Doing Business 2016 Russian??Federation 100829 Economy Profile 2016 Russian Federation Doing Business 2016 Russian Federation 2 © 2016 The 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 18 17 16 15 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 2016 Russian Federation 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 44 Registering property .................................................................................................................. 57 Getting credit .............................................................................................................................. 72 Protecting minority investors ................................................................................................... 79 Paying taxes ................................................................................................................................ 85 Trading across borders .............................................................................................................. 90 Enforcing contracts .................................................................................................................... 98 Resolving insolvency ................................................................................................................ 107 Labor market regulation ......................................................................................................... 115 Distance to frontier and ease of doing business ranking .................................................... 121 Resources on the Doing Business website ............................................................................ 124 Doing Business 2016 Russian Federation 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is economies (comparator economies) for each indicator. for a local entrepreneur to open and run a small to The data in this report are current as of June 1, 2015 medium-size business when complying with relevant (except for the paying taxes indicators, which cover the regulations. It measures and tracks changes in period January–December 2014). regulations affecting 11 areas in the life cycle of a The Doing Business methodology has limitations. Other business: starting a business, dealing with construction areas important to business—such as an economy’s permits, getting electricity, registering property, getting proximity to large markets, the quality of its credit, protecting minority investors, paying taxes, infrastructure services (other than those related to trading across borders, enforcing contracts, resolving trading across borders and getting electricity), the insolvency and labor market regulation. Doing Business security of property from theft and looting, the 2016 does not present rankings of economies on labor transparency of government procurement, market regulation indicators or include the topic in the macroeconomic conditions or the underlying strength of aggregate distance to frontier score or ranking on the institutions—are not directly studied by Doing Business. ease of doing business. The indicators refer to a specific type of business, In a series of annual reports Doing Business presents generally a local limited liability company operating in quantitative indicators on business regulations and the the largest business city. Because standard assumptions protection of property rights that can be compared are used in the data collection, comparisons and across 189 economies, from Afghanistan to Zimbabwe, benchmarks are valid across economies. The data not over time. The data set covers 47 economies in Sub- only highlight the extent of obstacles to doing business; Saharan Africa, 32 in Latin America and the Caribbean, 25 they also help identify the source of those obstacles, in East Asia and the Pacific, 25 in Eastern Europe and supporting policy makers in designing regulatory reform. Central Asia, 20 in the Middle East and North Africa and More information is available in the full report. Doing 8 in South Asia, as well as 32 OECD high-income Business 2016 presents the indicators, analyzes their economies. The indicators are used to analyze economic relationship with economic outcomes and presents outcomes and identify what reforms have worked, where business regulatory reforms. The data, along with and why. information on ordering Doing Business 2016, are This economy profile presents the Doing Business available on the Doing Business website at indicators for Russian Federation. To allow useful http://www.doingbusiness.org. comparison, it also provides data for other selected Doing Business 2016 Russian Federation 5 CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 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: High income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. Population: 143,819,569 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 13,210 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2016 rank: 51 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2015 rank: 54* 0 represents the worst performance and 100 the frontier. Change in rank: 3 (See the chapter on the distance to frontier and ease of doing business). DB 2016 DTF: 70.99 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2015 DTF: 69.26 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 1.73 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2015 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2015 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 119 of the Doing Business 2016 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2016: 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 this year’s economy profile. Doing Business 2016 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 2016 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 2015 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 2016 Russian Federation 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Russian Federation (Scale: Rank 189 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 2015 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 2016 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 119 of the Doing Business 2016 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2016 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 DB2016 Best performer globally Russian Federation Russian Federation Moscow DB2016 Indicator Japan DB2016 China DB2016 Brazil DB2016 India DB2016 DB2016 DB2015 DB2016 Starting a Business 41 34 -- -- 174 136 155 81 New Zealand (1) (rank) Starting a Business (DTF 92.35 92.17 91.08 95.3 64.33 77.46 73.59 86.34 New Zealand (99.96) Score) Procedures (number) 4.4 4.4 5.0 3.0 11.0 11.0 12.9 8.0 New Zealand (1.00)* Time (days) 10.5 11.2 12.0 7.0 83.0 31.4 29.0 10.2 New Zealand (0.50) Cost (% of income per 1.1 1.2 1.2 1.0 3.8 0.7 13.5 7.5 Slovenia (0.00) capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 105 Economies (0.00)* of income per capita) Dealing with Construction Permits 119 117 -- -- 169 176 183 68 Singapore (1) (rank) Dealing with Construction Permits 65.23 65.17 66.5 62.28 51.92 48.29 32.47 71.65 Singapore (92.97) (DTF Score) Procedures (number) 19.0 19.0 19.0 19.0 18.2 22.0 33.6 12.0 5 Economies (7.00)* Doing Business 2016 Russian Federation 12 Saint Petersburg DB2016 Best performer globally Russian Federation Russian Federation Moscow DB2016 Indicator Japan DB2016 China DB2016 Brazil DB2016 India DB2016 DB2016 DB2015 DB2016 Time (days) 263.5 263.5 244.0 309.0 425.7 244.3 191.5 197.0 Singapore (26.00) Cost (% of warehouse 1.6 1.6 1.7 1.3 0.4 7.2 26.0 0.6 Qatar (0.00) value) Building quality control 14.0 14.0 14.0 14.0 9.4 9.0 11.0 10.0 New Zealand (15.00) index (0-15) Getting Electricity 29 53 -- -- 22 92 70 14 Korea, Rep. (1) (rank) Getting Electricity (DTF 84.22 77.89 85.43 81.41 85.5 68.66 74.56 89.88 Korea, Rep. (99.88) Score) Procedures (number) 3.0 4.0 3.0 3.0 4.0 5.5 5.0 3.4 14 Economies (3.00)* Time (days) 160.5 175.2 150.0 185.0 43.6 143.2 90.1 97.7 Korea, Rep. (18.00)* Cost (% of income per 93.1 277.4 71.9 142.4 28.6 413.3 442.3 0.0 Japan (0.00) capita) Reliability of supply and transparency of tariff 8.0 8.0 8.0 8.0 5.6 6.0 5.5 8.0 18 Economies (8.00)* index (0-8) Registering Property 8 8 -- -- 130 43 138 48 New Zealand (1) (rank) Registering Property 90.51 90.12 90.51 90.51 52.48 75.02 50.29 73.91 New Zealand (94.46) (DTF Score) Procedures (number) 3.0 3.0 3.0 3.0 13.6 4.0 7.0 6.0 4 Economies (1.00)* Time (days) 15.0 19.0 15.0 15.0 31.7 19.5 47.0 13.0 3 Economies (1.00)* Cost (% of property 0.2 0.1 0.2 0.2 3.1 3.4 7.5 5.8 Saudi Arabia (0.00) value) Quality of the land administration index (0- 26.0 26.0 26.0 26.0 13.6 17.0 7.0 24.5 3 Economies (28.50)* 30) Doing Business 2016 Russian Federation 13 Saint Petersburg DB2016 Best performer globally Russian Federation Russian Federation Moscow DB2016 Indicator Japan DB2016 China DB2016 Brazil DB2016 India DB2016 DB2016 DB2015 DB2016 Getting Credit (rank) 42 61 -- -- 97 79 42 79 New Zealand (1) Getting Credit (DTF 65 55 65 65 45 50 65 50 New Zealand (100) Score) Strength of legal rights 6.0 4.0 6.0 6.0 2.0 4.0 6.0 4.0 3 Economies (12.00)* index (0-12) Depth of credit 7.0 7.0 7.0 7.0 7.0 6.0 7.0 6.0 26 Economies (8.00)* information index (0-8) Credit registry coverage 0.0 0.0 0.0 0.0 55.1 89.5 0.0 0.0 Portugal (100.00) (% of adults) Credit bureau coverage 22 Economies 70.2 64.6 70.2 70.2 79.0 0.0 22.0 100.0 (% of adults) (100.00)* Protecting Minority 66 64 -- -- 29 134 8 36 Singapore (1)* Investors (rank) Protecting Minority 56.67 56.67 56.67 56.67 65 43.33 73.33 63.33 Singapore (83.33)* Investors (DTF Score) Strength of minority investor protection 5.7 5.7 5.7 5.7 6.5 4.3 7.3 6.3 3 Economies (8.30)* index (0-10) Extent of conflict of interest regulation 5.0 5.0 5.0 5.0 5.7 5.0 6.7 7.0 Singapore (9.30)* index (0-10) Extent of shareholder governance index (0- 6.3 6.3 6.3 6.3 7.3 3.7 8.0 5.7 4 Economies (8.00)* 10) United Arab Emirates Paying Taxes (rank) 47 50 -- -- 178 132 157 121 (1)* Paying Taxes (DTF United Arab Emirates 81.6 80.63 81.55 81.7 40.85 64.46 56.14 67.16 Score) (99.44)* Payments (number per 7.0 7.0 7.0 7.0 9.6 9.0 33.0 14.0 Hong Kong SAR, Doing Business 2016 Russian Federation 14 Saint Petersburg DB2016 Best performer globally Russian Federation Russian Federation Moscow DB2016 Indicator Japan DB2016 China DB2016 Brazil DB2016 India DB2016 DB2016 DB2015 DB2016 year) China (3.00)* Time (hours per year) 168.0 168.0 168.0 168.0 2,600.0 261.0 243.0 330.0 Luxembourg (55.00) Total tax rate (% of 47.0 48.9 47.1 46.8 69.2 67.8 60.6 51.3 Ireland (25.90) profit) Trading Across Borders 170 169 -- -- 145 96 133 52 Denmark (1)* (rank) Trading Across Borders 37.39 37.39 37.39 37.39 52.43 69.13 56.45 85.9 Denmark (100)* (DTF Score) Time to export: Border 96 96 96 96 49 26 109 48 15 Economies (0.00)* compliance (hours) Cost to export: Border 1,125 1,125 1,125 1,125 959 522 413 306 18 Economies (0.00)* compliance (USD) Time to export: Documentary 43 43 43 43 42 21 41 3 Jordan (0.00) compliance (hours) Cost to export: Documentary 500 500 500 500 226 85 102 15 20 Economies (0.00)* compliance (USD) Time to import: Border 96 96 96 96 63 92 287 48 19 Economies (0.00)* compliance (hours) Cost to import: Border 1,125 1,125 1,125 1,125 970 777 574 337 28 Economies (0.00)* compliance (USD) Time to import: Documentary 43 43 43 43 146 66 63 3 21 Economies (1.00)* compliance (hours) Cost to import: Documentary 500 500 500 500 107 171 145 23 30 Economies (0.00)* compliance (USD) Enforcing Contracts 5 5 -- -- 45 7 178 51 Singapore (1) Doing Business 2016 Russian Federation 15 Saint Petersburg DB2016 Best performer globally Russian Federation Russian Federation Moscow DB2016 Indicator Japan DB2016 China DB2016 Brazil DB2016 India DB2016 DB2016 DB2015 DB2016 (rank) Enforcing Contracts 78.56 78.56 79.04 77.44 66.48 77.56 32.41 65.26 Singapore (84.91) (DTF Score) Time (days) 307.0 307.0 310.0 300.0 731.0 452.8 1,420.0 360.0 Singapore (150.00) Cost (% of claim) 16.5 16.5 15.0 20.0 20.7 16.2 39.6 23.4 Iceland (9.00) Quality of judicial 12.5 12.5 12.5 12.5 13.1 14.1 7.5 7.5 3 Economies (15.50)* processes index (0-18) Resolving Insolvency 51 44 -- -- 62 55 136 2 Finland (1) (rank) Resolving Insolvency 58.39 59.06 58.16 58.92 52.68 55.43 32.59 93.75 Finland (93.81) (DTF Score) Recovery rate (cents on 41.7 43.0 41.3 42.7 22.4 36.2 25.7 92.9 Japan (92.90) the dollar) Time (years) 2.0 2.0 2.0 1.8 4.0 1.7 4.3 0.6 Ireland (0.40) Cost (% of estate) 9.0 9.0 9.0 9.0 12.0 22.0 9.0 3.5 Norway (1.00) Outcome (0 as piecemeal sale and 1 as 0 0 0 0 1 0 0 1 going concern) Strength of insolvency 11.5 11.5 11.5 11.5 13.0 11.5 6.0 14.0 4 Economies (15.00)* framework index (0-16) Source: Doing Business database. Note: DB2015 rankings shown are not last year’s published rankings but comparable rankings for DB2015 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 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 2016 Russian Federation 16 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 city 1 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 Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business records all procedures officially required, or commonly done in practice, for an Each procedure starts on a separate day (2 entrepreneur to start up and formally operate an procedures cannot start on the same day). industrial or commercial business, as well as the time Procedures that can be fully completed and cost to complete these procedures and the paid- online are recorded as ½ day. in minimum capital requirement. These procedures Procedure completed once final document is include obtaining all necessary licenses and permits received and completing any required notifications, verifications or inscriptions for the company and No prior contact with officials employees with relevant authorities. The ranking of Cost required to complete each procedure economies on the ease of starting a business is (% of income per capita) determined by sorting their distance to frontier scores for starting a business. These scores are the Official costs only, no bribes simple average of the distance to frontier scores for No professional fees unless services required each of the component indicators. by law or commonly used in practice To make the data comparable across economies, Paid-in minimum capital (% of income several assumptions about the business and the per capita) procedures are used. It is assumed that any required information is readily available and that the Deposited in a bank or with a notary before entrepreneur will pay no bribes. Assumptions about registration (or within 3 months) the business:  Is a limited liability company (or its legal  Has a start-up capital of 10 times income per equivalent), located in the largest business city capita and a turnover of at least 100 times 1 and is 100% domestically owned with five income per capita. owners, none of whom is a legal entity.  Has a company deed 10 pages long.  Has at least 10 and up to 50 employees, all of  Does not qualify for any special benefits. them domestic nationals.  Leases the commercial plant or offices and is not  Performs general commercial or industrial a proprietor of real estate. activities. 