Useful tips for Individuals who want to Import and Export Art Objects to and from Russia

Useful tips for Individuals who want to Import and Export Art Objects to and from Russia

Different procedures and documents are required for individuals who want to import and export art objects in/out of Russia depending on the nature of the Art object. Import and export of Art Objects by individuals may be really simple or quiet difficult depending on whether Art Object qualified as cultural value or not. 

Import and Export Art Objects

Russia is a member of the Customs Union, including Belarus and Kazakhstan. The same customs legislation is applied on the entire territory of the Customs Union. Therefore, once imported into one of the countries, items may be moved within the territory of Russia, Belarus and Kazakhstan without customs formalities.

Procedure of import and export of an art object depends on whether the art object is qualified as a cultural value under Russian law or not.

Art Objects Qualified as a Cultural Value

Russian law establishes a list of art objects that are qualified as cultural values. In general, an art object is regarded as a cultural value if it has historical, scientific, artistic or other cultural significance.

Certain categories of items of cultural value are not allowed to be sold and exported from the territory of Russia. The restrictions are applicable to the following cultural values:

  • movable objects of significant cultural value and classified under the Russian laws as particularly valuable objects of Russian cultural heritage;
  • movable objects protected by the Government;
  • cultural values stored in state museums; or
  • cultural values created over 100 years ago (with some exemptions).

Prohibition on export of such items is set forth in Russian law and the list is exhaustive.

The items of cultural value which are not included into the list of items prohibited to export can be exported pursuant to the decisions of the state authorities. The items of cultural value to be exported are also subject to obligatory examination.

If state authorities approve to export art items of cultural value, the respective certificate is issued. This certificate is considered to be a clearance to transfer the items of cultural value outside of Russia.

The items of cultural value can be exported by the following persons:

  • by their legal owner or
  • by person authorized by such owner or
  • by author of such items of cultural value prior to the sale.

Art Objects not Qualified as a Cultural Value

The abovementioned restrictions are not applicable to art objects that are considered as common souvenirs and cultural items in mass or series production. Thus, the art objects that are not qualified as a cultural value can be imported and exported without any formalities.

In general import of art objects to Russia is exempt from import customs duty, but subject to VAT at the rate of 18%.

Temporary Import of Art Object

However, temporary import is exempt also from tax under special circumstances. The temporary import regime is applied by the customs authorities based on:

  • the statement of the applicant;
  • the purposes and circumstances of such import.

The temporary import shall not exceed 2 years from the date of exercising customs temporary import control. In practice customs authorities establish the term of temporary import of up to one year.

The customs laws provide various benefits in respect of temporary import of cultural values. Hence, the cultural values created over 100 years ago can be imported to the Customs Union free of tax and duties for 5 years. Upon expiration of 5 years the owner of such cultural values shall:

  • export them or
  • pay VAT for import (18% of their value) and relevant interest.

Otherwise he/she will be liable for violation of the Russian laws. This relief is granted in respect of cultural values owned by foreigners and imported to the Customs Union free of charge for exhibitions.

It should be noted that in the cases specified above the cultural value imported to the Russian Federation must be duly declared to the Russian customs authorities. https://alrud.com/

Strong restrictions for Foreign Accounts in Russia?

Strong restrictions for Foreign Accounts in Russia?

Russian law establishes special regulation for individuals’ foreign accounts. Individuals (Russian currency residents) cannot receive on their foreign accounts in Russia for the majority of funds transfers. Spending of funds is less problematic, however subject to certain restrictions as well. Fine for non-compliance is 75%-100% out of the amount of illegal funds transfer.

In 2013 amendments to the Russian Administrative Offenses Code introducing significant administrative fines applicable to individuals for non-compliance with foreign accounts regulations came into force.

Restrictions to Foreign Accounts

The restrictions to foreign accounts are applied only to individuals that are regarded as currency residents, particularly to Russian citizens (with some exemptions). Thus, a Russian citizen is not considered to be a currency resident after one year of living abroad without visiting Russia. If a Russian citizen crosses the Russian border, a one year term for getting a non-resident status restarts.

