneurs or workers discussed in the case studies were men. This was incomplete by not reflecting correctly the Doing Business processes as applied to women—which in some economies may be different from the processes applied to men. Starting this year, Doing Business measures the starting a business process for two case scenarios: one where all entrepreneurs are men and one where all entrepreneurs are women. In economies where the processes are more onerous if the entrepreneur is a woman, Doing Business now counts the extra procedures applied to roughly half of the population that is female (for example, obtaining a husband’s consent or gender-specific requirements for opening a personal bank account when starting a business). Within the registering property indicators, a gender component has been added to the quality of land administration index. This component measures women’s ability to use, own, and transfer property according to the law. Finally, within the enforcing contracts indicator set, economies will be scored on Doing Business 2017 Russian Federation 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: Europe & Central Asia based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Upper middle income businesses through their life cycle. Economies are ranked from 1 to 190 by the ease of doing business ranking. Population: 144,096,812 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 11,400 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2017 rank: 40 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2016 rank: 36* 0 represents the worst performance and 100 the frontier. Change in rank: -4 (See the chapter on the distance to frontier and ease of doing business). DB 2017 DTF: 73.19 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2016 DTF: 73.2 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: -0.01 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2016 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2016 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 114 of the Doing Business 2017 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2017: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in the economy profile. Doing Business 2017 Russian Federation THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2017 Russian Federation THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Russian Federation and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2017 Russian Federation 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Russian Federation (Scale: Rank 190 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Russian Federation (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2017 Russian Federation 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Russian Federation come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2017 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2017 Russian Federation 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Russian Federation Saint Petersburg DB2017 Best performer globally Kazakhstan DB2017 Russian Federation Russian Federation Moscow DB2017 Mexico DB2017 Indicator China DB2017 Brazil DB2017 DB2017 DB2016 DB2017 Starting a Business 26 37 -- -- 175 127 45 93 1 (New Zealand) (Rank) Starting a Business (DTF 93.57 92.35 92.82 95.31 65.04 81.02 91.94 85.74 99.96 (New Zealand) Score) Procedure – Men 3.7 4.4 4.0 3.0 11.0 9.0 5.0 7.8 1.0 (New Zealand) (number) Time – Men (days) 9.8 10.5 11.0 7.0 79.5 28.9 9.0 8.4 0.5 (New Zealand) Cost – Men (% of 1.0 1.1 1.0 0.9 5.2 0.7 0.3 17.8 0.0 (Slovenia) income per capita) Procedure – Women 3.7 4.4 4.0 3.0 11.0 9.0 5.0 7.8 1.0 (New Zealand) (number) Time – Women (days) 9.8 10.5 11.0 7.0 79.5 28.9 9.0 8.4 0.5 (New Zealand) Cost – Women (% of 1.0 1.1 1.0 0.9 5.2 0.7 0.3 17.8 0.0 (Slovenia) income per capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (127 Economies*) of income per capita) Dealing with 115 117 -- -- 172 177 22 83 1 (New Zealand) Construction Permits Doing Business 2017 Russian Federation 12 Saint Petersburg DB2017 Best performer globally Kazakhstan DB2017 Russian Federation Russian Federation Moscow DB2017 Mexico DB2017 Indicator China DB2017 Brazil DB2017 DB2017 DB2016 DB2017 (Rank) Dealing with Construction Permits 65.86 64.67 66.14 65.20 51.28 48.52 79.05 69.79 87.40 (New Zealand) (DTF Score) Procedures (number) 13.7 14.3 14.0 13.0 18.2 22.0 13.0 13.0 7.0 (4 Economies*) Time (days) 239.3 244.1 229.5 262.0 425.7 244.3 68.0 86.4 28.0 (Korea, Rep.) Cost (% of warehouse 0.1 (Trinidad and 1.4 1.6 1.5 1.2 0.4 7.0 1.3 9.8 value) Tobago) Building quality control 10.0 10.0 10.0 10.0 9.0 9.0 10.0 11.7 15.0 (Luxembourg*) index (0-15) Getting Electricity 30 26 -- -- 47 97 75 98 1 (Korea, Rep.) (Rank) Getting Electricity (DTF 84.37 84.22 85.54 81.66 81.23 68.73 73.64 68.32 99.88 (Korea, Rep.) Score) Procedures (number) 3.0 3.0 3.0 3.0 4.0 5.5 7.0 6.8 3.0 (15 Economies*) Time (days) 160.5 160.5 150.0 185.0 64.4 143.2 77.0 100.4 18.0 (Korea, Rep.*) Cost (% of income per 44.1 93.1 37.2 60.1 58.0 390.4 50.6 336.7 0.0 (Japan) capita) Reliability of supply and transparency of tariff 8.0 8.0 8.0 8.0 5.0 6.0 7.0 6.2 8.0 (26 Economies*) index (0-8) Registering Property 9 8 -- -- 128 42 18 101 1 (New Zealand) (Rank) Registering Property 90.55 90.51 90.55 90.55 52.62 76.15 83.72 61.05 94.46 (New Zealand) (DTF Score) Procedures (number) 3.0 3.0 3.0 3.0 13.6 4.0 3.0 7.7 1.0 (4 Economies*) Doing Business 2017 Russian Federation 13 Saint Petersburg DB2017 Best performer globally Kazakhstan DB2017 Russian Federation Russian Federation Moscow DB2017 Mexico DB2017 Indicator China DB2017 Brazil DB2017 DB2017 DB2016 DB2017 Time (days) 15.0 15.0 15.0 15.0 31.4 19.5 3.5 42.1 1.0 (3 Economies*) Cost (% of property 0.2 0.2 0.2 0.2 3.1 3.4 0.1 5.2 0.0 (Saudi Arabia) value) Quality of the land administration index (0- 26.0 26.0 26.0 26.0 13.8 18.3 16.0 16.3 29.0 (Singapore) 30) Getting Credit (Rank) 44 42 -- -- 101 62 75 5 1 (New Zealand) Getting Credit (DTF 65.00 65.00 65.00 65.00 45.00 60.00 55.00 90.00 100.00 (New Zealand) Score) Strength of legal rights 6.0 6.0 6.0 6.0 2.0 4.0 4.0 10.0 12.0 (3 Economies*) index (0-12) Depth of credit 7.0 7.0 7.0 7.0 7.0 8.0 7.0 8.0 8.0 (30 Economies*) information index (0-8) Credit registry coverage 0.0 0.0 0.0 0.0 53.4 91.1 0.0 0.0 100.0 (3 Economies*) (% of adults) Credit bureau coverage 77.2 70.2 77.2 77.2 78.9 21.3 52.0 100.0 100.0 (23 Economies*) (% of adults) Protecting Minority 53 51 -- -- 32 123 3 53 1 (New Zealand*) Investors (Rank) Protecting Minority 60.00 60.00 60.00 60.00 65.00 45.00 80.00 60.00 83.33 (New Zealand*) Investors (DTF Score) Strength of minority investor protection 6.0 6.0 6.0 6.0 6.5 4.5 8.0 6.0 8.3 (New Zealand) index (0-10) Extent of conflict of interest regulation 5.0 5.0 5.0 5.0 5.7 5.0 8.0 6.0 9.3 (New Zealand) index (0-10) Extent of shareholder 7.0 7.0 7.0 7.0 7.3 4.0 8.0 6.0 8.3 (Norway) governance index (0- Doing Business 2017 Russian Federation 14 Saint Petersburg DB2017 Best performer globally Kazakhstan DB2017 Russian Federation Russian Federation Moscow DB2017 Mexico DB2017 Indicator China DB2017 Brazil DB2017 DB2017 DB2016 DB2017 10) 1 (United Arab Paying Taxes (Rank) 45 40 -- -- 181 131 60 114 Emirates) Paying Taxes (DTF 99.44 (United Arab 82.96 83.09 82.92 83.04 33.03 60.46 79.54 65.81 Score) Emirates) Payments (number per 3.0 (Hong Kong SAR, 7.0 7.0 7.0 7.0 9.6 9.0 7.0 6.0 year) China*) Time (hours per year) 168.0 168.0 168.0 168.0 2038.0 259.0 178.0 286.0 55.0 (Luxembourg) Total tax rate (% of 47.4 47.0 47.5 47.2 68.4 68.0 29.2 52.0 26.1 (32 Economies*) profit) Postfiling index (0-100) 87.6 87.6 49.1 98.5 (Estonia) Trading across Borders 140 138 -- -- 149 96 119 61 1 (10 Economies*) (Rank) Trading across Borders 100.00 (10 57.96 57.96 58.16 57.50 55.57 69.13 63.19 82.09 (DTF Score) Economies*) Time to export: Border 96 96 96 96 49 26 133 20 0 (18 Economies*) compliance (hours) Cost to export: Border 765 765 765 765 959 522 574 400 0 (18 Economies*) compliance (USD) Time to export: Documentary 25 25 26 24 18 21 128 8 1 (25 Economies*) compliance (hours) Cost to export: Documentary 92 92 80 120 226 85 320 60 0 (19 Economies*) compliance (USD) Time to import: Border 96 96 96 96 63 92 2 44 0 (25 Economies*) compliance (hours) Doing Business 2017 Russian Federation 15 Saint Petersburg DB2017 Best performer globally Kazakhstan DB2017 Russian Federation Russian Federation Moscow DB2017 Mexico DB2017 Indicator China DB2017 Brazil DB2017 DB2017 DB2016 DB2017 Cost to import: Border 1125 1125 1125 1125 970 777 0 450 0 (28 Economies*) compliance (USD) Time to import: Documentary 43 43 43 43 120 66 6 18 1 (29 Economies*) compliance (hours) Cost to import: Documentary 153 153 160 135 107 171 0 100 0 (30 Economies*) compliance (USD) Enforcing Contracts 12 8 -- -- 37 5 9 40 1 (Korea, Rep.) (Rank) Enforcing Contracts 74.96 75.78 75.44 73.84 67.41 77.98 75.70 67.01 84.15 (Korea, Rep.) (DTF Score) Time (days) 337.0 307.0 340.0 330.0 731.0 452.8 370.0 340.7 164.0 (Singapore) Cost (% of claim) 16.5 16.5 15.0 20.0 20.7 16.2 22.0 33.0 9.0 (Iceland) Quality of judicial 11.0 11.0 11.0 11.0 13.6 14.3 13.0 10.1 15.5 (Australia) processes index (0-18) Resolving Insolvency 51 49 -- -- 67 53 37 30 1 (Finland) (Rank) Resolving Insolvency 56.69 58.39 56.44 57.28 49.15 55.82 69.17 73.11 93.89 (Finland) (DTF Score) Recovery rate (cents on 38.6 41.7 38.1 39.7 15.8 36.9 41.4 69.1 92.9 (Norway) the dollar) Time (years) 2.0 2.0 2.0 1.8 4.0 1.7 1.5 1.8 0.4 (22 Economies*) Cost (% of estate) 9.0 9.0 9.0 9.0 12.0 22.0 15.0 18.0 1.0 (22 Economies*) Strength of insolvency 11.5 11.5 11.5 11.5 13.0 11.5 15.0 11.5 15.0 (6 Economies*) framework index (0-16) Source: Doing Business database. Note: DB2016 rankings shown are not last year’s published rankings but comparable rankings for DB2016 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest Doing Business 2017 Russian Federation 16 time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Doing Business 2017 Russian Federation 17 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Obtaining approval from spouse to start a generating more revenue for the government. business, to leave the home to register the company or open a bank account. What do the indicators cover? Obtaining any gender specific document for Doing Business records all procedures officially company registration and operation, national required, or commonly done in practice, for an identification card or opening a bank entrepreneur to start up and formally operate an account. industrial or commercial business, as well as the time and cost to complete these procedures and the paid- Time required to complete each procedure in minimum capital requirement. These procedures (calendar days) include obtaining all necessary licenses and permits Does not include time spent gathering and completing any required notifications, information verifications or inscriptions for the company and employees with relevant authorities. The ranking of Each procedure starts on a separate day (2 economies on the ease of starting a business is procedures cannot start on the same day). determined by sorting their distance to frontier Procedures that can be fully completed scores for starting a business. These scores are the online are recorded as ½ day. simple average of the distance to frontier scores for Procedure completed once final document is each of the component indicators. received To make the data comparable across economies, No prior contact with officials several assumptions about the business and the procedures are used. It is assumed that any required Cost required to complete each procedure information is readily available and that the (% of income per capita) entrepreneur will pay no bribes. Assumptions about Official costs only, no bribes the business: No professional fees unless services required  Is a limited liability company (or its legal by law or commonly used in practice equivalent). If there is more than one type of limited liability company in the economy, the Paid-in minimum capital (% of income limited liability form most common among per capita) domestic firms is chosen. Information on the Deposited in a bank or with a notary before most common form is obtained from registration (or within 3 months) incorporation lawyers or the statistical office.  Operates in the economy’s largest business  The size of the entire office space is city. For 11 economies the data are also approximately 929 square meters (10,000 square collected for the second largest business city. feet).  Is 100% domestically owned and has five Doing Business 2017 Russian Federation 18 owners, none of whom is a legal entity  Does not qualify for investment incentives or any special benefits.  Has start-up capital of 10 times income per capita  Has at least 10 and up to 50 employees one month after the commencement of operations, all  Performs general commercial or industrial of them domestic nationals. activities, such as the production or sale to the public of products or services. The business  Has a turnover of at least 100 times income per does not perform foreign trade activities and capita. does not handle products subject to a special  Has a company deed 10 pages long. tax regime, for example, liquor or tobacco. It is not using heavily polluting production The owners: processes.  Have reached the legal age of majority and are  Leases the commercial plant or offices and is capable of making decisions as an adult. If there not a proprietor of real estate. is no legal age of majority, they are assumed to be 30 years old.  The amount of the annual lease for the office space is equivalent to 1 times income per  Are sane, competent, in good health and have no capita criminal record.  Are married, the marriage is monogamous and registered with the authorities.  Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Doing Business 2017 Russian Federation 19 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Russian both men and women. Most indicator sets refer to a case Federation? According to data collected by Doing scenario in the largest business city of an economy, Business, starting a business there requires 3.7 except for 11 economies for which the data are a procedures , takes 9.8 days, costs 1.0% of income per population-weighted average of the 2 largest business capita for men, and requires 3.7 procedures , takes 9.8 cities. See the chapter on distance to frontier and ease of days, costs 1.0% of income per capita for women. A doing business ranking at the end of this profile for more requirement of paid-in minimum capital of 0.0% of details. income per capita (figure 2.1) is legally mandatory for . Figure 2.1 What it takes to start a business in Russian Federation - Moscow Paid-in minimum capital (% of income per capita): 0.0 Doing Business 2017 Russian Federation 20 What it takes to start a business in Russian Federation - Saint Petersburg Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Procedures in light blue are for married women only. Doing Business 2017 Russian Federation 21 STARTING A BUSINESS Globally, Russian Federation stands at 26 in the ranking the regional average ranking provide other useful of 190 economies on the ease of starting a business information for assessing how easy it is for an (figure 2.2). The rankings for comparator economies and entrepreneur in Russian Federation to start a business. Figure 2.2 How Russian Federation and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2017 Russian Federation 22 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Russian Federation (table 2.1)? Table 2.1 How has Russian Federation made starting a business easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia made starting a business easier by abolishing the DB2014 requirement to have the bank signature card notarized before opening a company bank account. The Russian Federation made starting a business easier by eliminating the requirement to deposit the charter capital DB2015 before company registration as well as the requirement to notify tax authorities of the opening of a bank account. This reform applies to both Moscow and St. Petersburg. The Russian Federation made starting a business in Moscow DB2016 easier by reducing the number of days required to open a corporate bank account. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 23 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Russian Federation is a set of specific procedures— the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Liability Company firm. These are identified by Doing Business through (OOO) collaboration with relevant local professionals and the study of laws, regulations and publicly available Paid-in minimum capital requirement: RUB 0 information on business entry in that economy. City: Moscow, Saint Petersburg Following is a detailed summary of those procedures, along with the associated time and cost. These Start-up Capital: 10 times GNI per capita procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Russian Federation - Moscow Time to No. Procedure Cost to complete complete Notarize company registration application Each founder must fill out and sign a standard registration application, which must be notarized. There is a stamp duty of RUB200 per copy. This cost does not include fees for technical work charged by notaries or lawyers if this application form is completed by them – the cost of RUB 200 assumes that the application form is filled out by the entrepreneur themselves. Fees of technical work by lawyer/notaries are only applicable in cases where there is a need to draft a charter, and thus are not applicable to the Starting a Business case study. 