1 For 11 economies the data are also collected for the second largest business city. Doing Business 2016 Russian Federation 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Russian to a case scenario in the largest business city of an Federation? According to data collected by Doing economy, except for 11 economies for which the data Business, starting a business there requires 4.40 are a population-weighted average of the 2 largest procedures, takes 10.50 days, costs 1.10% of income per business cities. See the chapter on distance to frontier capita and requires paid-in minimum capital of 0.00% of and ease of doing business ranking at the end of this income per capita (figure 2.1). Most indicator sets refer profile for more details. Figure 2.1 What it takes to start a business in Russian Federation - Moscow Paid-in minimum capital (% of income per capita): 0.00 Doing Business 2016 Russian Federation 18 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. Doing Business 2016 Russian Federation 19 STARTING A BUSINESS Globally, Russian Federation stands at 41 in the ranking the regional average ranking provide other useful of 189 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 2016 Russian Federation 20 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 DB2016 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 2016 Russian Federation 21 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 New company must pay a registration fee of RUB 4,000, and collect a payment receipt from a terminal machine. Business registration receipt 2 is required for Procedure 4, registration with Federal Tax Service. The 1 day no charge entire process takes only a few minutes, but it must be done in person. Payments can be made at the post office, any bank office, including Sberbank offices throughout Moscow, or at payment terminals at the Moscow Tax Service Office #46, where business registration is done. Doing Business 2016 Russian Federation 22 Time to No. Procedure Cost to complete complete The registration service is free of charge only at Sberbank, all other entities charge a commission. Agency: Bank Register with the unified register at the Federal Tax Service on the local level, obtain state registration number and identification number of taxpayer (INN) The company must submit the following documents for registration: • 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; • Receipt of payment of the state registration fee (procedure 2). • 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, 7 days RUB 4,000 3 which specifies the date that the registration will be complete and ready for pick up. This is always 5 working days (not counting the day of the application) after application. 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 4 On 6 April 2015, the President of the Russian Federation signed Federal 1 day RUB 500 Law #82 that eliminates requirement for a company seal. However, in practice, majority of the businesses still obtain a company seal as part Doing Business 2016 Russian Federation 23 Time to No. Procedure Cost to complete complete of the process of starting a business. A company seal typically costs RUB 500. Agency: Seal-making service Open the company bank account According to the Central Bank of Russian Federation instruction No. 153-I from May 30, 2014, the following documents are required in order to open a business bank account: • A certificate of state registration of the legal entity; • Founding documents of the legal entity; • Certificate of tax registration; • The license (permit) issued for a legal entity if such licenses (permits) 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. free if done at the In accordance with Article 22.1.10 of the Basic Principles of Russian bank; RUB 200 Legislation on Notaries Public, the notary's fee for certification of (signatures and signatures and bank cards is equal to RUB 200. The notary's total fee for bank card) + RUR 5 such certification, including technical work, is approximately RUB 800 - 2 days 1000 (notary fees) 1200. approximately if done with the The signature of the entrepreneur must be certified and registered by a bank. There is a special form (provided by the government) that must notary 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. Summary of time, cost and procedures for starting a business in Russian Federation - Saint Petersburg Time to No. Procedure Cost to complete complete Doing Business 2016 Russian Federation 24 Time to No. Procedure Cost to complete complete Pay the Registration Fee and Registration with the Unified State Register 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 5 days RUB 4,000 1 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) Agency: the 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. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2016 Russian Federation 25 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 Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business Liability and insurance regimes (0-2) city. Professional certifications (0-4)  Is 100% domestically and privately owned.  Has five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 Russian Federation 26 The construction company (BuildCo) (continued):  Will be a new construction (there was no previous construction on the land), with no  Has 60 builders and other employees, all of trees, natural water sources, natural reserves them nationals with the technical expertise or historical monuments of any kind on the and professional experience necessary to plot. obtain construction permits and approvals.  Will have complete architectural and  Has at least one employee who is a technical plans prepared by a licensed licensed architect or engineer and architect. If preparation of the plans requires registered with the local association of such steps as obtaining further architects or engineers. BuildCo is not documentation or getting prior approvals assumed to have any other employees who from external agencies, these are counted as are technical or licensed experts, such as procedures. geological or topographical experts.  Will include all technical equipment required  Has paid all taxes and taken out all to be fully operational. necessary insurance applicable to its general business activity (for example,  Will take 30 weeks to construct (excluding all accidental insurance for construction delays due to administrative and regulatory workers and third-person liability). requirements).  Owns the land on which the warehouse will be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita.  Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there The warehouse: is no water delivery infrastructure in the economy, a borehole will be dug. If there is  Will be used for general storage activities, no sewerage infrastructure, a septic tank in such as storage of books or stationery. The the smallest size available will be installed or warehouse will not be used for any goods built. requiring special conditions, such as food, chemicals or pharmaceuticals.  Will not require water for fire protection reasons; a fire extinguishing system (dry  Will have two stories, both above ground, system) will be used instead. If a wet fire with a total constructed area of protection system is required by law, it is approximately 1,300.6 square meters assumed that the water demand specified (14,000 square feet). Each floor will be 3 below also covers the water needed for fire meters (9 feet, 10 inches) high. protection.  Will have road access and be located in the  Will have an average water use of 662 liters periurban area of the economy’s largest (175 gallons) a day and an average business city (that is, on the fringes of the wastewater flow of 568 liters (150 gallons) a city but still within its official limits). For 11 day. Will have a peak water use of 1,325 liters economies the data are also collected for (350 gallons) a day and a peak wastewater the second largest business city. flow of 1,136 liters (300 gallons) a day.  