Residents and Foreign Accounts

Residents, with exemption for state officials, can freely open foreign accounts. However Residents must notify within one month Russian tax authorities about opening, closing or changing details of their foreign accounts.

Resident individuals can only receive on their foreign accounts types of funds that are expressly allowed by the law. Under the first sight almost all types of funds transfers are forbidden. Thus, residents are not entitled to receive on their foreign accounts the following transfers:

  • dividends;
  • proceeds from the sale of shares and jewellery;
  • scholarship;
  • stock options;
  • salary, if a resident works in a foreign company (in such a case, salary should be transferred to resident’s account with a Russian bank) and others.

Interest on deposits and bonds are not directly allowed by the law, however, according to the position of Russian currency supervisory authorities individuals are entitled to receive such transfers on their foreign accounts. Meanwhile, such position is not confirmed by any references to the law. Therefore, it is unclear how it will be applied in practice.

Spending funds from Foreign Accounts in Russia

The law also forbids individuals to spend funds from the foreign accounts for services and property in Russia. With the abovementioned exception, individuals can freely spend funds for all other purposes outside Russia.

The fine for violation of the above rules is up to 100 % out of the amount of illegal currency transaction. https://www.alrud.com/

How can Individuals Import and Export of Art Objects to and from Russia?

Inherited Business Assets in Russia: Problems and Risks

Inherited Business Assets in Russia: Problems and Risks

Russian legislation does not provide any specific regulations to protect business assets after the death of testator which leads to impossibility to inherit business as a whole complex. There are risks of losing the business till the heirs accept the inheritance. For more details please follow…

What Problems One May Face with Inherited Business Assets in Russia?

In accordance with the Russian laws the inheritance comprises all the assets owned by the testator by the moment of death. If the inherited estate includes the business assets (shares, participatory shares in Russian or foreign legal entity) the heirs and the business itself may face a number of difficulties. Russian laws do not take into account the following points:

  • type of assets;
  • place of their location;
  • number of heirs;
  • heirs age, social, cultural, educational background.

Moreover, there is no definition of “Business” in Russian law so it is impossible to inherit the business as a whole complex but only via transferring to the heirs separate elements of it.

Also Russian laws provide only standard instruments for inheritance issues – inheritance by operation of law and making a will. Trusts and foundations are not recognized in Russia (but of course Russian persons may be settlers and beneficiaries of such institutions established under the foreign law).

The facilities of the instruments allowed by law are limited. For example, it is impossible to inherit the beneficial rights to the assets and the spouse’s share (The property acquired by the spouses during their marriage shall be their joint property according to the Family Code of the Russian Federation. The shares of the spouses are considered as equal, unless the alternative is provided by marriage contract.

The freedom to transfer the business assets under will is limited by the right of the following forced heirs:

  • minor or disabled children of the testator;
  • disabled spouse and parents;
  • disabled dependants of the testator

The forced heirs shall inherit at least half of the share each of them is entitled to in the case of legal succession.

This half of the share cannot be inherited in accordance with the provisions of the will. Also the testator cannot indicate in the will the following items:

  • the conditions for the heirs to be considered as the owners of the inherited business assets (for example attaining of a certain age, receiving the education) or
  • to give the instructions to the heirs on the manner of managing the assets in future.

So there is a high risk that the inherited business assets will be transferred to the heirs not in accordance with the wishes of the testator or be transferred to the persons who actually do not have required professional skills for managing business.

Risks Arising within Six Months Period of the Inherited Business Assets Acceptance

The heirs are entitled to accept the estate (inherited business assets) within six months period from the death of the testator (in some cases this term may be prolonged). And the estate shall be considered to be owned by the heirs from the moment of the testator’s death. But in practice the heirs cannot exercise their right to manage the business assets, i.e.:

  • attend the general meetings of shareholders;
  • receive dividends, etc

until they have received the certificate confirming their rights. The confirming certificate shall be issued by the notary who deals with the inheritance case upon expiration of six months period from the testator’s death (except for the cases when the notary is entitled to issue the certificate earlier).

