1. New anti-crisis changes to Russia's tax legislation come into force from 01 January 2009.(Under the Federal law № 224-FZ “On Amendments to Part 1 and Part 2 of the Russian Tax Code” on 26 November 2008 ). Please note that these report does not cover all amendments provided by law.

2. 1. Cancellation of requirement to pay VAT in cash on barter transactions, offsets and deals involving securities VAT payers carrying out non-monetary settlements are not obliged to pay each other the amounts of VAT in regard to those non-monetary transactions. 2. Recovery of VAT on advances paid to suppliers. VAT paid to a supplier as advance payment (partial payment) for future deliveries is now tax deductible. If the transaction is cancelled and advance payment is reimbursed, VAT is also returned.

3. 3. Tax agents’ obligations Under current legislation, if foreign companies not registered with the tax authorities in Russia sell goods (property rights, work and services) in Russia via agents who take part in the processing of the payment, these agents shall pay VAT as tax agents. 4. Desk tax audits of VAT returns Amendments clarify the tax authorities’ decision making procedure on VAT recovery. It is assumed that amendment will speed up the VAT recovery procedure in terms of the sums that the tax authorities did not challenge. Provisions regarding invalidity of the evidence collected illegally is added to the Tax Code.

4. 5. Import of technological and production equipment to be VAT exempt Amendments introduce VAT exemption for import of technological equipment (including its components and spare parts) that does not have a Russian equivalent. The Russian government is to approve a list of equipment to which this incentive will apply. The current exemption for technological and production equipment imported as a contribution to the charter capital was revoked. The new exemption shall apply to imports not only of the technological and production equipment to be contributed to the charter capital, but also those made for other reasons (for example, under a buy-sale contract). 6. Sale of scrap and waste of ferrous metals The sale of scrap and waste of ferrous metals is now tax exempt.

5. 1.Tax Rate From 1 January 2009 tax rate decreased from 24% to 20 %. 2. Amortization Bonus depreciation for certain types of capital assets is increased to 30% from 10%. This includes costs of completion, reconstruction and modernization of such capital assets as well. However, if property for which this bonus depreciation was used is sold less than 5 years after it was put into operation, the bonus depreciation amount must be reimbursed from expenses (decreasing expenses for the sale period of these capital assets. 3. Restrictions on deduction of interest on debt obligations Limit for deductibility of interestfor Profits tax purposes are changed. Limit for Russian rubles loans equals the RF Central Bank rate multiplied by 1,5% (instead of 1,1) while interest expenses on loans in foreign currencies can not exceed 22% (instead of 15%). This regulation has temporarily effect and is valid from September 1, 2008 to December 31, 2009.

6. Housing incentive The maximum amount of tax deduction on the construction or purchase of residential premises in Russia has increased from RUB 1 million (approx. 23 000 Euro) to RUB 2 million (approx. 46 000 Euro). These regulations shall apply to legal relationships arising from 1 January 2008. Statistics:“Who's Irritating Russia's Tax Collectors” Which Industries At Risk 2008 saw the Russian Federal Tax Service make moves against businesses, which were shocking in number and value. Risk indicators : 1. the “Unprofitable” Index looks at the level of profit a company has based on the average Russian company, 2. where companies are less profitable than average. Risk Zones: 1. Offshore firms,2. Transactions above 100 million dollars that take place a year or less apart with attempts to obtain payments. Source: compiled by RBC magazine 13.03.2009

7. Top 10 Tax Generating Industries “Pay Risk” Index “Unprofitable” Index "Tax Consultant Grade" Index Total Food production90918 Hydrocarbon extraction 0 8 8.6 16.6 Metal ore extraction 08 8.316.3 Printing 8 08 16 Wholesale Trade8 0 8 16 Lumber, Paper production10 0 4.7 14.7 Production, Transmission, and Storage of Electrical Power 010 4.3 14.3 Textiles, clothing, shoes, and leather goods 100 0 Construction0 0 8.6 Transportation & Communications 08 0 8

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