Will not be located in a special economic  Will have a constant level of water demand or industrial zone. Will be located on a land and wastewater flow throughout the year. plot of approximately 929 square meters (10,000 square feet) that is 100% owned by  Will be 1 inch in diameter for the water BuildCo and is accurately registered in the connection and 4 inches in diameter for the cadastre and land registry. sewerage connection. Doing Business 2016 Russian Federation 27 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 19.00 procedures, takes 263.50 frontier and ease of doing business ranking at the end of days and costs 1.60% 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 2016 Russian Federation 28 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 2016 Russian Federation 29 DEALING WITH CONSTRUCTION PERMITS Globally, Russian Federation stands at 119 in the ranking provide other useful information for assessing how easy of 189 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 2016 Russian Federation 30 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 DB2016 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. 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 2016 Russian Federation 31 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 RUB 23,547,869 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 1 topographic survey with a layout of the building and structure. 30 days RUB 100,000 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 * Request and obtain the development plan of land plot (GPZU) at the Moscow Architecture and City Planning 3 Committee 30 days no charge A one-stop shop has been implemented at the Moscow Doing Business 2016 Russian Federation 32 Time to No. Procedure Cost to complete complete 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. Rather, BuildCo applies for the copy of the development plan of the land plot at MoskomArchitektura and they take care of all the steps. The procedure takes from 45-60 days. Agency: The Moscow Architecture and City Planning Committee * Request and obtain technical conditions for water and sewage The technical conditions are defined by the Moscow Water and Sewage Company. Under Government Regulation No. 83 dated February 13, 2006: • A list of technical conditions must be prepared by the local government when preparing the city development plan of the 4 land plot. 30 days no charge • If the city development plan of the land plot does not contain this information, the technical conditions, as well as the information on payment for connection to such services, must be provided by the respective agency within 14 business days after receiving the request. However, in practice it takes longer. Agency: Moscow Water and Sewage Company - Mosvodokanal 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 approval of the architectural and urban planning design Approval of the architectural and urban planning decision is required in order to have the approval of the facades and the location of the building by the chief architect of the city and subordinate agencies within the relevant municipality. Regulated 6 by the Decree of the Government of Moscow № 284-PP dated 30 days no charge 30 April 2014 (as amended). The required documents include: 1) Scheme of the situational plan (based on 1:2000); 2) Urban planning scheme in combination with the scheme of the organization of the transport in the indicated territory (based on 1:500); Doing Business 2016 Russian Federation 33 Time to No. Procedure Cost to complete complete 3) Drawings of the façade (based on 1:200); 4) The plan of the first floor, nonrecurring floors and underground levels (based on 1:200); 5) Schemes of the slits showing the elevations (based 1:200). Agency: Moscomarchitectura 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 7 After reforms implemented in 2006, the statutory time line of issuing the permit was reduced from 30 days to 10. The permit is free of charge. Agency: Moscow State Committee of Construction Supervision 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 8 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) Notify the Moscow State Committee of Construction Supervision about the commencement of work 9 1 day no charge Agency: Moscow State Committee of Construction Supervision * Receive control-geodesic survey from Mosgorgeotrest Prior to beginning the construction, Mosgorgeotrest conducts 1 day RUB 30,000 10 topographic and geodesic surveys (geodesic base, general construction plan). This is conducted in order to verify the compliance of the project design documentation with the Doing Business 2016 Russian Federation 34 Time to No. Procedure Cost to complete complete existing schemes of underground infrastructure lines. Agency: Mosgorgeotrest Receive random inspection during construction Construction activities are not interrupted during inspections. 11 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 12 service is then installed. 30 days RUB 109,259 Agency: Moscow Water and Sewage Company - Mosvodokanal Notify the Moscow State Committee of Construction Supervision about the commencement of work 13 1 day no charge Agency: Moscow State Committee of Construction Supervision 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 close the order on conducting of construction works from the Union of Administrative Technical Inspections (UATI). The documents required for the closing of the order are: 1. Proof of identity of the applicant. 14 2. Documents certifying the authority to act on behalf of the 10 days no charge business entity. 3. The application of the established sample. The closing of the order on conducting of construction works is done within 8 business days. Agency: Union of Administrative Technical Inspections (UATI) Request and convene Acceptance Commission BuildCo files application forms with the Moscow State 15 Committee of Construction Supervision in order to convene the 30 days no charge Acceptance Commission. The Commission includes representatives from different agencies, such as ecology, the prefecture, the local government, the sanitary services, the Doing Business 2016 Russian Federation 35 Time to No. Procedure Cost to complete complete company, and the designer. After the Commission has convened, BuildCo collects the signatures of all its members. The timeline established by Government of Moscow Resolution No. 530 (dated November 7, 2001) for the relevant authorities to appoint representatives to the Acceptance Commission is 10 days. The time required for approval of the building depends on the state of the building (whether it is ready to be occupied or not) and on the inspection results. In practice, this takes on average 30 days. The most difficult part is to convene the members of the Commission and gather their signatures for approval. Agency: Acceptance Commission Receive final inspection by Moscow State Committee of Construction Supervision 16 1 day no charge Agency: Moscow State Committee of Construction Supervision Request and receive the disposition on operation of building (occupancy permit) 17 10 days no charge Agency: Moscow State Committee of Construction Supervision Request and receive the technical plans / cadastre passports of the building 18 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. 