1 1 day RUB 200 per copy Starting from May 5, 2014 this procedure ceased to be compulsory. If the founder is able to attend the Tax Service office and file all the documents in person, the application does not have to be notarized and the tax officer can certify the founder’s signature instead. However, this is possible only in case when all the founders are able to visit the Tax Service in person, otherwise the application must be notarized. Agency: Notary Public Pay registration fee and register with the unified register at the Federal Tax Service on the local level, obtain state registration number and identification number of taxpayer (INN) 2 The company must submit the following documents for registration: 7 days RUB 4,000 • Resolution of the founders on the establishment of the company; • Charter (2 originals required, one is stamped by the Federal Tax Services and returned to applicants after the registration); • Notarized Registration Application; Doing Business 2017 Russian Federation 24 Time to No. Procedure Cost to complete complete • Receipt of payment of the state registration fee; • Document Certifying the Physical Address of the New Company (this could be a lease agreement or a letter by the property owner of the leased property, certified with signature and building company’s stamp. If the leasing office space is from an individual owner this document would need notarization.) The tax authorities sometimes implement a number of additional requirements, and failure to comply may lead to the rejection of the application. At the time of application, the applicant receives a confirmation slip, which specifies the date that the registration will be complete and ready for pick up. Starting from December 29, 2015 the registration term is 3 working days, not including the day of submission of documents and the day of issuance of the registration certificate. The registration fee is RUB 4,000. On the day of pick up, the applicant will receive a package of documents, including Abstract of the state registration, abstract of tax registration with a Tax Identification Number (TIN), one of the original company charters (that the applicant submitted) stamped by the government, and certificate of business entry in the unified State Register of Legal Entities. If the applicant does not pick the registration documents from the office, it is sent by mail. The procedure could also be done online http://www.nalog.ru/rn77/service/gosreg_eldocs/- with electronic signature. However, obtaining online signature is costly and time consuming. In practice, most businesses do not utilize the online services. The online service has been available since 2012. Agency: Federal Tax Service Make a company seal On 6 April 2015, the President of the Russian Federation signed Federal Law #82 that eliminates requirement for a company seal. However, in practice, majority of the businesses still obtain a company seal as part 3 of the process of starting a business. A company seal typically costs 1 day RUB 500 RUB 500. Agency: Seal-making service Open the company bank account free if done at the bank; RUB 200 According to the Central Bank of Russian Federation instruction No. 2 days (signatures and 4 153-I from May 30, 2014, the following documents are required in order to open a business bank account: bank card) + RUR • A certificate of state registration of the legal entity; 1000 (notary fees) • Founding documents of the legal entity; approximately if Doing Business 2017 Russian Federation 25 Time to No. Procedure Cost to complete complete • Certificate of tax registration; done with the • The license (permit) issued for a legal entity if such licenses (permits) notary are directly related to the capacity of the legal entity; • Bank signature card; • Documents confirming authorities of the persons defined in bank signature card; • Documents confirming authorities of the sole executive body of the legal entity. In accordance with Article 22.1.10 of the Basic Principles of Russian Legislation on Notaries Public, the notary's fee for certification of signatures and bank cards is equal to RUB 200. The notary's total fee for such certification, including technical work, is approximately RUB 800 - 1200. The signature of the entrepreneur must be certified and registered by a bank. There is a special form (provided by the government) that must be completed for this procedure. Entrepreneurs have two options. They can either (a) have the signature form notarized and then it can be brought to the bank when opening the bank account, or (b) they can certify the signature of the entrepreneur at the bank, when opening a bank account. According to the Federal law No. 52-FZ on Introduction of Amendments to Parts One and Two of the Tax Code of the Russian Federation and Certain Legislative Acts of the Russian Federation, as of May 1, 2014 a company is not obliged to inform the Federal Tax Service on opening, closing or changing details of the company's bank account. Agency: Bank * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Summary of time, cost and procedures for starting a business in Russian Federation - Saint Petersburg Time to No. Procedure Cost to complete complete Pay the Registration Fee and Registration with the Unified State Register Founder's signature on the application for state registration must be certified by a notary public unless the application is submitted to the registration authority by the founder personally or in the form of 5 days RUB 4,000 1 electronic documents signed by digital signature. The cost of notarial certification is RUB 200. Documents needed to start a business in Saint Petersburg: 1. Application for state registration of a legal entity upon its foundation; 2. Decision to found a company formalized by sole founder decision or Doing Business 2017 Russian Federation 26 Time to No. Procedure Cost to complete complete protocol of the general meeting of founders; 3. Articles of incorporation of a legal entity (charter) (in two original copies – if filed in hard copy); 4. documents proving the registered address of the new company (this could be a lease or sub-lease agreement, guarantee letter from the owner of the leased property confirming the intention to conclude lease agreement upon registration of the new company); 5. Receipt of payment of the registration fee. Payment of the stamp duty can be made at the payment terminal by the registering window. Agency: Unified State Register Make a seal in a private company The company needs to make a company seal before opening a bank account. The cost of acquiring a company seal at the average market 2 price is RUB 350 1 day RUB 350 Agency: Seal maker Open a company bank account Fees may vary depending on the bank. According to the Federal law No. 52-FZ on Introduction of Amendments to Parts One and Two of the Tax Code of the Russian Federation and Certain Legislative Acts of the Russian Federation, as of 1 day RUB 500 3 May 1, 2014 a company is not obliged to inform the Federal Tax Service on opening, closing or changing details of the company's bank account. This is done automatically by the bank. Agency: Commercial Bank * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Doing Business 2017 Russian Federation 27 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business city. Quality control during construction (0-3) For 11 economies the data are also collected for Quality control after construction (0-3) the second largest business city.  Is 100% domestically and privately owned. Liability and insurance regimes (0-2)  Has five owners, none of whom is a legal entity. Professional certifications (0-4)  Is fully licensed and insured to carry out construction projects, such as building warehouses. The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of them nationals with the technical expertise and Doing Business 2017 Russian Federation 28 professional experience necessary to obtain  Will be a new construction (there was no previous construction permits and approvals. construction on the land), with no trees, natural  Has is a licensed architect and a licensed water sources, natural reserves or historical engineer, both registered with the local monuments of any kind on the plot. association of architects or engineers. BuildCo is  Will have complete architectural and technical plans not assumed to have any other employees who prepared by a licensed architect. If preparation of are technical or licensed experts, such as the plans requires such steps as obtaining further geological or topographical experts. documentation or getting prior approvals from  Has paid all taxes and taken out all necessary external agencies, these are counted as procedures. insurance applicable to its general business  Will include all technical equipment required to be activity (for example, accidental insurance for fully operational. construction workers and third-person liability).  Will take 30 weeks to construct (excluding all delays  Owns the land on which the warehouse will be due to administrative and regulatory requirements). built and will sell the warehouse upon its completion. Assumptions about the utility connections  Is valued at 50 times income per capita. The water and sewerage connections:  Will be 150 meters (492 feet) from the existing Assumptions about the warehouse water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole The warehouse: will be dug. If there is no sewerage infrastructure, a  Will be used for general storage activities, septic tank in the smallest size available will be such as storage of books or stationery. The installed or built. warehouse will not be used for any goods  Will not require water for fire protection reasons; a requiring special conditions, such as food, fire extinguishing system (dry system) will be used chemicals or pharmaceuticals. instead. If a wet fire protection system is required  Will have two stories, both above ground, by law, it is assumed that the water demand with a total constructed area of specified below also covers the water needed for approximately 1,300.6 square meters (14,000 fire protection. square feet). Each floor will be 3 meters (9  Will have an average water use of 662 liters (175 feet, 10 inches) high. gallons) a day and an average wastewater flow of  Will have road access and be located in the 568 liters (150 gallons) a day. Will have a peak periurban area of the economy’s largest water use of 1,325 liters (350 gallons) a day and a business city (that is, on the fringes of the peak wastewater flow of 1,136 liters (300 gallons) a city but still within its official limits). For 11 day. economies the data are also collected for the  Will have a constant level of water demand and second largest business city. wastewater flow throughout the year.  Will not be located in a special economic or  Will be 1 inch in diameter for the water connection industrial zone. Will be located on a land plot and 4 inches in diameter for the sewerage of approximately 929 square meters (10,000 connection. square feet) that is 100% owned by BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2017 Russian Federation 29 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in Russian Federation? According to data which the data are a population-weighted average of the collected by Doing Business, dealing with construction 2 largest business cities. See the chapter on distance to permits there requires 13.7 procedures, takes 239.3 days frontier and ease of doing business ranking at the end of and costs 1.4% of the warehouse value (figure 3.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in Russian Federation - Moscow Doing Business 2017 Russian Federation 30 What it takes to comply with formalities to build a warehouse in Russian Federation - Saint Petersburg Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 Russian Federation 31 dealing with construction permits Globally, Russian Federation stands at 115 in the ranking provide other useful information for assessing how easy of 190 economies on the ease of dealing with it is for an entrepreneur in Russian Federation to legally construction permits (figure 3.2). The rankings for build a warehouse. comparator economies and the regional average ranking Figure 3.2 How Russian Federation and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2017 Russian Federation 32 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while compliance costs reasonable, governments around the making compliance easy and accessible to all. Coherent world have worked on consolidating permitting and transparent rules, efficient processes and adequate requirements. What construction permitting reforms has allocation of resources are especially important in sectors Doing Business recorded in Russian Federation (table where safety is at stake. Construction is one of them. In 3.1)? an effort to ensure building safety while keeping Table 3.1 How has Russian Federation made dealing with construction permits easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia eased construction permitting by implementing a single DB2011 window for all procedures related to land use. Russia made obtaining a construction permit simpler by DB2013 eliminating requirements for several preconstruction approvals. Russia made dealing with construction permits easier by eliminating several requirements for project approvals from DB2014 government agencies and by reducing the time required to register a new building. Russian Federation Saint Petersburg made dealing with DB2017 construction permits easier by removing the requirement to obtain permission to fence the construction site. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 33 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Russian Federation BUILDING A WAREHOUSE are based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated value of information collected from experts in construction 26851637.1 warehouse : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Moscow, Saint Petersburg service providers and public officials who deal with building regulations. These procedures are those that apply to a company and structure matching the The procedures, along with the associated time and cost, standard assumptions used by Doing Business in are summarized below. collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Russian Federation - Moscow Time to No. Procedure Cost to complete complete Request a topographic survey of the land plot BuildCo must obtain a land survey at a scale of 1:500/1 by a specialized organization. A report is prepared as a result of the topographic survey with a layout of the building and structure. 30 days RUB 100,000 1 Agency: Private Organization Request and obtain an engineering, geological and ecological survey and obtain Act of Moscow Geological - Geodesic Department Information about conditions of the land plot (geological, geodesic and ecological) is needed for project design. There are 5 types of mandatory engineering surveys. All or a few of them are requested, depending on the land plot and surrounding territorial conditions. 2 45 days RUB 100,000 In the Doing Business case, there could be 2 -- 3 types of surveys. Mosgorgeotrest conduct these surveys, but private licensed companies can also conduct these surveys but in that case, the companies are requested to get the results ‘stamped’ by Mosgorgeotrest. Agency: Mosgorgeotrest or Private Licensed Companies Doing Business 2017 Russian Federation 34 Time to No. Procedure Cost to complete complete Request and obtain technical conditions for water and sewage The technical conditions are defined by the Moscow Water and Sewage Company. *3 30 days no charge Agency: Moscow Water and Sewage Company - Mosvodokanal Request and obtain the development plan of land plot (GPZU) at the Moscow Architecture and City Planning Committee A one-stop shop has been implemented at the Moscow Architecture and City Planning Committee (MoskomArchitektura) in order to deal with all procedures related to land. BuildCo does not have to visit each agency in order to obtain the documents. 4 Rather, BuildCo applies for the copy of the development plan of 30 days no charge the land plot at MoskomArchitektura and they take care of all the steps. Agency: The Moscow Architecture and City Planning Committee Obtain compliance certificate from Moscow Water and Sewage Company BuildCo must obtain approval of the final construction design from the Moscow Water and Sewage Company, which will verify 30 days no charge 5 if the final design is in compliance with the technical conditions. Agency: Moscow Water and Sewage Company - Mosvodokanal Request and obtain permission for construction To obtain the building permit (permission for construction), BuildCo must submit the following documents to the Moscow State Committee of Construction Supervision: • Application form • Documents confirming title to the land • Town (planning) plan of land • Relevant project documentation 14 days no charge 6 After reforms implemented in 2006, the statutory time line of issuing the permit was reduced from 30 business days to 10 business. The permit is free of charge. Agency: Moscow State Committee of Construction Supervision Doing Business 2017 Russian Federation 35 Time to No. Procedure Cost to complete complete Request and obtain an opening order of production of works from the Union of Administrative Technical Inspections (UATI) The construction company must obtain an order of conducting of construction works and for building the utility networks. It is possible to obtain the order at once or in stages, individually for 7 each network and for each phase of construction. The list of 7 days no charge required document to apply for this order are listed on the website oati.mos.ru. The order must be closed after completion of construction works. Agency: Union of Administrative Technical Inspections (UATI) Receive control-geodesic survey from Mosgorgeotrest Prior to beginning the construction, Mosgorgeotrest conducts topographic and geodesic surveys (geodesic base, general construction plan). This is conducted in order to verify the *8 compliance of the project design documentation with the 1 day RUB 30,000 existing schemes of underground infrastructure lines. Agency: Mosgorgeotrest Receive random inspection during construction Construction activities are not interrupted during inspections. 9 1 day no charge Agency: Union of Administrative Technical Inspections (UATI) Connect to water and sewage services An agreement must be concluded between BuildCo and the Moscow Water and Sewage Company. The connection to water 10 service is then installed. 30 days RUB 109,259 Agency: Moscow Water and Sewage Company - Mosvodokanal Close the order on conducting of construction works from the Union of Administrative Technical Inspections (UATI) After the completion of construction works, it is mandatory to 0.5 days no charge 11 close the order on conducting of construction works from the Union of Administrative Technical Inspections (UATI). The request to close the order is submitted online at www.stroi.mos.ru. The documents that are required for the Doing Business 2017 Russian Federation 36 Time to No. Procedure Cost to complete complete closing of the order are requested by UATI through an online interaction with other agencies, without the involvement of the investor. The closing of the order can take up to 8 business days. However, the investor does not need to wait for for the order to be officially close before beginning other procedures, as submitting the request is sufficient. The requirement to submit the request online was introduced by Resolution of the Government of Moscow № 284-PP on May 19, 2015. Agency: Union of Administrative Technical Inspections (UATI) Request and receive the disposition on operation of building (occupancy permit) 12 14 days no charge Agency: Moscow State Committee of Construction Supervision Request and receive the technical plans / cadastre passports of the building 13 14 days RUB 40,000 Agency: Federal Agency for Technical Inventory Register the building after completion in Rosreestr According to the Russian Federation Civil Code, the right to own and "create" immovable things, including buildings, is subject to state registration at the Unified State Register of rights to immovable assets and associated transactions. 