So the uncertainty in shareholding structure exists during the mentioned six months, i.e. it may be difficult to clear up in advance the following:

  • who are the heirs;
  • whether the heirs have the intention to accept the inherited business assets or not.

Due to it the company which shares are being inherited may have the following difficulties and risks:

  • difficulties in convening and holding the general meeting of the shareholders for taking decisions and solving urgent problems (as there is no information on the persons entitled to participate in such meeting);
  • if nonetheless the general meeting was held there is a high risk of contestation of the taken decisions in future. The contestation may be provided by the new shareholders upon receiving the notary certificate.

This problem is relevant not only to the heirs of the business, but also to the management (members of the BoD, CEO) as there are no persons who can give the necessary instructions and make decisions.

Also it is worth mentioning that the period of uncertainty in shareholding structure may last for a very long time, i.e.:

  • heirs may not be aware that the estate includes business assets;
  • heirs may not inform the company on the fact of acceptance of the estate and receipt of the notary certificate;
  • the company or the shareholders alive do not have the access to the following information:
    – to the inheritance case,
    – to the information whether the will exists or not,
    – to the provisions of the will.

The situation becomes critical if the diseased was not just the shareholder of the company but also the CEO. In this case the company’s activity will be actually paralyzed as there are no corporate bodies entitled to take decisions required in day-to-day dealings of the company.

Managing the Inherited Business Assets on Behalf of the Heirs

If the estate includes shares and other assets to be managed, it is possible to establish the fiduciary management of the inherited business assets for the period until the heirs accept the estate and the notary issues the certificate confirming the rights of the heirs. The conditions of such fiduciary management are:

  • to be established by the notary or by the executor of the will;
  • exists only until the heirs accept the estate and not longer than nine months from the death of the testator if the management was established by the notary.

So it is recommended for the persons having business assets to make a will and indicate in it the authorities of the will executor. It will help to avoid the situations when:

  • the notary is not interested in execution of a fiduciary management agreement and does nothing, or
  • the notary enters into agreement with persons/companies not being professionals (as the activity of such managers is not licensed and there are no formal requirements for them), or
  • the heirs contest the inheritance issues in court for more than six or nine months, and
  • there is no authorized person to manage the assets during proceedings in the case in court.

Anyway in case the inherited business assets require managing after the heirs acceptance of the estate (for example in case the heirs are minors) then the business of the diseased may face a lot of problems as the transactions with the property of minors may need the approval of the tutorship authority.

Whether the Consent of Other Shareholders is Required for Transferring Shares of Inherited Business Assets to the Heirs?

Articles of Association of a limited liability company may provide that the participatory share in such company can be transferred to the heirs of the diseased only with the written consent of other participants of the company.

So in theory the rights of the heirs to receive a participatory share may depend on the will of other participants.

Under the practice of Russian courts the participants can approve or not the heir to be a new member of the shareholder structure only upon expiration of the six months period from the testator’s death. This may prolong the period of uncertainty in the shareholder structure.

The participants may give their consent by issuing one of the following documents depending on the provisions of Articles of Association:

  • Minutes of the general meeting of the participants to be signed by all of them (the share of the diseased shall not be taken into consideration);
  • Consent to be executed as a single document signed by all the participants;
  • Written statements to be signed by each participant.

The heir is considered to be a new member of inherited business assets shareholder structure automatically if the participants remain silent within 30 days from the receipt of request for approving of the heir to be a new member of the shareholder structure.

If the participants of the company deny the heirs right to receive the diseased share in the Authorized capital, the shares shall pass to the company itself. In this case the company is obliged to:

  • divide the shares between the existing participants of the company or,
  • dispose the shares to the third parties within one year if it is not prohibited by the Articles of Association.