19 To complete the registration, BuildCo must submit an 18 days RUB 22,000 application, the real property plan, and approval of the building, confirming that real property has been built. Based on the order of the Federal Service for State Registration, Cadastre and Cartography (Rosreestr) on Moscow dated 08.15.2012, the time limit for completing the registration is 20 calendar days from the application date. Doing Business 2016 Russian Federation 36 Time to No. Procedure Cost to complete complete 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 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 According to the applicable regulations, the technical conditions should be provided within 16 business days. However, in practice it takes about 45 days to obtain the technical conditions for the water and 45 days no charge 3 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 30 days no charge 4 and to obtain a building permit. It is also required at the end of the construction in order to obtain the occupancy certificate. The applicant shall provide the land plot documents, preliminary Doing Business 2016 Russian Federation 37 Time to No. Procedure Cost to complete complete drawings 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 * Request and obtain the decision of the State Administrative Technical Inspectorate on fencing the construction site The State Administrative Technical Inspectorate grants permission on fencing the construction site in order to maintain safety during 16 days no charge 5 construction. Agency: State Administrative Technical Inspectorate 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 6 - 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 approval of the architectural and urban planning design by Saint-Petersburg Architecture and City Planning Committee (KGA) The Saint-Petersburg Architecture and City Planning Committee (KGA) and Chief Architect must approve the layout of the land plot and the 15 days no charge 7 architectural design. Agency: Saint-Petersburg Architecture and City Planning Committee (KGA) 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: 8 • Application form 14 days no charge • Documents confirming title to the land • Town (planning) plan of land • Relevant project documentation The permit is free of charge. Doing Business 2016 Russian Federation 38 Time to No. Procedure Cost to complete complete 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 9 14 days no charge Agency: State Administrative Technical Inspectorate Notify the State Agency of Construction Supervision and Expertise of Saint-Petersburg about commencement of construction works 10 1 day no charge Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg Receive inspection from the State Agency of Construction Supervision and Expertise The State Agency of Construction Supervision and Expertise of Saint- Petersburg will generally perform one inspection during construction. 1 day no charge 11 Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg 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 12 the date specified in the contract. Agency: Saint-Petersburg Vodocanal Notify the State Agency of Construction Supervision and Expertise of Saint-Petersburg about completion of construction works After the completion of construction BuildCo has to Notify the State Agency of Construction Supervision and Expertise of Saint-Petersburg 13 about the completion of construction works. 1 day no charge Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg Doing Business 2016 Russian Federation 39 Time to No. Procedure Cost to complete complete 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 14 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 convene Acceptance Commission BuildCo has to convene an "Acceptance Commission" through the State Agency of Construction Supervision and Expertise of Saint Petersburg in order to conduct a comprehensive final examination of the construction. "Acceptance Commission" usually involves all agencies 15 that were involved in the preparation or approval of the architectural 30 days no charge designs, supervision of construction, as well as various sub-contractors that were involved in the construction process. Agency: Acceptance Commission Receive final inspection from the State Agency of Construction Supervision and Expertise After the completion of construction works, the State Agency of Construction Supervision and Expertise of Saint-Petersburg conducts a final inspection to verify if the building was built according to the 1 day no charge 16 approved design conditions. Agency: State Agency of Construction Supervision and Expertise of Saint- Petersburg 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: 17 1) land ownership documents 30 days no charge 2) development plan of the land plot 3) building permit 4) a document confirming that the constructed building meets the requirements of technical regulations signed by the person responsible for conducting the construction works 5) a detailed map showing the location of the construction, location of Doing Business 2016 Russian Federation 40 Time to No. Procedure Cost to complete complete 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 order to be able to register the building at the Federal Service for State Registration, Cadastre and Cartography. 18 Preparation of the technical plan of the building can be done by either 20 days RUB 55,000 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 19 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 2016 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. Source: Doing Business database. 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) 14.00 14.00 Quality of building regulations index (0-2) 2.00 2.00 In what way are the building regulations (including the Available 1.0 Available building code) or any regulations dealing with online. 1.0 online. construction permits made available? (0-1) List of 1.0 List of required required documents; Which requirements for obtaining a building permit are documents; Fees to be clearly specified by the building regulations or by 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) 1.00 1.00 Licensed 1.0 Licensed Who is part of the committee or team that reviews and architect; architect; approves building permit applications in the relevant 1.0 Licensed Licensed permit-issuing agency? (0-1) engineer. engineer. Quality control during construction index (0-3) 3.00 3.00 Inspections 2.0 Inspections by by in-house in-house engineer; engineer; What types of inspections (if any) are required by law to Unschedule Unscheduled 2.0 be carried out during construction? (0-2) d inspections; inspections; Risk-based Risk-based inspections. inspections. Mandatory 1.0 Mandatory Do legally mandated inspections occur in practice during inspections inspections 1.0 construction? (0-1) are always are always done in done in Doing Business 2016 Russian Federation 42 Answer Score Answer (Saint Score (Saint (Moscow) (Moscow) Petersburg) Petersburg) practice. practice. Quality control after construction index (0-3) 3.00 3.00 Yes, final 2.0 Yes, final inspection inspection is is done by done by government government Is there a final inspection required by law to verify that agency; Yes, agency; Yes, the building was built in accordance with the approved in-house in-house 2.0 plans and regulations? (0-2) engineer engineer submits submits report for report for final final inspection. inspection. Final 1.0 Final inspection Do legally mandated final inspections occur in practice? inspection always 1.0 (0-1) always occurs occurs in in practice. practice. Liability and insurance regimes index (0-2) 1.00 1.00 Architect or 1.0 Architect or Which parties (if any) are held liable by law for structural engineer; engineer; 1.0 flaws or problems in the building once it is in use? (0-1) Constructio Construction n company. company. No party is 0.0 No party is Which parties (if any) are required by law to obtain an required by required by insurance policy to cover possible structural flaws or law to 0.0 law to obtain problems in the building once it is in use? (0-1) obtain insurance . insurance . Professional certifications index (0-4) 4.00 4.00 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. Minimum 2.0 Minimum What are the qualification requirements for the number of number of professional who supervises the construction on the years of years of 2.0 ground? (0-2) experience; experience; University University Doing Business 2016 Russian Federation 43 Answer Score Answer (Saint Score (Saint (Moscow) (Moscow) Petersburg) Petersburg) 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 2016 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, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. In obtaining final supply addition, this year Doing Business adds two new measures: the reliability of supply and transparency Time required to complete each procedure of tariffs index (included in the aggregate distance to (calendar days) frontier score and ranking on the ease of doing Is