14 To complete the registration, BuildCo must submit an 14 days RUB 22,000 application, the real property plan, and approval of the building, confirming that real property has been built. Agency: Federal Service for State Registration, Cadastre and Cartography (Rosreestr) * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for dealing with construction permits in Russian Federation - Saint Petersburg Time to No. Procedure Cost to complete complete Doing Business 2017 Russian Federation 37 Time to No. Procedure Cost to complete complete Request a topographic survey of the land plot BuildCo must obtain a land survey at a scale of 1:500/1 by a specialized organization. A report is prepared as a result of the topographic survey 1 with a layout of the building and structure. 30 days RUB 100,000 Agency: Specialized Organization Request and obtain an engineering, geological and ecological survey of the land plot Information about conditions of the land plot (geological, geodesic and ecological) is needed for project design. There are 5 types of mandatory engineering surveys. All or a few of them are requested, depending on the land plot and surrounding territorial conditions. In 2 the Doing Business case, there could be 2 -- 3 types of surveys. 45 days RUB 100,000 Engineering surveys are performed by private companies which belong to self-regulated organizations (SRO). Agency: Licensed Private Company Request and obtain technical conditions for water and sewage After obtaining a topographic survey of the land plot and an engineering, geological, and ecological survey, BuildCo can obtain the technical conditions for water and sewage. According to the applicable regulations, the technical conditions should be provided within 16 *3 business days. However, in practice it takes about 45 days to obtain the 45 days no charge technical conditions for the water and sewage connection. Agency: Saint-Petersburg Water and Sewage Company (Vodokanal) Request and obtain the development plan of land plot Development plan of the land plot is a mandatory document, which is required in order to receive state expertise of project documentation and to obtain a building permit. It is also required at the end of the construction in order to obtain the occupancy certificate. After obtaining the technical conditions for water and sewage, the 4 applicant shall provide the land plot documents, preliminary drawings 30 days no charge of the proposed construction and constituent documents (registration documents and other supporting documentation verifying the legal status of BuildCo). Agency: Saint-Petersburg Architecture and City Planning Committee Doing Business 2017 Russian Federation 38 Time to No. Procedure Cost to complete complete Request terms of connection to utility networks and request a contract for water and sewage connection BuildCo submits the following documents to Vodokanal of Saint- Petersburg in order to request a water and sewage connection: - Copies of constituent documents (registration documents and other supporting documentation verifying the legal status of BuildCo) - Cadastral plan of the land 30 days no charge *5 - Technical conditions for water and sewage - Estimated balance of water consumption and wastewater usage - Topographic map of the land on a scale of 1:500 - Urban development plan for the land Agency: Saint-Petersburg Vodokanal Request and obtain permission for construction To obtain the building permit (permission for construction), BuildCo must submit the following documents to the State Agency of Construction Supervision and Expertise of Saint-Petersburg: • Application form • Documents confirming title to the land • Town (planning) plan of land 14 days no charge 6 • Relevant project documentation The permit is free of charge. Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg Request and obtain an opening order of production of works from the State Administrative Technical Inspectorate 7 14 days no charge Agency: State Administrative Technical Inspectorate Receive inspection from the State Agency of Construction Supervision and Expertise to check working conditions The State Agency of Construction Supervision and Expertise of Saint- Petersburg will generally perform one inspection during construction to check that the working conditions at the construction site are 8 appropriate for the workers and that there is temporary electricity, 1 day no charge running water, and safety mechanisms in place. Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg Doing Business 2017 Russian Federation 39 Time to No. Procedure Cost to complete complete Obtain connection to water and sewage services BuildCo signs the contract prepared by the water and sewage company and requests the date of connection to water and sewage services. The water and sewage company will provide the connection according to 30 days RUB 37,161 9 the date specified in the contract. Agency: Saint-Petersburg Vodocanal Close the order on conducting of construction works from the State Administrative Technical Inspectorate After the completion of construction works, it is mandatory to close the order on conducting of construction works from the State Administrative Technical Inspectorate. According to the Decree of the State administrative and technical inspection of the Government of St. Petersburg from January 22, 2008 N 4 "On Approval of Rules of earthwork, construction 16 days no charge 10 and repair work related to the improvement of St. Petersburg", the closing of the order on conducting of construction works shall be done within 12 business days (16 calendar days). Agency: State Administrative Technical Inspectorate Request and receive the disposition on operation of the building (occupancy permit) In order to obtain permission to use the building, it is necessary to apply to the State Agency of Construction Supervision and Expertise of Saint-Petersburg with the following documents: 1) land ownership documents 2) development plan of the land plot 3) building permit 4) a document confirming that the constructed building meets the 11 requirements of technical regulations signed by the person responsible 30 days no charge for conducting the construction works 5) a detailed map showing the location of the construction, location of the utility networks within the boundaries of the land plot and the schematic plan of the land plot. The document should be signed by the person responsible for conducting the construction works. Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg Request and obtain a technical plan of the building BuildCo has to provide technical and cadastral plans of the building in 12 order to be able to register the building at the Federal Service for State 20 days RUB 55,000 Registration, Cadastre and Cartography. Preparation of the technical plan of the building can be done by either Doing Business 2017 Russian Federation 40 Time to No. Procedure Cost to complete complete a licensed cadatstral engineer or the Bureau of Technical Inventory. The preparation of the technical plan can take from 10 to 30 days. Agency: Cadastral Engineers / Bureau of Technical Inventory Register the building at Rosreestr According to the Russian Federation Civil Code, the right to own and "create" immovable things, including buildings, is subject to state registration at the Unified State Register of rights to immovable assets 13 and associated transactions. 30 days RUB 22,000 Agency: Federal Service for State Registration, Cadastre and Cartography (Rosreestr) * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. . Doing Business 2017 Russian Federation 41 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Table 3.3 Summary of time quality control and safety mechanisms in Russian Federation Answer Score Answer (Saint Score (Saint (Moscow) (Moscow) Petersburg) Petersburg) Building quality control index (0-15) 10.0 10.0 Licensed Licensed Which third-party entities are required by law to verify architect; architect; that the building plans are in compliance with existing Licensed Licensed building regulations? (0-1) engineer. engineer. Quality of building regulations index (0-2) 2.0 2.0 Available 1.0 Available How accessible are building laws and regulations in your online; Free online; Free of 1.0 economy? (0-1) of charge. charge. List of 1.0 List of required required documents; Which requirements for obtaining a building permit are documents; Fees to be clearly specified in the building regulations or on any Fees to be 1.0 paid; accessible website, brochure or pamphlet? (0-1) paid; Required Required preapproval preapprovals. s. Quality control before construction index (0-1) 1.0 1.0 Licensed 1.0 Licensed Which third-party entities are required by law to verify architect; architect; that the building plans are in compliance with existing 1.0 Licensed Licensed building regulations? (0-1) engineer. engineer. Quality control during construction index (0-3) 2.0 2.0 Inspections 1.0 Inspections by by in-house in-house engineer; engineer; No What types of inspections (if any) are required by law to No inspections inspections 1.0 be carried out during construction? (0-2) are legally are legally required required during during construction. constructio Doing Business 2017 Russian Federation 42 Answer Score Answer (Saint Score (Saint (Moscow) (Moscow) Petersburg) Petersburg) n. Mandatory 1.0 Mandatory inspections inspections Do legally mandated inspections occur in practice during are always are always 1.0 construction? (0-1) done in done in practice. practice. Quality control after construction index (0-3) 0.0 0.0 Final 0.0 Final Is there a final inspection required by law to verify that inspection inspection is the building was built in accordance with the approved is not 0.0 not required plans and regulations? (0-2) required by by law. law. Final 0.0 Final inspection inspection Do legally mandated final inspections occur in practice? does not does not 0.0 (0-1) always always occur occur in in practice. practice. Liability and insurance regimes index (0-2) 1.0 1.0 Architect or 1.0 Architect or Which parties (if any) are held liable by law for structural engineer; engineer; flaws or problems in the building once it is in use (Latent 1.0 Constructio Construction Defect Liability or Decennial Liability)? (0-1) n company. company. No party is 0.0 Which parties (if any) are required by law to obtain an No party is required by insurance policy to cover possible structural flaws or required by law to 0.0 problems in the building once it is in use (Latent Defect law to obtain obtain Liability Insurance or Decennial Insurance)? (0-1) insurance . insurance . Professional certifications index (0-4) 4.0 4.0 Minimum 2.0 Minimum number of number of years of years of experience; experience; What are the qualification requirements for the University University professional responsible for verifying that the degree in degree in 2.0 architectural plans or drawings are in compliance with architecture architecture existing building regulations? (0-2) or or engineering engineering; ; Passing a Passing a certification certification exam. exam. What are the qualification requirements for the Minimum 2.0 Minimum professional who supervises the construction on the number of number of 2.0 ground? (0-2) years of years of experience; experience; Doing Business 2017 Russian Federation 43 Answer Score Answer (Saint Score (Saint (Moscow) (Moscow) Petersburg) Petersburg) University University degree in degree in engineering engineering, , construction constructio or n or construction constructio management; n Passing a manageme certification nt; Passing exam. a certification exam. Source: Doing Business database. Doing Business 2017 Russian Federation 44 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, Obtaining external installation works and as well as the time and cost to complete them. These possibly purchasing material for these works procedures include applications and contracts with Concluding any necessary supply contract and electricity utilities, clearances from other agencies obtaining final supply and the external and final connection works. In addition, this year Doing Business adds two new Time required to complete each procedure measures: the reliability of supply and transparency (calendar days) of tariffs index (included in the aggregate distance to Is at least 1 calendar day frontier score and ranking on the ease of doing Each procedure starts on a separate day business) and the price of electricity (omitted from these aggregate measures). The ranking of Does not include time spent gathering economies on the ease of getting electricity is information determined by sorting their distance to frontier Reflects the time spent in practice, with little scores for getting electricity. These scores are the follow-up and no prior contact with officials simple average of the distance to frontier scores for Cost required to complete each procedure (% each of the component indicators. To make the data of income per capita) comparable across economies, several assumptions are used. Official costs only, no bribes Excludes value added tax Assumptions about the warehouse The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business city. Duration and frequency of outages For 11 economies the data are also collected for Tools to monitor power outages the second largest business city. Tools to restore power supply  Is located in an area where similar warehouses are typically located. In this area a new electricity Regulatory monitoring of utilities’ performance connection is not eligible for a special investment Financial deterrents aimed at limiting outages promotion regime (offering special subsidization Transparency and accessibility of tariffs or faster service, for example). Price of electricity (cents per kilowatt-hour)*  Is located in an area with no physical constraints. For example, the property is not near a railway. Price based on monthly bill for commercial warehouse in case study  Is a new construction and is being connected to electricity for the first time. *Price of electricity is not included in the calculation of distance to frontier nor ease of doing business ranking The warehouse (continued): Doing Business 2017 Russian Federation 45  Has two stories, both above ground, with a total surface area of approximately 1,300.6 square Assumptions about the monthly consumption meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000  It is assumed that the warehouse operates 30 days square feet). a month from 9:00 a.m. to 5:00 p.m. (8 hours a day),  Is used for storage of goods. with equipment utilized at 80% of capacity on average and that there are no electricity cuts Assumptions about the electricity connection (assumed for simplicity reasons).  The monthly energy consumption is 26,880 The electricity connection: kilowatt-hours (kWh); hourly consumption is 112  Is a permanent one. kWh.  Is a three-phase, four-wire Y connection with a  If multiple electricity suppliers exist, the warehouse subscribed capacity of 140-kilo-volt-ampere is served by the cheapest supplier. (kVA) with a power factor of 1, when 1 kVA = 1  Tariffs effective in March of the current year are kilowatt (kW). used for calculation of the price of electricity for the  Has a length of 150 meters. The connection is to warehouse. Although March has 31 days, for either the low- or medium-voltage distribution calculation purposes only 30 days are used. network and is either overhead or underground, whichever is more common in the area where the warehouse is located Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base Doing Business 2017 Russian Federation 46 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection business city of an economy, except for 11 economies for in Russian Federation? According to data collected by which the data are a population-weighted average of the Doing Business, getting electricity there requires 3.0 2 largest business cities. See the chapter on distance to procedures, takes 160.5 days and costs 44.1% of income frontier and ease of doing business ranking at the end of per capita (figure 4.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 4.1 What it takes to obtain an electricity connection in Russian Federation - Moscow Doing Business 2017 Russian Federation 47 What it takes to obtain an electricity connection in Russian Federation - Saint Petersburg Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 Russian Federation 48 GETTING ELECTRICITY Globally, Russian Federation stands at 30 in the ranking perspective in assessing how easy it is for an of 190 economies on the ease of getting electricity entrepreneur in Russian Federation to connect a (figure 4.2). The rankings for comparator economies and warehouse to electricity. the regional average ranking provide another Figure 4.2 How Russian Federation and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2017 Russian Federation 49 GETTING ELECTRICITY Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in Russian practices and internal wiring installations. In an effort to Federation (table 4.1)? Table 4.1 How has Russian Federation made getting electricity easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russian Federation made getting electricity less costly by DB2012 revising the tariffs for connection. Russia made getting electricity simpler and less costly by DB2014 setting standard connection tariffs and eliminating many procedures previously required. Russia made the process of obtaining an electricity connection simpler, faster and less costly by eliminating a meter DB2016 inspection by electricity providers and revising connection tariffs. This reform applies to both Moscow and St. Petersburg. Source: Doing Business database. Doing Business 2017 Russian Federation 50 GETTING ELECTRICITY What are the details? The indicators reported here for Russian Federation are OBTAINING AN ELECTRICITY CONNECTION* based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— identified by Doing Business. Data are collected from the distribution utility, then completed and verified by electricity regulatory agencies and independent Name of utility - Moscow: MOESK professionals such as electrical engineers, electrical contractors and construction companies. The electricity distribution utility surveyed is the one serving the area Name of utility - Saint Petersburg: Lenenergo (Ленэнерго) (or areas) in which warehouses are located. If there is a choice of distribution utilities, the one serving the largest number of customers is selected. Price of electricity (US cents per kWh) - 9.7 The procedures are those that apply to a warehouse and Moscow: electricity connection matching the standard assumptions used by Doing Business in collecting the Price of electricity data (see the section in this chapter on what the (US cents per kWh) - 10.0 indicators cover). The procedures, along with the Saint Petersburg: associated time and cost, are summarized below. City: Moscow, Saint Petersburg *Price is calculated as a monthly consumption of 26,880 kWh for business customers, based on a standardized case study adopted by the Getting Electricity methodology. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. Table 4.2 Summary of time, cost and procedures for getting electricity in Russian Federation Time to No. Procedure Cost to complete complete Submit application to MOESK, await technical conditions and sign connection contract The application is submitted electronically through the “Personal cabinet” internet portal on technological connection on the MOESK website http://utp.moesk.ru/my/ without visiting the client services 1 office, along with doing a preliminary calculation of the connection cost 15 calendar days RUB 200,000 online. The application should be supported by the documents required by the utility, including internal wiring and equipment location plan, justification of the requested capacity, copy of the license of the firm which prepared the plan, documents certifying the legal status of the customer. Within 7 days after receiving the connection application MOESK provides Doing Business 2017 Russian Federation 51 Time to No. Procedure Cost to complete complete the customer with technical conditions for connection along with signed connection and supply contracts. All the documents are available online in the “Personal cabinet”, where those can be signed electronically, if the customer has a digital signature. Alternatively those can be sent to the customer via free courier service for signing. On every stage of the application processing, the applicant receives a text-message notification to the cellular phone indicated on the application form. It is also possible to track the status of the application by visiting the online “Personal cabinet”. Upon signing the connection contract the customer makes the payment of the connection cost. Since September 1, 2015 MOESK offers the customers an option of paying the connection cost by installments over up to 3 years without charging any interest on the amount. Agency: MOESK Await completion of external works by MOESK Upon having the connection contract signed by the customer, the utility prepares project design for building a network for connection and obtain all approvals for construction work (such as, a permit required for the laying of underground or overhead lines), and carry out all the external works according to the contract and the technical conditions. Before energizing, utility checks the readiness of the internal network and equipment of the customer, including the meter and sealing it, to receive electric energy. If there are no any issues on the customer side, the utility energizes the object and provided the customer with the final set of documents, including the technological connection act, the balance inventory act and attachments to the supply contract. 2 114 calendar days RUB 0 Utility performs all work up to the land boundaries of the applicant and assumes the responsibility of the performed work, and the customer is responsible for the performance of work within the boundaries of their plot. The customer is responsible for having the internal network ready with all the necessary equipment installed, including the metering equipment. The customers have a right to design and build the internal network with their own resources, or can outsource that to a specialized electric company/utility under a separate contract. Agency: MOESK Sign supply contract with Mosenergosbyt Customer visits Mosenergosbyt to conclude a supply contract. 21 calendar days RUB 0 3 From February, 2014 it became possible to select a preferred supplier in Doing Business 2017 Russian Federation 52 Time to No. Procedure Cost to complete complete the application form for a technological connection. Agency: Mosenergosbyt * Takes place simultaneously with previous procedure. Source: Doing Business database. Summary of time, cost and procedures for getting electricity in Russian Federation - Saint Petersburg Time to No. Procedure Cost to complete complete Submit application to Lenenergo and await technical conditions and connection contract The application is submitted electronically through the “Personal cabinet” internet portal on technological connection on the Lenenergo website https://lkk.lenenergo.ru/SiteAssets/tags.aspx without visiting the client services office, along with doing a preliminary calculation of the connection cost online. The application should be supported by the documents required by the utility, including internal wiring and equipment location plan, justification of the requested capacity, copy of the license of the firm which prepared the plan, documents certifying the legal status of the customer. Within 7 days after receiving the connection application Lenenergo provides the customer with technical conditions for connection along 15 calendar days RUB 322,724 1 with signed connection and supply contracts. All the documents are available online in the “Personal cabinet”, where those can be signed electronically, if the customer has a digital signature. Alternatively those can be sent to the customer via free courier service for signing. On every stage of the application processing, the applicant receives a text-message notification to the cellular phone indicated on the application form. It is also possible to track the status of the application by visiting the online “Personal cabinet”. Upon signing the connection contract the customer makes the payment of the connection cost. Agency: Lenenergo Await completion of external works by Lenenergo Upon having the connection contract signed by the customer, the utility prepares project design for building a network for connection and obtain all approvals for construction work (such as, a permit required for the 2 laying of underground or overhead lines), and carry out all the external 140 calendar days RUB 0 works according to the contract and the technical conditions. Before energizing, utility checks the readiness of the internal network and equipment of the customer to receive electric energy. If there are no any issues on the customer side, the utility energizes the object and provided the customer with the final set of documents, including the Doing Business 2017 Russian Federation 53 Time to No. Procedure Cost to complete complete technological connection act, the balance inventory act and attachments to the supply contract. Utility performs all work up to the land boundaries of the applicant and assumes the responsibility of the performed work, and the customer is responsible for the performance of work within the boundaries of their plot. The customer is responsible for having the internal network ready with all the necessary equipment installed, including the metering equipment. The customers have a right to design and build the internal network with their own resources, or can outsource that to a specialized electric company/utility under a separate contract. Agency: Lenenergo Sign supply contract and await supply of electricity After all inspections are completed the customer submits documents required for conclusion of an electricity supply contract. After the contract is signed the supply utility sends an order to the distribution utility to turn on the electricity. 3 30 calendar days RUB 0 From February, 2014 it became possible to select a preferred supplier in the application form for a technological connection. Agency: Saint Petersburg Supply Company * Takes place simultaneously with previous procedure. Source: Doing Business database. Doing Business 2017 Russian Federation 54 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in Russian Federation Answer Score Answer Score (Saint (Moscow) (Moscow) (Saint Petersburg) Petersburg) Reliability of supply and transparency of tariff index 8.0 8.0 (0-8) Total duration and frequency of outages per customer 3.0 3.0 a year (0-3) System average interruption duration index (SAIDI) 0.01 0.01 System average interruption frequency index (SAIFI) 0.01 0 Mechanisms for monitoring outages (0-1) 1.0 1.0 Does the distribution utility use automated tools to Yes Yes monitor outages? Mechanisms for restoring service (0-1) 1.0 1.0 Does the distribution utility use automated tools to Yes Yes restore service? Regulatory monitoring (0-1) 1.0 1.0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Financial deterrents aimed at limiting outages (0-1) 1.0 1.0 Doing Business 2017 Russian Federation 55 Answer Score Answer Score (Saint (Moscow) (Moscow) (Saint Petersburg) Petersburg) Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages Yes Yes exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.0 1.0 Are effective tariffs available online? Yes Yes http://www .pesc.ru/for http://www.m _clients/dis osenergosbyt closure_of_i .ru/website/fa nformation ces/legals/tar /St_Petersb iffs-n- urg/ Link to the website, if available online prices?_adf.ct rl- state=11iei8i http://www dwi_17&_afrL .pesc.ru/for oop=457846 _clients/dis 438209203& closure_of_i nformation /len_obl/ Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? Price of electricity (US cents per kWh) 9.7 10.0 Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March (for 11 economies the data are also collected for the second largest business city). As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of- use tariff is available. Doing Business 2017 Russian Federation 56 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and perform . The parties (buyer and seller): general commercial activities in the economy’s largest business city.  Are limited liability companies, 100% domestically and privately owned and perform general  Have 50 employees each, all of whom are commercial activities in the economy’s largest nationals. business city. The property (fully owned by the seller):  Have 50 employees each, all of whom are nationals.  Has a value of 50 times income per capita. The The property (fully owned by the seller): sale price equals the value and entire property will be transferred.  Has a value of 50 times income per capita. The sale price equals the value and entire property will be  Is registered in the land registry or cadastre, or transferred. both, and is free of title disputes.  Is registered in the land registry or cadastre, or both, Is located in a periurban commercial zone, and no and is free of title disputes. rezoning is required. Doing Business 2017 Russian Federation 57 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Russian Federation? According to data collected by business city of an economy, except for 11 economies for Doing Business, registering property there requires 3.0 which the data are a population-weighted average of the procedures, takes 15.0 days and costs 0.2% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). The score on the quality of frontier and ease of doing business ranking at the end of land administration index is 26.0 this profile for more details. Figure 5.1 What it takes to register property in Russian Federation - Moscow What it takes to register property in Russian Federation - Saint Petersburg Doing Business 2017 Russian Federation 58 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 Russian Federation 59 REGISTERING PROPERTY Globally, Russian Federation stands at 9 in the ranking of the regional average ranking provide other useful 190 economies on the ease of registering property information for assessing how easy it is for an (figure 5.2). The rankings for comparator economies and entrepreneur in Russian Federation to transfer property. Figure 5.2 How Russian Federation and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2017 Russian Federation 60 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Russian Federation (table 5.1)? Table 5.1 How has Russian Federation made registering property easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia made registering property transfers easier by DB2012 eliminating the requirement to obtain cadastral passports on land plots. Russia made transferring property easier by streamlining DB2014 procedures and implementing effective time limits for processing transfer applications. The Russian Federation made transferring property easier by eliminating the requirement for notarization and introducing DB2015 tighter time limits for completing the property registration. This reform applies to both Moscow and St. Petersburg. Russia made transferring property easier by reducing the time DB2016 required for property registration. This reform applies to both Moscow and St. Petersburg. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 61 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: 26851637.1 notaries and property registries. These procedures are those that apply to a transaction matching the Moscow, Saint City: standard assumptions used by Doing Business in Petersburg collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Russian Federation Moscow Time to No. Procedure Cost to complete complete Buyer checks for encumbrances on property at the Federal Service for State Registration, Cadastre and Cartography Even though not mandatory by law, in practice most buyers do check for non-encumbrances on the property to prove the validity of the seller's title. The complete information on the property (ownership rights, encumbrances) can be obtained by the Buyer in two ways with equal RUB 600 (for a legal power of each. In a form of the official document provided by the hard copy) and authorized agency (Rosreestr) and in electronic format. RUB 300 (electronic Less than a day document); According to the Federal Law №122 the registration authority upon the (electronic official request for information on a property shall provide an official RUB 900 (for document); hard copy document with all information available in the Unified State extraterritorial 5 working days Register of Real Estate Property within five (5 working) days. request of hard 1 (hard copy) copy document (in (simultaneous another region)); with procedure 2) Alternatively, checking and verification ownership rights of the seller can RUB 400 (for be performed on-line on the main web page of the Federal Service for extraterritorial State Registration, Cadastre and Cartography (www.rosreestr.ru). request of electronic document ). The Buyer can also obtain a paper copy of the extract from Real Estate Property Register by making an application as individual (not the legal entity) with the cost being RUB 200. There is also an option to access the information resource of Rosreestr: any individual or legal entity may obtain an electronic extract from the Property Register and verify ownership title to any real estate facility and existence of encumbrances, if any. Doing Business 2017 Russian Federation 62 Time to No. Procedure Cost to complete complete The procedure includes the following steps: 1) obtaining an electronic access key (free of charge); 2) refilling one's account with the help of a credit card for a minimum sum of RUB 100; 3) receiving the electronic extract from the Property Register within a day with the charge being RUB 1 for one query. Agency: Federal Service of State Registration, Cadastre and Cartography (Rosreestr) Check for legal status and current conditions of the buyer at the Unified State Register of Legal Entities Electronic Legal entities will obtain extracts from the Unified State Register of Legal Less than a day document - no Entities, officially managed and maintained by the Federal Tax Service (online charge. (FNS) (http://egrul.nalog.ru/#). Although Russian legislation does not procedure); establish the term of validity for the extracts, in practice most state Regular authorities accept the extracts issued not earlier than 30 days before Official documents procedure - 5 their submission to the respective state authority. in hard copy - RUB working days, 200 (regular *2 and procedure - 5 Expedited Since 2015 the official information on the legal status of a legal entity working days) or procedure - 1 became available in a form of the official electronic extract with RUB 400 encrypted digital signature of FNS on its official website: working day (expedited https://service.nalog.ru/vyp/. The statutory term for obtaining the official (simultaneous procedure - 1 electronic extract is the same as for the official hard copy extract (not with procedures working day) more than 5 days). 1) Agency: Federal Tax Service (FNS) Apply for state registration of title transfer in the Unified State Register of Rights to Real Estate The state registration of title transfer shall be completed within 10 business days since obtaining an application and relevant documents in either (i) hard copies, or (ii) electronic format. 