In this case the heirs are entitled to receive the compensation for the shares. The shares cost  should be calculated on the basis of the last accounting statements of the company prepared prior testator’s death. https://www.alrud.com

Useful tips for Individuals who want to Import and Export Art Objects to and from Russia

Succession in Russia

Succession in Russia is possible by will and operation of law. The freedom of will is limited. To acquire the estate the heirs shall accept it. Succession in Russia is the only way to transfer property in case of death. The only way to change the order of succession established by law in Russia is to make a will. The freedom of will is limited by compulsory heirship rules and spouse’ part in the joint property. For more details please follow…

Order of Succession in Russia in Compliance with Domestic Law

Succession in Russia is the only way to transfer property in the case of death. Deceased’s estate (property, rights and obligations) shall pass to other persons by universal succession, i.e. in an unchanged, single form at the same time. It is an important fact that heirs have no right to waive part of inherited property. For example, it is impossible to accept deceased’s assets and to reject debts.

Rights and liabilities which are connected with the personality of the deceased shall not be included in the estate. In particular it will be the following rights:

  • the right to alimony,
  • right to damages for harm inflicted to the person’s life or health, and also
  • rights and liabilities prohibited for succession by law,

For example, rights arisen from the following agreements shall not be inherited:

  • gratuitous use agreements,
  • agency agreements,
  • contracts of commission agency.

The following personal incorporeal rights shall not be included in the estate:

  • right to the name,
  • right of authorship,
  • other personal non-property rights and intangible wealth.

Inheritance includes both properties situated in Russia and abroad. Whereby if testator’s last abode is situated abroad, only real property (immovable), situated in Russia, will be inherited by Russian law.

Succession in Russia may be provided by will and by operation of law. In the case of succession by operation of law all legal heirs, who are called upon to inherit in compliance with the priority, shall inherit in equal shares. The order of succession may be changed by composing a will which has a priority under succession by operation of law.

Inheritance by Will as the Way of Structuring of Succession in Russia

The will as the way of structuring of Succession in Russia shall be created personally and contain dispositions of only one person. It cannot be created through a representative and it cannot be created by two persons or more . As a general rule, the will shall be made in writing and attested by a notary. Failure to observe these rules causes the invalidity of the will.

The deceased can dispose of his/her property or a portion thereof by means of one or several wills . A will may contain dispositions relating to any property, in particular, a property that a testator might acquire after issuing a will .

The testator has the following rights:

  • to transfer property at his own discretion to any persons,
  • to define in any way the shares of the heirs in the inheritance,
  • to deprive of the inheritance several or all legal heirs, not explaining the reasons for such deprivation,
  • to include into the will other orders.

Nevertheless, irrespectively of the provisions of the will the following compulsory heirs excluded from the will automatically gain at least half of the share each of them is entitled to in the case of legal Succession in Russia :

  • minor or disabled children of the testator,
  • disabled spouse and parents,
  • disabled dependants of the testator.

Spouse’s Right to ½ Part of the Deceased Property

The property acquired by the spouses during their marriage shall be their joint property according to the Family Code of the Russian Federation . The shares of the spouses in their joint property are considered as equal, unless the alternative is provided by marriage contract. Therefore, in case the spouses do not agreed otherwise, the deceased’s spouse automatically gains half of jointly owned property. The second part of this common joined property shall be divided between all heirs by will or by operation of law.

Inheritance Acceptance as the Step of Succession in Russia

Inheritance acceptance is the important step of Succession in Russia. To acquire the inheritance the heirs shall accept it. There are two methods of inheritance acceptance :

  1. filing an application to the notary who maintain the inheritance case and
  2. making implicative actions.

The implicative actions will be made if the heir:

  • has commenced possession or administration of assets of the inheritance;
  • has taken measures for preserving assets of the estate, protecting it against third persons’ encroachments or claims;
  • has made expenses on his account towards maintenance of assets of the estate;
  • has paid the testator’s debts or received from third persons amounts of money payable to the testator.

The term for inheritance acceptance consists of 6 months after the date of the testator’s death. The heir may accept the assets after this term in two cases:

  1. reinitiating the term for inheritance acceptance by the court order
  2. without applying to the court if other hers have no objections.

The inheritance by minors has some special features:

  • assets to be transferred to the minors may be accepted by their legal representatives (for example by the parents alive),
  • in certain cases the disposal of the property owned by minors cannot be performed without preliminary consent of the guardianship agency. https://www.alrud.com