at least 1 calendar day business) and the price of electricity (omitted from these aggregate measures). The ranking of Each procedure starts on a separate day economies on the ease of getting electricity is Does not include time spent gathering determined by sorting their distance to frontier information scores for getting electricity. These scores are the Reflects the time spent in practice, with little simple average of the distance to frontier scores for follow-up and no prior contact with officials each of the component indicators. To make the data comparable across economies, several assumptions Cost required to complete each procedure (% are used. of income per capita) Assumptions about the warehouse Official costs only, no bribes The warehouse: Excludes value added tax  Is owned by a local entrepreneur. The reliability of supply and transparency of tariffs index  Is located in the economy’s largest business city. For 11 economies the data Sum of the scores of six component indices: are also collected for the second largest Duration and frequency of outages business city. Tools to monitor power outages  Is located in an area where similar warehouses are typically located. In this Tools to restore power supply area a new electricity connection is not Regulatory monitoring of utilities’ performance eligible for a special investment promotion Financial deterrents aimed at limiting outages regime (offering special subsidization or faster service, for example). Transparency and accessibility of tariffs  Is located in an area with no physical Price of electricity (cents per kilowatt-hour)* constraints. For example, the property is Price based on monthly bill for commercial not near a railway. warehouse in case study  Is a new construction and is being *Price of electricity is not included in the calculation of connected to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 Russian Federation 45 The warehouse (continued): Assumptions about the monthly consumption  Has two stories, both above ground, with a  It is assumed that the warehouse operates 8 total surface area of approximately 1,300.6 hours a day for 30 days a month, with square meters (14,000 square feet). The equipment utilized at 80% of capacity on plot of land on which it is built is 929 average, and that there are no electricity cuts square meters (10,000 square feet). (assumed for simplicity). The subscribed capacity of the warehouse is 140 kVA, with a  Is used for storage of goods. power factor of 1 (1 kVA = 1 kW). The monthly energy consumption is therefore Assumptions about the electricity connection 26,880 kWh, and the hourly consumption 112 kWh (26,880 kWh/30 days/8 hours). The electricity connection:  If multiple electricity suppliers exist, the  Is a permanent one. warehouse is served by the cheapest supplier.  Is a three-phase, four-wire Y, 140-kilovolt-  Tariffs effective in March of the current year ampere (kVA) (subscribed capacity) are used for calculation of the price of connection (where the voltage is 120/208 electricity for the warehouse. V, the current would be 400 amperes; where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and 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.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 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 3.00 2 largest business cities. See the chapter on distance to procedures, takes 160.50 days and costs 93.10% of frontier and ease of doing business ranking at the end of income 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 What it takes to obtain an electricity connection in Russian Federation - Saint Petersburg Doing Business 2016 Russian Federation 47 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 2016 Russian Federation 48 GETTING ELECTRICITY Globally, Russian Federation stands at 29 in the ranking perspective in assessing how easy it is for an of 189 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 2016 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 DB2016 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 2016 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— Name of utility - identified by Doing Business. Data are collected from the Moscow: MOESK distribution utility, then completed and verified by electricity regulatory agencies and independent Name of utility - professionals such as electrical engineers, electrical Saint Petersburg: Lenenergo (Ленэнерго) contractors and construction companies. The electricity distribution utility surveyed is the one serving the area Price of electricity (or areas) in which warehouses are located. If there is a (US cents per kWh) - 12 choice of distribution utilities, the one serving the largest Moscow: number of customers is selected. Price of electricity The procedures are those that apply to a warehouse and (US cents per kWh) - 10 electricity connection matching the standard Saint Petersburg: assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the City: Moscow, Saint Petersburg associated time and cost, are summarized below. *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 If the required load is less than 750 KW an application for an electricity connection is submitted to a local office of MOESK. Above 750 KW an application is submitted to the central office of MOESK. 1 15 calendar days RUB 338,683.16 The following documents are attached to the application: 1) Plan of the location of electrical equipment; 2) Plan of electrical cables with the justification of the required load; 3) a copy of the license of the firm which prepared the plan. Furthermore, the applicant should present documents certifying the legal status of the customer or his representative: a certificate from the Doing Business 2016 Russian Federation 51 Time to No. Procedure Cost to complete complete Business Registry, a certificate from tax authorities, and document certifying the head of the organization. Once technical conditions are ready MOESK notifies the customer and a connection contract is signed. There is not external inspection for the preparation of the technical conditions. Application can be submitted in person or online on MOESK’s electronic portal, http://utp.moesk.ru/my/ in a “personal cabinet”. Alternatively, application can be mailed via regular post. 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”. Agency: MOESK Await completion of external works by MOESK Upon receipt of the application and the duly signed agreement, the network organization will prepare 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 specifications. Utility performs all work up to the land boundaries of the applicant and assumes the responsibility of the performed work, and the applicant is responsible for the performance of work within the boundaries of their plot. 2 114 calendar days RUB 0 The applicant, if desired, designs and builds network only within the boundaries of their land on their own or entrusts this work to network organization under a separate contract. JSC "Moscow United Electric Grid" performs the following steps: • the inclusion of the amount of work in the investment program of JSC "Moscow United Electric Grid"; • carrying out procurement procedures; Doing Business 2016 Russian Federation 52 Time to No. Procedure Cost to complete complete • carrying out the physical works involving the installation of the substation. Agency: MOESK Sign supply contract with Mosenergosbyt Customer visits Mosenergosbyt to conclude a supply contract. 3 From February, 2014 it became possible to select a preferred supplier in 21 calendar days RUB 0 the application form for a technological connection. Agency: Mosenergosbyt * Takes place simultaneously with another 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 following documents are required to be submitted with general application for a connection: 1. Copy of the document confirming the ownership of the construction site and land plot; 2. Map specifying location of electrical installations; 1 15 calendar days RUB 670,563.56 3. A copy of the certificate on state registration and certificate of tax registration. 