10 working days RUB 44,000: RUB 7 working days 22,000 (building) + 3 In addition to the submission of the application in a hard copy, since (online RUR 22,000 (land 2013 the application together with all relevant documents can be registration) plot transfer) submitted in an electronic format, using the following link: http://rosreestr.ru/wps/portal/cc_ib_electronic_state_rights#/. However, the online application for the registration of the property transfer is subject to the special requirements set forth by the Order No. 723 of the Ministry of Economic Development and Trade dated 29 Doing Business 2017 Russian Federation 63 Time to No. Procedure Cost to complete complete November 2013. For example, all documents submitted online be signed by the encrypted digital signature of a relevant person. In practice, submission of documents in electronic format is not frequent because there are not many legal entities/individuals who have the encrypted digital signature software. Agency: Federal Service of State Registration, Cadastre and Cartography (Rosreestr) * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for registering property in Russian Federation Saint Petersburg Time to No. Procedure Cost to complete complete Buyer checks for encumbrances on property at the Federal Service for State Registration, Cadastre and Cartography Even though not mandatory by law, in practice most buyers do check for RUB 600 (for a non-encumbrances on the property to prove the validity of the seller's hard copy) and title. The complete information on the property (ownership rights, RUB 300 encumbrances) can be obtained by the Buyer in two ways with equal (electronic legal power of each. In a form of the official document provided by the Less than a day authorized agency (Rosreestr) and in electronic format. document); (electronic RUB 900 (for document); extraterritorial 5 working days 1 According to the Federal Law №122 the registration authority upon the request of a hard (hard copy) official request for information on a property shall provide an official copy document (in (simultaneous hard copy document with all information available in the Unified State another region)); with procedure 2) Register of Real Estate Property within five (5 working) days. RUB 400 (for Alternatively, checking and verification ownership rights of the seller can extraterritorial be performed on-line on the main web page of the Federal Service for request of State Registration, Cadastre and Cartography (www.rosreestr.ru). electronic document ). Agency: Federal Service of State Registration, Cadastre and Cartography (Rosreestr) Check for legal status and current conditions of the buyer at the Less than a day Electronic Unified State Register of Legal Entities (online document - no procedure); charge. Legal entities will obtain extracts from the Unified State Register of Legal Regular Entities, officially managed and maintained by the Federal Tax Service *2 procedure - 5 Official documents (FNS) (http://egrul.nalog.ru/#). Although Russian legislation does not establish the term of validity for the extracts, in practice most state working days, in hard copy - RUB authorities accept the extracts issued not earlier than 30 days before and 200 (regular their submission to the respective state authority. Expedited procedure - 5 procedure - 1 working days) or Doing Business 2017 Russian Federation 64 Time to No. Procedure Cost to complete complete Since 2015 the official information on the legal status of a legal entity working day RUB 400 became available in a form of the official electronic extract with (simultaneous (expedited encrypted digital signature of FNS on its official website: with procedures procedure - 1 https://service.nalog.ru/vyp/. The statutory term for obtaining the official 1) working day) electronic extract is the same as for the official hard copy extract (not more than 5 days). Agency: Unified State Register of Legal Entities Apply for state registration of title transfer in the Unified State Register of Rights to Real Estate The state registration of title transfer shall be completed within 10 business days since obtaining an application and relevant documents in either (i) hard copies, or (ii) electronic format. In addition to the submission of the application in a hard copy, since 2013 the application together with all relevant documents can be submitted in an electronic format, using the following link: http://rosreestr.ru/wps/portal/cc_ib_electronic_state_rights#/. RUB 44,000: RUB 10 working days 22,000 (building) + 7 working days 3 However, the online application for the registration of the property RUR 22,000 (land (online transfer is subject to the special requirements set forth by the Order No. plot transfer) registration) 723 of the Ministry of Economic Development and Trade dated 29 November 2013. For example, all documents submitted online be signed by the encrypted digital signature of a relevant person. In practice, submission of documents in electronic format is not frequent because there are not many legal entities/individuals who have the encrypted digital signature software. Agency: Federal Service of State Registration, Cadastre and Cartography (Rosreestr) * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2017 Russian Federation 65 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in Russian Federation Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) Quality of the land administration index (0-30) 26.0 26.0 Reliability of infrastructure index (0-8) 8.0 8.0 Directorate General of the Federal Departmen Service of t of Federal State Service of Registration, Registratio What is the institution in charge of immovable Cadastre and n, Cadastre property registration? Cartography and in Moscow Cartograph (Directorate y in St. General of Petersburg Rosreestr in Moscow) In what format are the majority of title or deed records Computer/Ful Computer/ kept in the largest business city—in a paper format or in 2.0 2.0 ly digital Fully digital a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions and the Yes 1.0 Yes 1.0 like)? In what format are the majority of maps of land plots Computer/Ful Computer/ kept in the largest business city—in a paper format or in 2.0 2.0 ly digital Fully digital a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral Yes 1.0 Yes 1.0 information (geographic information system)? Doing Business 2017 Russian Federation 66 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) Is the information recorded by the immovable property Different Different registration agency and the cadastral or mapping databases 1.0 databases 1.0 agency kept in a single database, in different but linked but linked but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same Yes 1.0 Yes 1.0 identification number for properties? Transparency of information index (0–6) 6.0 6.0 Who is able to obtain information on land ownership at Freely Freely the agency in charge of immovable property accessible by 1.0 accessible 1.0 registration in the largest business city? anyone by anyone Is the list of documents that are required to complete any type of property transaction made publicly Yes, online 0.5 Yes, online 0.5 available–and if so, how? https://rosr https://rosree eestr.ru/site str.ru/site/fiz/ /fiz/zaregist zaregistrirova rirovat- t- nedvizhimo nedvizhimoe- e- imushchestvo imushchest - vo- Link for online access: /predstavleni /predstavle e- nie- dokumentov- dokumento na- v-na- gosudarstven gosudarstv nuyu- ennuyu- registraciyu- registraciyu prav/ -prav/ Is the applicable fee schedule for any property transaction at the agency in charge of immovable Yes, online 0.5 Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? https://rosree str.ru/site/ur/ https://rosr zaregistrirova eestr.ru/site Link for online access: t- /fiz/zaregist nedvizhimoe- rirovat- imushchestvo nedvizhimo -/?price e- Doing Business 2017 Russian Federation 67 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) imushchest vo-/?price Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property ownership within a Yes, online 0.5 Yes, online 0.5 specific time frame–and if so, how does it communicate the service standard? https://rosree https://rosr str.ru/site/fiz/ eestr.ru/site zaregistrirova /fiz/zaregist Link for online access: t- rirovat- nedvizhimoe- nedvizhimo imushchestvo e- -/ imushchest vo-/ Is there a specific and separate mechanism for filing complaints about a problem that occurred at the Yes 1.0 Yes 1.0 agency in charge of immovable property registration? https://rosree https://rosr str.ru/wps/po eestr.ru/wp Contact information: rtal/p/cc_ib_s s/portal/cc_ upport/cc_ib_ ib_complai complaint nt Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 Yes 0.5 registration agency? Number of property transfers in the largest business 25039034 144000 city in 2015: Freely Freely Who is able to consult maps of land plots in the largest accessible by 0.5 accessible 0.5 business city? anyone by anyone Is the applicable fee schedule for accessing maps of Yes, online 0.5 Yes, online 0.5 land plots made publicly available—and if so, how? https://rosree https://rosr str.ru/site/ur/ eestr.ru/site Link for online access: poluchit- /fiz/poluchi svedeniya-iz- t- gkn/?price svedeniya- iz- Doing Business 2017 Russian Federation 68 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) gkn/?price Does the cadastral or mapping agency commit to delivering an updated map within a specific time Yes, online 0.5 Yes, online 0.5 frame—and if so, how does it communicate the service standard? https://rosree str.ru/site/ur/ http://rosre poluchit- estr.ru/wps svedeniya-iz- Link for online access: /portal/cc_ gkn/ gkn_form_n http://maps.r ew osreestr.ru/P ortalOnline/ Is there a specific and separate mechanism for filing complaints about a problem that occurred at the Yes 0.5 Yes 0.5 cadastral or mapping agency? Geographic coverage index (0–8) 4.0 4.0 Are all privately held land plots in the economy No 0.0 No 0.0 formally registered at the immovable property registry? Are all privately held land plots in the largest business city formally registered at the immovable property Yes 2.0 Yes 2.0 registry? Are all privately held land plots in the economy No 0.0 No 0.0 mapped? Are all privately held land plots in the largest business Yes 2.0 Yes 2.0 city mapped? Land dispute resolution index (0–8) 8.0 8.0 Does the law require that all property sale transactions be registered at the immovable property registry to Yes 1.5 Yes 1.5 make them opposable to third parties? Is the system of immovable property registration Yes 0.5 Yes 0.5 subject to a state or private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction based on erroneous Yes 0.5 Yes 0.5 information certified by the immovable property registry? Doing Business 2017 Russian Federation 69 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) Does the legal system require a control of legality of the documents necessary for a property transaction Yes 0.5 Yes 0.5 (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of Registrar; Registrar. the documents? Notary. Does the legal system require verification of the Yes 0.5 Yes 0.5 identity of the parties to a property transaction? If yes, who is responsible for verifying the identity of Registrar; Registrar. the parties? Notary. Is there a national database to verify the accuracy of Yes 1.0 Yes 1.0 identity documents? State Commercia l For a standard land dispute between two local ('Arbitrazhn businesses over tenure rights of a property worth 50 Arbitration y") Court times gross national income (GNI) per capita and Court of the for St. located in the largest business city, what court would be Moscow city Petersburg in charge of the case in the first instance? and Leningrad Region) How long does it take on average to obtain a decision Less than a Less than a from the first-instance court for such a case (without 3.0 3.0 year year appeal)? Are there any statistics on the number of land disputes Yes 0.5 Yes 0.5 in the first instance? 23115 disputes concerning property 53 069 Number of land disputes in the largest business city in rights (0,03 2015: registration percent) 715950 disputes over land. Equal access to property rights index (-2–0) 0.0 0.0 Do unmarried men and unmarried women have equal Yes 0.0 Yes 0.0 ownership rights to property? Doing Business 2017 Russian Federation 70 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) Do married men and married women have equal Yes 0.0 Yes 0.0 ownership rights to property? Source: Doing Business database. Doing Business 2017 Russian Federation 71 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view and consider a potential borrower’s Strength of legal rights index (0–12) financial history (positive or negative) when assessing Rights of borrowers and lenders through risk and they allow borrowers to establish a good collateral laws credit history that will facilitate their access to credit. Protection of secured creditors’ rights through Sound collateral laws enable businesses to use their bankruptcy laws assets, especially movable property, as security to generate capital—while strong creditors’ rights have Depth of credit information index (0–8) been associated with higher ratios of private sector Scope and accessibility of credit information credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting credit Notes section of the Doing Business 2017 report). is determined by sorting their distance to frontier These scenarios assume that the borrower: scores for getting credit. These scores are the distance to frontier score for the strength of legal rights index  Is a domestic limited liability company. and the depth of credit information index.  Has its headquarters and only base of operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2017 Russian Federation 72 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Russian Federation stands at 44 in the ranking and bankruptcy laws in Russian Federation facilitate of 190 economies on the ease of getting credit (figure access to credit? The economy has a score of 7.0 on the 6.1). The rankings for comparator economies provide depth of credit information index and a score of 6.0 on useful information for assessing how well regulations the strength of legal rights index (see the summary of and institutions in Russian Federation support lending scoring at the end of this chapter for details). Higher and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Russian Federation and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2017 Russian Federation 73 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Russian Federation and shows the scores indicators into context is to see where the economy for comparator economies as well as the regional stands in the distribution of scores across economies. average score. Figure 6.3 shows the same for the depth Figure 6.2 highlights the score on the strength of legal of credit information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 Russian Federation 74 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Russian Federation (table 6.1)? Table 6.1 How has Russian Federation made getting credit easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia improved access to credit by adopting a new law on secured transactions that established a centralized collateral DB2016 registry and allows a general description of a combined category of assets granted as collateral. This reform applies to both Moscow and St. Petersburg. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 75 GETTING CREDIT What are the details? The getting credit indicators reported here for Russian The data on the legal rights of borrowers and lenders are Federation are based on detailed information collected gathered through a survey of financial lawyers and in that economy. The data on credit information sharing verified through analysis of laws and regulations as well are collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Moscow Saint Petersburg Strength of legal rights index (0–12) Index score: 6.0 Index score: 6.0 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional 0 0 equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description 0 0 of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of 1 1 collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the 0 0 original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between 1 1 parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non- incorporated entities, that is unified geographically and by asset type, with 1 1 an electronic database indexed by debtor's name? Can banks and financial institutions access borrowers’ credit information online (for example, through a web interface, a system-to-system 0 0 connection or both)? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any 0 0 interested third party? Are secured creditors paid first (i.e. before tax claims and employee 1 1 claims) when a debtor defaults outside an insolvency procedure? Doing Business 2017 Russian Federation 76 Moscow Saint Petersburg Strength of legal rights index (0–12) Index score: 6.0 Index score: 6.0 Are secured creditors paid first (i.e. before tax claims and employee 1 1 claims) when a business is liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law 0 0 protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor 1 1 to sell the collateral through public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 7.0 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - No No 0 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes No 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their Yes No 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes No 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 Russian Federation 77 Coverage Credit bureau Credit registry Number of individuals 76,000,000 0 Number of firms 1,700,000 0 Total 77,700,000 0 Total percentage of adult population 77.2 0.0 Source: Doing Business database. Doing Business 2017 Russian Federation 78 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions; Disclosure requirements for related- What do the indicators cover? party transactions Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold indicators and shareholders’ rights in corporate interested directors liable for prejudicial related- governance through another. The ranking of economies party transactions; Available legal remedies on the strength of minority investor protections is (damages, disgorgement of profits, fines, determined by sorting their distance to frontier scores imprisonment, rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange If the Extent of shareholder rights index (0-10) number of publicly traded companies listed on that Shareholders’ rights and role in major corporate exchange is less than 10, or if there is no stock decisions exchange in the economy, it is assumed that Buyer is a large private company with multiple Extent of ownership and control index (0-10) shareholders. Governance safeguards protecting shareholders  Has a board of directors and a chief executive from undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer Extent of corporate transparency index (0-10) where permitted, even if this is not specifically required by law. Corporate transparency on ownership stakes,  Has a supervisory board (applicable to economies compensation, audits and financial prospects with a two-tier board system) on which 60% of the Extent of shareholder governance index shareholder-elected members have been appointed (0–10) by Mr. James, who is Buyer’s controlling Simple average of the extent of shareholders rights, shareholder and a member of Buyer’s board of extent of ownership and control and extent of directors. corporate transparency indices  Has not adopted any bylaws or articles of Strength of minority investor protection association that differ from default minimum index (0–10) standards and does not follow any nonmandatory codes, principles, recommendations or guidelines Simple average of the extent of conflict of interest regulation and extent of shareholder governance relating to corporate governance. indices Doing Business 2017 Russian Federation 79  Is a manufacturing company with its own distribution network. The transaction involves the following details:  Mr. James owns 60% of Buyer and elected two directors to Buyer’s five-member board.  Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.  The proposed transaction is part of the company’s ordinary course of business and is not outside the authority of the company.  Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made (that is, the transaction is not fraudulent).  The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Doing Business 2017 Russian Federation 80 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Russian Federation? The economy has a not measure all aspects related to the protection of score of 6.0 on the strength of minority investor minority investors, a higher ranking does indicate that an protection index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, Russian Federation stands at 53 in the ranking of 190 economies on the strength of minority investor Figure 7.1 How Russian Federation and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2017 Russian Federation 81 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for Russian Federation. Figure 7.2 Summary of the various minority investor protection indices for Russian Federation and comparator economies. Source: Doing Business database. Doing Business 2017 Russian Federation 82 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported of conditions relating to disclosure, director liability, here for Russian Federation are based on detailed shareholder suits, shareholder rights, ownership and information collected through a survey of corporate and control and corporate transparency in a standard case securities lawyers about securities regulations, company study (for more details, see the Data Notes section of the laws and court rules of evidence and procedure. To Doing Business 2017 report). The summary below shows construct the six indicators on minority investor the details underlying the scores for Russian Federation. protection, scores are assigned to each based on a range Table 7.2 Summary of scoring for the protecting minority investors indicators in Russian Federation Answer Score Answer (Saint Score (Saint (Moscow) (Moscow) Petersburg) Petersburg) Strength of minority investor protection index (0-10) 6.0 6.0 Extent of conflict of interest regulation index (0-10) 5.0 5.0 Extent of disclosure index (0-10) 6.0 6.0 Shareholders Shareholders Which corporate body is legally sufficient to approve the excluding excluding 3.0 3.0 Buyer-Seller transaction? (0-3) interested interested parties parties Existence of a Existence of a Must Mr. James disclose his conflict of interest to the board conflict without 1.0 conflict without 1.0 of directors? (0-2) any specifics any specifics Disclosure on Must Buyer disclose the transaction in published periodic Disclosure on the 1.0 the transaction 1.0 filings (annual reports)? (0-2) transaction only only Disclosure on Must Buyer immediately disclose the transaction to the Disclosure on the 1.0 the transaction 1.0 public and/or shareholders? (0-2) transaction only only Must an external body review the terms of the transaction No 0.0 No 0.0 before it takes place? (0-1) Extent of director liability index (0-10) 2.0 2.0 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively for the damage the transaction Yes 1.0 Yes 1.0 caused to Buyer? (0-1) Can shareholders hold the interested director liable for the Not liable 0.0 Not liable 0.0 damage the transaction caused to Buyer? (0-2) Can shareholders hold the other directors liable for the Liable if Liable if negligent 1.0 1.0 damage the transaction caused to Buyer (0-2) negligent Must Mr. James pay damages for the harm caused to Buyer No 0.0 No 0.0 upon a successful claim by shareholders? (0-1) Must Mr. James repay profits made from the transaction No 0.0 No 0.0 upon a successful claim by shareholders? (0-1) Is Mr. James disqualifed or fined and imprisoned upon a No 0.0 No 0.0 successful claim by shareholders? (0-1) Only in case of Can a court void the transaction upon a successful claim by Only in case of 0.0 fraud or bad 0.0 shareholders? (0-2) fraud or bad faith faith Doing Business 2017 Russian Federation 83 Ease of shareholder suits index (0-10) 7.0 7.0 Before suing can shareholders representing 10% of Buyer's No 0.0 No 0.0 share capital inspect the transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant Any relevant Any relevant 3.0 3.0 and witnesses at trial? (0-3) document document Can the plaintiff request categories of documents from the No 0.0 No 0.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 Yes 2.0 witnesses at trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1.0 Yes 1.0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if Yes if successful 1.0 1.0 the company? (0-2) successful Extent of shareholder governance index (0-10) 7.0 7.0 Extent of shareholder rights index (0-10) 8.0 8.0 Does the sale of 51% of Buyer's assets require shareholder Yes 1.0 Yes 1.0 approval? Can shareholders representing 10% of Buyer's share capital Yes 1.0 Yes 1.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it No 0.0 No 0.0 issues new shares? Do shareholders automatically receive preemption rights Yes 1.0 Yes 1.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 Yes 1.0 external auditor? Are changes to the rights of a class of shares only possible if No 0.0 No 0.0 the holders of the affected shares approve? Assuming that Buyer is a limited company, does the sale of Yes 1.0 Yes 1.0 51% of its assets require member approval? Assuming that Buyer is a limited company, can members representing 10% call for an extraordinary meeting of Yes 1.0 Yes 1.0 members? Assuming that Buyer is a limited company, must all members Yes 1.0 Yes 1.0 consent to add a new member? Assuming that Buyer is a limited company, must a member first offer to sell his interest to the existing members before Yes 1.0 Yes 1.0 selling to a non-member? Extent of ownership and control index (0-10) 5.0 5.0 Is it forbidden to appoint the same individual as CEO and Yes 1.0 Yes 1.0 chair of the board of directors? Must the board of directors include independent and No 0.0 No 0.0 nonexecutive board members? Can shareholders remove members of the board of directors Yes 1.0 Yes 1.0 without cause before the end of their term? Must the board of directors include a separate audit No 0.0 No 0.0 committee exclusively comprising board members? Must a potential acquirer make a tender offer to all Yes 1.0 Yes 1.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by Yes 1.0 Yes 1.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its No 0.0 No 0.0 parent company? Doing Business 2017 Russian Federation 84 Assuming that Buyer is a limited company, is there a No 0.0 No 0.0 management deadlock breaking mechanism? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum period set by law after Yes 1.0 Yes 1.0 the declaration date? Extent of corporate transparency index (0-10) 8.0 8.0 Must Buyer disclose direct and indirect beneficial ownership Yes 1.0 Yes 1.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 Yes 1.0 primary employment? Must Buyer disclose the compensation of individual No 0.0 No 0.0 managers? Must a detailed notice of general meeting be sent 21 days No 0.0 No 0.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital Yes 1.0 Yes 1.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public? Yes 1.0 Yes 1.0 Assuming that Buyer is a limited company, must members Yes 1.0 Yes 1.0 meet at least once a year? Assuming that Buyer is a limited company, can members Yes 1.0 Yes 1.0 representing 5% put items on the meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 Yes 1.0 auditor? Source: Doing Business database. Doing Business 2017 Russian Federation 85 PAYING TAXES Taxes are essential. The level of tax rates needs to be WHAT THE PAYING TAXES INDICATORS carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business records the Method and frequency of filing and payment taxes and mandatory contributions that a medium- size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions and dealing with postfiling Collecting information and computing the tax processes. This case scenario uses a set of financial payable statements and assumptions about transactions made over the year. Information is also compiled on Completing tax return forms, filing with the frequency of filing and payments, time taken to proper agencies comply with tax laws, time taken to comply with the Arranging payment or withholding requirements of postfiling processes and time Preparing separate tax accounting books, if waiting for these processes to be completed. The required ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are Profit or corporate income tax the simple average of the distance to frontier scores Social contributions and labor taxes paid by for each of the four component indicators – number the employer of tax payments. time, total tax rate and postfiling index – with a threshold and a nonlinear Property and property transfer taxes transformation applied to one of the component Dividend, capital gains and financial indicators, the total tax rate1. If both VAT (or GST) transactions taxes and corporate income tax apply, the postfiling index Waste collection, vehicle, road and other taxes is the simple average of the distance to frontier scores for each of the four components: the time to Postfiling Index comply with a VAT or GST refund, the time to obtain The time to comply with a VAT or GST refund a VAT or GST refund, the time to comply with a corporate income tax audit and the time to complete The time to receive a VAT or GST refund a corporate income tax audit. If only VAT (or GST) or The time to comply with a corporate income corporate income tax applies, the postfiling index is tax audit the simple average of the scores for only the two The time to complete a corporate income tax components pertaining to the applicable tax. If audit neither VAT (or GST) nor corporate income tax 1 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2017 Russian Federation 86 applies, the postfiling index is not included in the Assumptions about the corporate income tax ranking of the ease of paying taxes. audit process: Taxes and mandatory contributions include  An error in the calculation of the income tax corporate income tax, turnover tax and all labor liability (for example, use of incorrect tax taxes and contributions paid by the company. A depreciation rates, or incorrectly treating an range of standard deductions and exemptions are expense as tax deductible) leads to an also recorded. incorrect income tax return and consequently All financial statement variables are proportional to an underpayment of corporate income tax. 2012 income per capita. To make the data  TaxpayerCo. discovered the error and comparable across economies, several assumptions voluntarily notified the tax authority of the are used. error in the corporate income tax return. TaxpayerCo is a medium-size business that started operations on January 1, 2014. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government. Assumptions about the VAT refund process:  In June 2015, TaxpayerCo. makes a large capital purchase: one additional machine for manufacturing pots.  The value of the machine is 65 times income per capita of the economy.  Sales are equally spread per month (that is, 1,050 times income per capita divided by 12).  Cost of goods sold are equally expensed per month (that is, 875 times income per capita divided by 12).  The seller of the machinery is registered for VAT or general sales tax (GST).  Excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT or GST rate is the same for inputs, sales and the machine and the tax reporting period is every month. . Doing Business 2017 Russian Federation 87 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with tax (see table 8.2 and table 8.3 at the end of this chapter for obligations and postfiling processes in Russian details). Most indicator sets refer to a case scenario in Federation—and how much do firms pay in taxes? the largest business city of an economy, except for 11 Globally, Russian Federation stands at in the ranking of economies for which the data are a population-weighted 190 economies on the ease of paying taxes (figure 8.1). average of the 2 largest business cities. See the chapter The rankings for comparator economies and the regional on distance to frontier and ease of doing business average ranking provide other useful information for ranking at the end of this profile for more details. assessing the tax compliance burden for businesses in . Figure 8.1 How Russian Federation and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2017 Russian Federation 88 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in Russian Federation (table 8.1)? Table 8.1 How has Russian Federation made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia increased the social security contribution rate for DB2012 employers. Russia eased the administrative burden of taxes for firms by simplifying compliance procedures for value added tax and by DB2013 promoting the use of tax accounting software and electronic services. Russia made paying taxes less costly for companies by excluding movable property from the corporate property tax base—though it also raised the wage ceiling used in calculating DB2016 social contributions. These changes apply to both Moscow and St. Petersburg. In addition, the cadastral value of land in Moscow was updated. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 89 PAYING TAXES What are the details? The indicators reported here for Russian Federation LOCATION OF STANDARDIZED COMPANY are based on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the City: Moscow, Saint Petersburg section in this chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of The taxes and contributions paid are listed in table 8.2 assumptions and transactions that the company below, along with the associated number of payments, completed during its 2nd year of operation. time and tax rate. Respondents are asked how much taxes and mandatory contributions the business must pay how The postfiling index is based on four components—the these taxes are filed and paid, how much time time to comply with a VAT or GST refund, the time to taxpayers spend preparing, filing and paying three obtain a VAT or GST refund, the time to comply with a major taxes (profit taxes, labor taxes including corporate income tax audit and the time to complete a mandatory contributions and consumption taxes) and corporate income tax audit. These components are how much time taxpayers spend complying with based on expanded case study assumptions. If only VAT postfiling processes and waiting for these processes (or GST) or corporate income tax applies for an to be completed. economy, the postfiling index is the simple average of the scores for only the two components pertaining to the applicable tax. If neither VAT (or GST) nor corporate income tax applies, the postfiling index is not included in the ranking of the ease of paying taxes. Table 8.2 Summary of tax rates and administration Total tax Notes on Moscow: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online 53 20% 8.81 profits Federal obligatory medical online and gross 0 5.1% 5.75 insurance fund contributions jointly salaries gross Social security insurance 1 online 76 2.9% 3.14 salaries gross Pension fund contribution 1 online 22% 24.36 salaries online and gross Accidents tax 0 2.5% 2.82 jointly salaries Doing Business 2017 Russian Federation 90 Total tax Notes on Moscow: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate book value Property tax 1 online 2.2% of 2.08 property cadastral value of Land tax 1 online 0.3%-1.5% 0.47 the land plot engine various Transport tax 1 online capacity of 0.05 rates vehicles value not Value Added Tax 1 online 39 18% 0.00 added included online and gross Personal income tax 0 13% 0.00 withheld jointly salaries Totals 7.0 168.0 47.5 Total tax Notes on Saint Petersburg: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online 53 20% 8.88 profits Federal obligatory medical online and gross 0 5.1% 5.75 insurance fund contributions jointly salaries gross Social security insurance 1 online 76 2.9% 3.14 salaries gross Pension fund contribution 1 online 22% 24.36 salaries online and gross Accidents tax 0 2.5% 2.82 jointly salaries book value Property tax 1 online 2.2% of 2.08 property cadastral value of Land tax 1 online 0.3%-1.5% 0.09 the land plot engine various Transport tax 1 online capacity of 0.05 rates vehicles Doing Business 2017 Russian Federation 91 Total tax Notes on Saint Petersburg: Tax or Payments Notes on Time Statutory Tax base rate (% of total tax mandatory contribution (number) payments (hours) tax rate profit) rate value not Value Added Tax 1 online 39 18% 0.00 added included online and gross Personal income tax 0 13% 0.00 withheld jointly salaries Totals 7.0 168.0 47.2 Source: Doing Business database. Doing Business 2017 Russian Federation 92 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive use of paper documents, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost & time to extra costs and delays for exporters and Obtain, prepare and submit documents: importers, stifling trade potential. -During transport, clearance, inspections and port What do the indicators cover? or border handling in origin economy Doing Business records the time and cost -Required by origin, destination and transit associated with the logistical process of exporting economies and importing goods. Under the new Covers all documents by law and in practice methodology introduced this year, Doing Business Border compliance – cost & time measures the time and cost (excluding tariffs) associated with three sets of procedures — Customs clearance and inspections documentary compliance, border compliance and Inspections by other agencies if applied to more domestic transport—within the overall process of than 10% of shipments) exporting or importing a shipment of goods. The Port or border handling ranking of economies on the ease of trading across borders is determined by sorting their Processing documents during clearance, distance to frontier scores for trading across inspections and port or border handling borders. These scores are the simple average of Domestic transport* the distance to frontier scores for the time and Loading and unloading of shipment cost for documentary compliance and border compliance to export and import (domestic Transport between warehouse and terminal/port transport is not used for calculating the ranking). Transport between terminal/port and border Traffic delays and road police checks while To make the data comparable across economies, a shipment is en route few assumptions are made about the traded goods and the transactions: * Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these Time data in calculating the distance to frontier score for trading  Time is measured in hours, and 1 day is 24 across borders or the ranking on the ease of trading across hours (for example, 22 days are recorded as 22 borders. × 24 = 528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Cost Alternatively, suppose that documents are  Insurance cost and informal payments for which no submitted to a customs agency at 8:00 a.m., are receipt is issued are excluded from the costs recorded. processed overnight and can be picked up at Costs are reported in U.S. dollars. Contributors are 8:00 a.m. the next day. In this case the time for asked to convert local currency into U.S. dollars based customs clearance would be recorded as 24 on the exchange rate prevailing on the day they answer hours because the actual procedure took 24 the questionnaire. hours. Doing Business 2017 Russian Federation 93 Assumptions of the case study  If government fees are determined by the value of the shipment, the value is assumed to be $50,000.  