4. A copy of company’s charter as amended; 5. Table with load calculations; 5. Copy of the application template for an electricity connection; 6. A copy of the document confirming the authority of the person signing the application. Doing Business 2016 Russian Federation 53 Time to No. Procedure Cost to complete complete Once technical conditions are ready, the utility notifies the customer and a connection contract is signed. It became possible to submit application online since 2014. Agency: Lenenergo Await completion of external works by Lenenergo Upon receipt of the application and the duly signed agreement, the network organization will prepare project design for building a network for connection. The utility opens a competitive bid for subcontractors that is usually based on regions. The duration of the contract with subcontractors is usually for one year, although may vary. The winner of the tender will 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 specifications. They performs all work up to the land boundaries of the applicant and 140 calendar days RUB 0 2 the utility company assumes responsibility of the performed work, and the applicant is responsible for the performance of work within the boundaries of their plot. Simultaneously, the applicant, designs and builds network only within the boundaries of their land. 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 Doing Business 2016 Russian Federation 54 * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2016 Russian Federation 55 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 8.00 8.00 (0-8) Total duration and frequency of outages per customer 3.00 3.00 a year (0-3) System average interruption duration index (SAIDI) 0.0 0.0 System average interruption frequency index (SAIFI) 0.0 0.0 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) 1.00 1.00 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Doing Business 2016 Russian Federation 56 Answer Score Answer Score (Saint (Moscow) (Moscow) (Saint Petersburg) Petersburg) Financial deterrents aimed at limiting outages (0-1) 1.00 1.00 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) 1.00 1.00 Are effective tariffs available online? Yes Yes http://www.m osenergosbyt .ru/website/fa ces/legals/tar iffs-n- http://tarifs Link to the website, if available online prices?_adf.ct pb.ru/tariff rl- s/ state=11iei8i dwi_17&_afrl oop=457846 438209203& Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? 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 2016 Russian Federation 57 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 city 2 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  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 Russian Federation 58 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 3.00 which the data are a population-weighted average of the procedures, takes 15.00 days and costs 0.20% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). frontier and ease of doing business ranking at the end of 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 2016 Russian Federation 59 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 2016 Russian Federation 60 REGISTERING PROPERTY Globally, Russian Federation stands at 8 in the ranking of the regional average ranking provide other useful 189 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 2016 Russian Federation 61 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 DB2016 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 2016 Russian Federation 62 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: RUB 23,547,869 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 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 (as an encumbrances) can be obtained by the Buyer in two ways with equal - Less than a day electronic legal power of each. In a form of the official document provided by the for obtaining an authorized agency (Rosreestr) and in electronic format. document); RUB electronic 900 (for an document - 5 According to the Federal Law №122 the registration authority upon the working days for extraterritorial 1 official request for information on a property shall provide an official request of a hard a hard copy hard copy document with all information available in the Unified State copy document (in document Register of Real Estate Property within five (5 working) days. another region)); (simultaneous RUB 400 (for an Alternatively, checking and verification ownership rights of the seller can with procedure 1 extraterritorial be performed on-line on the main web page of the Federal Service for & 3) request of an 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.Official Legal entities will obtain extracts from the Unified State Register of Legal Regular documents in hard 2 Entities, officially managed and maintained by the Federal Tax Service (FNS) (http://egrul.nalog.ru/#). Although Russian legislation does not procedure - 5-7 copy - RUB 200 establish the term of validity for the extracts, in practice most state days and (regular procedure authorities accept the extracts issued not earlier than 30 days before Expedited - 5-7 days) or RUB their submission to the respective state authority. procedure - 1 400 (expedited Doing Business 2016 Russian Federation 63 Time to No. Procedure Cost to complete complete working procedure - 1 Agency: Federal Tax Service (FNS) day(simultaneous working day) with procedures 1) Apply for state registration of title transfer in the Unified State Register of Rights to Real Estate The Russian Federation adopted the Federal Law #447-FZ. New provisions of the Law came into effect on December 22, 2014 and shortened effective time limits for the title registration from a maximum of 18 calendar days to 10 working days. As a result of the RUB 44,000: RUB 10 working days implementation of this time limit in practice, entrepreneur can now 22,000 (building) + 3 (14 calendar transfer property at the State Cadastre of Immovable Property within 10 RUR 22,000 (land days) working days. plot transfer) 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 an RUB 600 (for a Even though not mandatory by law, in practice most buyers do check for hard copy) and non-encumbrances on the property to prove the validity of the seller's RUB 300 (as an title. The complete information on the property (ownership rights, - Less than a day electronic encumbrances) can be obtained by the Buyer in two ways with equal for obtaining an legal power of each. In a form of the official document provided by the document); RUB electronic authorized agency (Rosreestr) and in electronic format. 