For each of the 190 economies covered by Doing Business, it is assumed that a shipment  The product is new, not secondhand or used travels from a warehouse in the largest business merchandise. city of the exporting economy to a warehouse in the largest business city of the importing  The exporting firm is responsible for hiring and paying economy. For 11 economies the data are also for a freight forwarder or customs broker (or both) and collected, under the same case study pays for all costs related to international shipping, assumptions, for the second largest business domestic transport, clearance and mandatory city. inspections by customs and other government agencies, port or border handling, documentary  The import and export case studies assume compliance fees and the like for exports. The importing different traded products. It is assumed that firm is responsible for the above costs for imports. each economy imports a standardized shipment of 15 metric tons of containerized  The mode of transport is the one most widely used for auto parts (HS 8708) from its natural import the chosen export or import product and the trading partner—the economy from which it imports partner, as is the seaport, airport or land border the largest value (price times quantity) of auto crossing. parts. It is assumed that each economy exports the product of its comparative advantage  All electronic submissions of information requested by (defined by the largest export value) to its any government agency in connection with the natural export partner—the economy that is the shipment are considered to be documents obtained, largest purchaser of this product. Special prepared and submitted during the export or import products such as precious metal and gems, live process. animals and pharmaceuticals are excluded from the list of possible export products. However,  A port or border is defined as a place (seaport, airport the second largest product category is or land border crossing) where merchandise can enter considered as needed. or leave an economy.  A shipment is a unit of trade. Export shipments  Government agencies considered relevant are agencies do not necessarily need to be containerized, such as customs, port authorities, road police, border while import shipments of auto parts are guards, standardization agencies, ministries or assumed to be containerized. departments of agriculture or industry, national security agencies and any other government authorities. Doing Business 2017 Russian Federation 94 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Borders indicator refers to a case Globally, Russian Federation stands at 140 in the ranking study scenario of a warehouse in the largest business city of 190 economies on the ease of trading across borders of an economy (except for 11 economies for which the (figure 9.1). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How Russian Federation and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2017 Russian Federation 95 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in Russian Federation (table 9.1)? based inspections and electronic data interchange Table 9.1 How has Russian Federation made trading across borders easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia made trading across borders easier by reducing the DB2012 number of documents needed for each export or import transaction and lowering the associated cost. Russia made trading across borders easier by implementing an DB2014 electronic system for submitting export and import documents and by reducing the number of physical inspections. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 96 TRADING ACROSS BORDERS What are the details? The indicators reported here for Russian Federation LOCATION OF STANDARDIZED COMPANY are based on a set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea or land). The City: Moscow, Saint Petersburg information on the time and cost to complete export and import is collected from local freight forwarders, The details on the predefined set of procedures, and the customs brokers and traders. associated time and cost, for exporting and importing a shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in Russian Federation Moscow Saint Petersburg Europe & Central Asia Time to export: Border compliance 96 96 28 (hours) Cost to export: Border compliance 765 765 195 (USD) Time to export: Documentary 26 24 27 compliance (hours) Cost to export: Documentary 80 120 111 compliance (USD) Time to import: Border compliance 96 96 26 (hours) Cost to import: Border compliance 1125 1125 202 (USD) Time to import: Documentary 43 43 26 compliance (hours) Cost to import: Documentary 160 135 91 compliance (USD) Source: Doing Business database. Table 9.3 Summary of trading details, transport time and documents for trading across borders in Russian Federation Moscow Saint Petersburg Export Import Export Import HS 72 : Iron and HS 8708: Parts and HS 72 : Iron and HS 8708: Parts and Product steel accessories of steel accessories of Doing Business 2017 Russian Federation 97 Moscow Saint Petersburg Export Import Export Import motor vehicles motor vehicles Trade partner Italy Germany Italy Germany Saint Petersburg Saint Petersburg Border St Petersburg Port St Petersburg Port port port Distance (km) 724 724 8 8 Domestic transport time (hours) 20 20 4 4 Domestic transport cost (USD) 958 958 246 246 Source: Doing Business database. Documents used to export Acceptance order Bill of lading Consignment note/ CMR waybill Commercial Invoice (original) Customs Export Declaration Declaration of origin / Certificate of Origin Export/loading order Packing list Sales purchase contract Documents used to import Acceptance order Bill of lading Certificate of conformity Commercial invoice Consignment note Customs Import Declaration Document of warehouse Letter from the bank certifying opening of letter of credit Packing list Doing Business 2017 Russian Federation 98 Sales purchase contract Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2017 Russian Federation 99 Figure 9.2 Summary of Russian Federation on the ease of trading across borders Export (Moscow) Import (Moscow) Export (Saint Petersburg) Import (Saint Petersburg) Source: Doing Business database. Doing Business 2017 Russian Federation 100 ENFORCING CONTRACTS WHAT THE ENFORCING CONTRACTS Effective commercial dispute resolution has many benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long Time to enforce the judgment court dispute. Cost required to enforce a contract through What do the indicators cover? the courts (% of claim) Doing Business measures the time and cost for Attorney fees resolving a standardized commercial dispute through a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy Quality of judicial processes index (0-18) has adopted a series of good practices that promote quality and efficiency in the court system. This new Court structure and proceedings (0-6) index replaces the indicator on procedures, which Case management (0-6) was eliminated this year. The ranking of economies on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a  The seller requests a pretrial attachment to secure sales contract between 2 domestic businesses. The the claim. case study assumes that the court hears an expert on  The dispute on the quality of the goods requires an the quality of the goods in dispute. This distinguishes expert opinion. the case from simple debt enforcement. To make the  The judge decides in favor of the seller; there is no data comparable across economies, Doing Business appeal. uses several assumptions about the case:  The seller enforces the judgment through a public  The dispute concerns a lawful transaction sale of the buyer’s movable assets. between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.  The buyer orders custom-made goods, then fails to pay.  The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.  The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Doing Business 2017 Russian Federation 101 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial on distance to frontier and ease of doing business dispute through the courts in Russian Federation? ranking at the end of this profile for more details. According to data collected by Doing Business, contract Globally, Russian Federation stands at 12 in the ranking enforcement takes 337.0 days and costs 16.5% of the of 190 economies on the ease of enforcing contracts value of the claim. Most indicator sets refer to the (figure 10.1). The rankings for comparator economies largest business city of an economy, except for 11 and the regional average ranking provide other useful economies for which the data are a population-weighted benchmarks for assessing the efficiency of contract average of the 2 largest business cities. See the chapter enforcement in Russian Federation. Figure 10.1 How Russian Federation and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2017 Russian Federation 102 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look contract enforcement faster. What reforms making it for ways to enhance efficiency by introducing new easier (or more difficult) to enforce contracts has Doing technology. Lower-income economies often work on Business recorded in Russian Federation (table 10.1)? Table 10.1 How has Russian Federation made enforcing contracts easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia made filing a commercial case easier by introducing an DB2012 electronic case filing system. The Russian Federation made enforcing contracts more DB2017 difficult by mandating pre-trial resolution before filing a claim, thus lengthening the initial phase of the judicial proceedings. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 103 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for Russian ECONOMY DETAILS Federation are built by following the step-by-step evolution of a commercial sale dispute within the Claim value - court, under the assumptions about the case RUB 941,915 Moscow: described above (figure 10.2). The time and cost of resolving the standardized dispute are identified Claim value - Saint through study of the codes of civil procedure and RUB 941,915 Petersburg: other court regulations, as well as through questionnaires completed by local litigation lawyers Court name - (and, in a quarter of the economies covered by Moscow Arbitrazh Court Moscow: Doing Business, by judges as well). Commercial (Arbitrazh) Court name - Saint Court of St. Petersburg Petersburg: and Leningard Region Moscow, Saint City: Petersburg Doing Business 2017 Russian Federation 104 Figure 10.2 Time and cost of contract enforcement in Russian Federation and comparator economies Source: Doing Business database. Doing Business 2017 Russian Federation 105 Table 10.2 Details on time and cost for enforcing contracts in Russian Federation Europe & Central Indicator Moscow Saint Petersburg Asia average Time (days) 340.0 330.0 486 Filing and service 60 60 Trial and judgment 160 150 Enforcement of judgment 120 120 Cost (% of claim) 15.0 20.0 26.6 Attorney fees 10.0 15.0 Court fees 5.0 5.0 Enforcement fees 0.0 0.0 Source: Doing Business database. Doing Business 2017 Russian Federation 106 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in Russian Federation (figure 10.3). practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating better, more efficient judicial processes. Figure 10.3 Quality of judicial processes index in Russian Federation and comparator economies Source: Doing Business database. Doing Business 2017 Russian Federation 107 Table 10.3 Details of the quality of judicial processes index in Russian Federation Answer Score Answer Score (Saint (Saint (Moscow) (Moscow) Petersburg Petersburg ) ) Quality of judicial processes index (0-18) 11.0 11.0 Court structure and proceedings (0-5) 4.5 4.5 1. Is there a court or division of a court dedicated Yes 1.5 Yes 1.5 solely to hearing commercial cases? 2. Small claims court 1.5 1.5 2.a. Is there a small claims court or a fast-track Yes Yes procedure for small claims? 2.b. If yes, is self-representation allowed? Yes Yes 3. Is pretrial attachment available? Yes 1.0 Yes 1.0 Yes, but Yes, but 4. Are new cases assigned randomly to judges? 0.5 0.5 manual manual 5. Does a woman's testimony carry the same Yes 0.0 Yes 0.0 evidentiary weight in court as a man's? Case management (0-6) 4.0 4.0 1. Time standards 0.0 0.0 1.a. Are there laws setting overall time standards for Yes Yes key court events in a civil case? 1.b. If yes, are the time standards set for at least No No three court events? 1.c. Are these time standards respected in more than Yes Yes 50% of cases? 2. Adjournments 0.0 0.0 2.a. Does the law regulate the maximum number of No No adjournments that can be granted? 2.b. Are adjournments limited to unforeseen and No No exceptional circumstances? 2.c. If rules on adjournments exist, are they respected n.a. n.a. in more than 50% of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of Yes 1.0 Yes 1.0 pending cases report; and (iv) single case progress report? Doing Business 2017 Russian Federation 108 Answer Score Answer Score (Saint (Saint (Moscow) (Moscow) Petersburg Petersburg ) ) 4. Is a pretrial conference among the case management techniques used before the competent Yes 1.0 Yes 1.0 court? 5. Are there any electronic case management tools in Yes 1.0 Yes 1.0 place within the competent court for use by judges? 6. Are there any electronic case management tools in Yes 1.0 Yes 1.0 place within the competent court for use by lawyers? Court automation (0-4) 0.0 0.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent No 0.0 No 0.0 court? 2. Is it possible to carry out service of process electronically for claims filed before the competent No 0.0 No 0.0 court? 3. Can court fees be paid electronically within the No 0.0 No 0.0 competent court? 4. Publication of judgments 0.0 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public No No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official No No gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 2.5 1. Arbitration 1.0 1.0 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— Yes Yes that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements Yes Yes usually enforced by the courts? Doing Business 2017 Russian Federation 109 Answer Score Answer Score (Saint (Saint (Moscow) (Moscow) Petersburg Petersburg ) ) 2. Mediation/Conciliation 1.5 1.5 2.a. Is voluntary mediation or conciliation available? Yes Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or Yes Yes conciliation is successful, a refund of court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2017 Russian Federation 110 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal Economist Intelligence Unit. Recovery rate for creditors To make the data on the time, cost and outcome Measures the cents on the dollar recovered comparable across economies, several assumptions by secured creditors about the business and the case are used: Outcome for the business (survival or not)  A hotel located in the largest city (or cities) has determines the maximum value that can be 201 employees and 50 suppliers. The hotel recovered experiences financial difficulties. Official costs of the insolvency proceedings  The value of the hotel is 100% of the income per are deducted capita or the equivalent in local currency of USD Depreciation of furniture is taken into 200,000, whichever is greater. account  The hotel has a loan from a domestic bank, Present value of debt recovered secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but Strength of insolvency framework index (0- makes enough money to operate otherwise. 16) In addition, Doing Business evaluates the adequacy Sum of the scores of four component indices: and integrity of the existing legal framework Commencement of proceedings index (0-3) applicable to liquidation and reorganization Management of debtor’s assets index (0-6) proceedings through the strength of insolvency framework index. The index tests whether economies Reorganization proceedings index (0-3) adopted internationally accepted good practices in Creditor participation index (0-4) four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation. Doing Business 2017 Russian Federation 111 RESOLVING INSOLVENCY Where does the economy stand today? Globally, Russian Federation stands at 51 in the ranking insolvency framework index. The Resolving Insolvency of 190 economies on the ease of resolving insolvency indicator does not measure insolvency proceedings of (figure 11.1). The ranking of economies on the ease of individuals and financial institutions. The data are derived resolving insolvency is determined by sorting their from questionnaire responses by local insolvency distance to frontier scores for resolving insolvency. These practitioners and verified through a study of laws and scores are the simple average of the distance to frontier regulations as well as public information on bankruptcy scores for the recovery rate and the strength of systems. Figure 11.1 How Russian Federation and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2017 Russian Federation 112 RESOLVING INSOLVENCY Recovery of debt in insolvency Data on the time, cost and outcome refer to the most scenario in the largest business city of an economy, likely in-court insolvency procedure applicable under except for 11 economies for which the data are a specific case study assumptions. population-weighted average of the 2 largest business cities. According to data collected by Doing Business, resolving insolvency takes 2.0 years on average and costs 9.0% of the debtor’s estate. The average recovery rate is 38.6 cents on the dollar. Most indicator sets refer to a case Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Russian Federation and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2015 lending rates. Doing Business 2017 Russian Federation 113 Table 11.1 Summary of data for the strength of insolvency framework index Russian Federation Answer Explanation In accordance with Art. 9 of the Law on Insolvency (Bankruptcy), the management of Mirage must petition the court to declare the company bankrupt within 1 month of failing to pay the Bank’s claims. The court will institute a supervisory procedure and will Moscow, appoint a temporary administrator. Temporary administrator will Proceeding Saint liquidation convene the first creditors’ meeting, where the creditors will decide Petersburg whether to petition the court for liquidation or reorganization. Under the case study assumptions, creditors, most likely, will choose the liquidation procedure, because it is not likely that other procedures can lead to restoration of the debtor’s solvency. On the contrary, in liquidation, the bank can partially satisfy its claims. Moscow, Despite the fact that the value of the business will be higher if it is Outcome Saint piecemeal sale sold as a going concern, it will be difficult to find a buyer willing to Petersburg purchase all the assets as a whole. In accordance with Article 51 of the Law on Insolvency (Bankruptcy), a bankruptcy case must be considered within 7 months of the day the petition was received by the arbitrazh court. Liquidation proceedings by law are limited to 6 months and can be extended by Moscow, 6 more months (art. 124 of the Law on Insolvency (Bankruptcy)). Time (in years) Saint 2.0 Therefore, the time dictated by law is 19 months. However, in Petersburg practice, liquidation proceedings are extended several times and for longer periods. One reason for extension, for example, is that not all mechanisms were used to collect on the debt, and court decisions on this issue become effective only after appeals. Additionally, time is needed to execute judicial acts. Total cost of the insolvency proceedings will be around 9% of the value of the estate, including: - Fees of attorneys will be around RUB 1,000,000 - Fees of temporary insolvency representative for the supervisory period (for 8 months) will be RUB 733,663. - Fees of insolvency representative during liquidation proceedings Moscow, (for 16 months) will be RUB 1,202,057. Cost (% of Saint 9.0 - Payments for services of professionals hired by insolvency estate) Petersburg representatives (accountants, assessors) will be around RUB 1,000,000. - Other current expenses for insolvency proceedings (not counting expenses necessary to upkeep the assets of the debtor) will be around RUB 20,000 (publication of announcements, mailing fees, etc). Recovery rate: 38.6 Source: Doing Business database. Doing Business 2017 Russian Federation 114 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. Russian Federation scores index, reorganization proceedings index and creditor 11.5 out of 16 on the strength of resolving insolvency participation index. The index ranges from 0 to 16, index. Figure 11.3 Strength of insolvency framework index (0-16) in Russian Federation and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome Doing Business 2017 Russian Federation 115 indicators are recorded as “no practice”. Doing Business 2017 Russian Federation 116 Table 11.2 Summary of data for the strength of insolvency framework index Russian Federation Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) Strength of insolvency framework index (0-16) 11.5 11.5 Commencement of proceedings index (0-3) 2.5 2.5 (a) Debtor (a) Debtor may file for may file for both both What procedures are available to a DEBTOR when liquidation 1.0 liquidation 1.0 commencing insolvency proceedings? and and reorganizatio reorganizati n on (b) Yes, but a (b) Yes, but creditor may a creditor Does the insolvency framework allow a CREDITOR to file for 0.5 may file for 0.5 file for insolvency of the debtor? liquidation liquidation only only (a) Debtor (a) Debtor is is generally What basis for commencement of the insolvency generally unable to proceedings is allowed under the insolvency unable to pay 1.0 pay its 1.0 framework? its debts as debts as they mature they mature Management of debtor's assets index (0-6) 5.0 5.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to No 0.0 No 0.0 the debtor? Does the insolvency framework allow the rejection by Yes 1.0 Yes 1.0 the debtor of overly burdensome contracts? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 preferential transactions? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 undervalued transactions? Does the insolvency framework provide for the possibility of the debtor obtaining credit after Yes 1.0 Yes 1.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post- (b) Yes over 1.0 (b) Yes over 1.0 Doing Business 2017 Russian Federation 117 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) commencement credit? ordinary ordinary unsecured unsecured creditors but creditors not over but not secured over creditors secured creditors Reorganization proceedings index (0-3) 1.0 1.0 (b) Only (b) Only creditors creditors whose whose rights Which creditors vote on the proposed reorganization rights are are affected 1.0 1.0 plan? affected by by the the proposed proposed plan plan Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 No 0.0 what they would obtain in a liquidation? Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class No 0.0 No 0.0 vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 3.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 Yes 1.0 representative? Does the insolvency framework require approval by the Yes 1.0 Yes 1.0 creditors for sale of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or Yes 1.0 Yes 1.0 rejecting creditors' claims? Source: Doing Business database. Doing Business 2017 Russian Federation 118 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Russian Federation (table 11.3)? even viable businesses are liquidated. This is starting to Table 11.3 How has Russian Federation made resolving insolvency easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Russia introduced a series of legislative measures in 2009 to DB2011 improve creditor rights and the insolvency system. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Russian Federation 119 LABOR MARKET REGULATION Doing Business studies the flexibility of regulation of  Operates a supermarket or grocery store in the employment, specifically as it relates to the areas of economy’s largest business city. For 11 hiring, working hours and redundancy. Doing Business economies the data are also collected for the also measures several aspects of job quality such as the second largest business city. availability of maternity leave, paid sick leave and the  Has 60 employees. equal treatment of men and women at the workplace.  Is subject to collective bargaining agreements if such agreements cover more than 50% of the Doing Business 2017 presents the data for the labor food retail sector and they apply even to firms market regulation indicators in an annex. The report that are not party to them. does not present rankings of economies on these  Abides by every law and regulation but does not indicators or include the topic in the aggregate distance grant workers more benefits than those to frontier score or ranking on the ease of doing mandated by law, regulation or (if applicable) business. Detailed data collected on labor market collective bargaining agreements. regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and regulations as well as secondary sources are reviewed to ensure accuracy. To make the data comparable across economies, several assumptions about the worker and the business are used. The worker:  Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.  Is a full-time employee.  Is not a member of the labor union, unless membership is mandatory. The business:  Is a limited liability company (or the equivalent in the economy). Doing Business 2017 Russian Federation 120 LABOR MARKET REGULATION What are the details? The data reported here for Russian Federation are based Employment laws and regulations as well as secondary on a detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Hiring Data on hiring cover five areas: (i) whether fixed-term minimum wage to the average value added per worker contracts are prohibited for permanent tasks; (ii) the (the ratio of an economy’s GNI per capita to the maximum cumulative duration of fixed-term contracts; working-age population as a percentage of the total (iii) the minimum wage for a cashier, age 19, with one population). year of work experience; and (iv) the ratio of the Moscow Saint Petersburg Hiring Data Data Fixed-term contracts prohibited for permanent tasks? Yes Yes Maximum length of a single fixed-term contract (months) 60 months 60 months Maximum length of fixed-term contracts, including renewals (months) 60.0 60.0 Minimum wage applicable to the worker assumed in the case study 367.2 248.4 (US$/month) Ratio of minimum wage to value added per worker 0.3 0.2 Source: Doing Business database. Doing Business 2017 Russian Federation 121 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work; and (ix) the average paid annual leave for percentage of hourly pay); (iv) the premium for overtime workers with 1 year of tenure, 5 years of tenure, and 10 work (as a percentage of hourly pay); (v) whether there years of tenure. are restrictions on night work; (vi) whether nonpregnant Moscow Saint Petersburg Working Hours Data Data Maximum number of working days per week 6.0 6.0 Premium for night work (% of hourly pay) 20.0 20.0 Premium for work on weekly rest day (% of hourly pay) 100.0 100.0 Premium for overtime work (% of hourly pay) 50.0 50.0 Restrictions on night work? No No Whether nonpregnant and nonnursing women can work the same Yes Yes night hours as men Restrictions on weekly holiday? Yes Yes Restrictions on overtime work? No No Paid annual leave for a worker with 1 year of tenure (working days) 22.0 22.0 Paid annual leave for a worker with 5 years of tenure (working days) 22.0 22.0 Paid annual leave for a worker with 10 years of tenure (working days) 22.0 22.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, 22.0 22.0 in working days) Source: Doing Business database. Doing Business 2017 Russian Federation 122 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. Moscow Saint Petersburg Difficulty of redundancy index Data Data Maximum length of probationary period (months) 3.0 3.0 Dismissal due to redundancy allowed by law? Yes Yes Third-party notification if one worker is dismissed? Yes Yes Third-party approval if one worker is dismissed? No No Third-party notification if nine workers are dismissed? Yes Yes Third-party approval if nine workers are dismissed? No No Retraining or reassignment obligation before redundancy? Yes Yes Priority rules for redundancies? Yes Yes Priority rules for reemployment? No No Source: Doing Business database. Doing Business 2017 Russian Federation 123 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year requirements and severance payments due when of tenure, a worker with 5 years and a worker with 10 terminating a redundant worker, expressed in weeks of years is considered. One month is recorded as 4 and salary. The average value of notice requirements and 1/3 weeks. Moscow Saint Petersburg Redundancy cost indicator (in salary weeks) Data Data Notice period for redundancy dismissal for a worker with 1 year of 8.7 8.7 tenure Notice period for redundancy dismissal for a worker with 5 years of 8.7 8.7 tenure Notice period for redundancy dismissal for a worker with 10 years of 8.7 8.7 tenure Notice period for redundancy dismissal (average for workers with 1, 5 8.7 8.7 and 10 years of tenure) Severance pay for redundancy dismissal for a worker with 1 year of 8.7 8.7 tenure Severance pay for redundancy dismissal for a worker with 5 years of 8.7 8.7 tenure Severance pay for redundancy dismissal for a worker with 10 years of 8.7 8.7 tenure Severance pay for redundancy dismissal (average for workers with 1, 5 8.7 8.7 and 10 years of tenure) Source: Doing Business database. Doing Business 2017 Russian Federation 124 LABOR MARKET REGULATION Job quality Doing Business introduced new data on job quality in 2015. Doing Business 2017 covers eight questions on job quality (i) whether the law mandates equal remuneration for work of equal value; (ii) whether the law mandates nondiscrimination based on gender in hiring; (iii) whether the law mandates paid or unpaid maternity leave; (iv) the minimum length of paid maternity leave (in calendar days); (v) whether employees on maternity leave receive 100% of wages; (vi) the availability of five fully paid days of sick leave a year; (vii) whether a worker is eligible for an unemployment protection scheme after one year of service; and (viii) the minimum duration of the contribution period (in months) required for unemployment. Moscow Saint Petersburg Job Quality Data Data Equal remuneration for work of equal value? No No Gender nondiscrimination in hiring? No No Paid or unpaid maternity leave mandated by law? Yes Yes Minimum length of maternity leave (calendar days)? 140.0 140.0 Receive 100% of wages on maternity leave? Yes Yes Five fully paid days of sick leave a year? Yes Yes Unemployment protection after one year of employment? Yes Yes Minimum contribution period for unemployment protection (months)? 0.0 0.0 Source: Doing Business database. Doing Business 2017 Russian Federation 125 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is defined as 1 hour even though in many economies the Distance to Frontier time is less than that. The distance to frontier score captures the gap between In the same formulation, to mitigate the effects of an economy’s performance and a measure of best extreme outliers in the distributions of the rescaled data practice across the entire sample of 36 indicators for 10 for most component indicators (very few economies Doing Business topics (the labor market regulation need 700 days to complete the procedures to start a indicators are excluded). For starting a business, for business, but many need 9 days), the worst performance example, the former Yugoslav Republic of Macedonia is calculated after the removal of outliers. The definition and New Zealand have the smallest number of of outliers is based on the distribution for each procedures required (1), and New Zealand the shortest component indicator. To simplify the process two rules time to fulfill them (0.5 days). Slovenia has the lowest were defined: the 95th percentile is used for the cost (0.0), and Australia, Colombia and 103 other indicators with the most dispersed distributions economies have no paid-in minimum capital (including minimum capital, number of payments to pay requirement (table 14.1 in the Doing Business 2016 taxes, and the time and cost indicators), and the 99th report). percentile is used for number of procedures. No outlier is removed for component indicators bound by definition Calculation of the distance to frontier score or construction, including legal index scores (such as the Calculating the distance to frontier score for each depth of credit information index, extent of conflict of economy involves two main steps. In the first step interest regulation index and strength of insolvency individual component indicators are normalized to a framework index) and the recovery rate. common unit where each of the 36 component In the second step for calculating the distance to frontier indicators y (except for the total tax rate) is rescaled score, the scores obtained for individual indicators for using the linear transformation (worst − y)/(worst − each economy are aggregated through simple averaging frontier). In this formulation the frontier represents the into one distance to frontier score, first for each topic best performance on the indicator across all economies and then across all 10 topics: starting a business, dealing since 2005 or the third year in which data for the with construction permits, getting electricity, registering indicator were collected. Both the best performance and property, getting credit, protecting minority investors, the worst performance are established every five years paying taxes, trading across borders, enforcing contracts based on the Doing Business data for the year in which and resolving insolvency. More complex aggregation they are established, and remain at that level for the five methods—such as principal components and years regardless of any changes in data in interim years. unobserved components—yield a ranking nearly Thus an economy may set the frontier for an indicator Doing Business 2017 Russian Federation 126 identical to the simple average used by Doing Business2. The nonlinear transformation is not based on any Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components 3. overall tax system. Instead, it is mainly empirical in nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 in the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 in the Doing Business 2016 report). 2 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 3 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2017 Russian Federation 127 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 190. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2017 Russian Federation 128 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 190 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 190 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 190 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 190 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2017 Russian Federation 129