900 (for an document - 5 extraterritorial working days for 1 According to the Federal Law №122 the registration authority upon the request of a hard a hard copy official request for information on a property shall provide an official copy document (in document hard copy document with all information available in the Unified State another region)); (simultaneous Register of Real Estate Property within five (5 working) days. RUB 400 (for an Alternatively, checking and verification ownership rights of the seller can with procedure 1 extraterritorial be performed on-line on the main web page of the Federal Service for & 3) request of an State Registration, Cadastre and Cartography (www.rosreestr.ru). electronic document ). Agency: Federal Service of State Registration, Cadastre and Cartography (Rosreestr) Doing Business 2016 Russian Federation 64 Time to No. Procedure Cost to complete complete * Check for legal status and current conditions of the buyer at the - Less than a day Unified State Register of Legal Entities (online Electronic procedure) - document - no Legal entities will obtain extracts from the Unified State Register of Legal Regular charge. Official Entities, officially managed and maintained by the Federal Tax Service procedure - 5-7 documents in hard (FNS) (http://egrul.nalog.ru/#). Although Russian legislation does not days and - copy - RUB 200 2 establish the term of validity for the extracts, in practice most state Expedited (regular procedure authorities accept the extracts issued not earlier than 30 days before procedure - 1 - 5-7 days) or RUB their submission to the respective state authority. working 400 (expedited Agency: Unified State Register of Legal Entities day(simultaneous procedure - 1 with procedures working day) 1) Apply for state registration of title transfer in the Unified State Register of Rights to Real Estat The Russian Federation adopted the Federal Law #447-FZ. New provisions of the Law came into effect on December 22, 2014 and shortened effective time limits for the title registration from a maximum RUB 44,000: RUB of 18 calendar days to 10 working days. As a result of the 10 working days 22,000 (building) + 3 implementation of this time limit in practice, entrepreneur can now (14 calendar RUR 22,000 (land transfer property at the State Cadastre of Immovable Property within 10 days) plot transfer) working days. 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 2016 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) 26.00 26.00 Reliability of infrastructure index (0-8) 8.00 8.00 Directorate General of Departmen the Federal t of Federal Service of Service of State State Registration, What is the institution in charge of immovable Registratio Cadastre and property registration? n, Cadastre 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)? Directorate Departmen General of t of Federal Institution in charge of the plans showing legal the Federal Service of boundaries in the largest business city: Service of State State Registratio Registration, n, Cadastre Doing Business 2016 Russian Federation 66 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) Cadastre and and Cartography Cartograph in Moscow y for St. (Directorate Petersburg General of Rosreestr in Moscow) 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)? 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) 6.00 6.00 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://rosree http://to78. str.ru/site/fiz/ rosreestr.ru zaregistrirova /registr/doc t- / nedvizhimoe- or imushchestvo https://rosr Link for online access: - eestr.ru/site /predstavleni /fiz/zaregist e- rirovat- dokumentov- nedvizhimo na- e- gosudarstven imushchest nuyu- vo- Doing Business 2016 Russian Federation 67 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) registraciyu- /predstavle prav/ nie- dokumento v-na- gosudarstv ennuyu- registraciyu -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? http://to78. rosreestr.ru /registr/upl ata_gos_po sh/gosposh https://rosree l/razm_gos str.ru/site/ur/ posh_rasprs zaregistrirova or Link for online access: t- https://rosr nedvizhimoe- eestr.ru/site imushchestvo /ur/zaregist -/?price rirovat- nedvizhimo e- 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? http://to78. https://rosree rosreestr.ru str.ru/site/fiz/ /registr/rig zaregistrirova hts_1/tabl_s Link for online access: t- rokov_isp_g nedvizhimoe- os_funktion imushchestvo / -/ or https://rosr eestr.ru/site Doing Business 2016 Russian Federation 68 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) /fiz/zaregist rirovat- nedvizhimo 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://rosr https://rosree eestr.ru/wp str.ru/wps/po s/portal/p/ Contact information: rtal/p/cc_ib_s cc_ib_supp upport/cc_ib_ ort/cc_ib_c complaint omplaint Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 Yes 0.5 registration agency? 25,534,570 in total for the Number of property transfers in the largest business Russian 479,610 city in 2014: Federation and 857,991 in Moscow. 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? http://to78. rosreestr.ru /kadastr/or https://rosree der/por_pr str.ru/site/ur/ ed_kad_sve Link for online access: poluchit- d/ svedeniya-iz- or gkn/?price https://rosr eestr.ru/site /ur/poluchi t- svedeniya- Doing Business 2016 Russian Federation 69 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) iz- 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? http://to78. rosreestr.ru /kadastr/or https://rosree der/ str.ru/site/ur/ or Link for online access: poluchit- https://rosr svedeniya-iz- eestr.ru/site gkn/ /ur/poluchi t- svedeniya- iz-gkn/ 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? https://rosr https://rosree eestr.ru/wp str.ru/wps/po s/portal/p/ Contact information: rtal/p/cc_ib_s cc_ib_supp upport/cc_ib_ ort/cc_ib_c complaint omplaint Geographic coverage index (0–8) 4.00 4.00 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) 8.00 8.00 Does the law require that all property sale transactions Yes 1.5 Yes 1.5 be registered at the immovable property registry to Doing Business 2016 Russian Federation 70 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) 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? 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? 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? 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? Number of land disputes in the largest business city in 2158 land 18739 disputes in 2014: St.Petersbu Doing Business 2016 Russian Federation 71 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) rg in 2014 Source: Doing Business database. Doing Business 2016 Russian Federation 72 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’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector 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 Notes section of the Doing Business 2016 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. 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 2016 Russian Federation 73 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Russian Federation stands at 42 in the ranking and bankruptcy laws in Russian Federation facilitate of 189 economies on the ease of getting credit (figure access to credit? The economy has a score of 7.00 on the 6.1). The rankings for comparator economies provide depth of credit information index and a score of 6.00 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 2016 Russian Federation 74 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 2016 Russian Federation 75 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 DB2016 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 2016 Russian Federation 76 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: 6.00 Index score: 6.00 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional No No 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 No No 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 Yes Yes 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 No No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between Yes Yes 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 Yes Yes an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional No No equivalents can be registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any No No interested third party? Are secured creditors paid first (i.e. before tax claims and employee Yes Yes claims) when a debtor defaults outside an insolvency procedure? Doing Business 2016 Russian Federation 77 Moscow Saint Petersburg Strength of legal rights index (0–12) Index score: 6.00 Index score: 6.00 Are secured creditors paid first (i.e. before tax claims and employee Yes Yes 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 No No 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 Yes Yes 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: 7.00 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 2016 Russian Federation 78 Coverage Credit bureau Credit registry Number of firms 1,500,000 0 Number of individuals 70,000,000 0 Total 71,500,000 0 Total percentage of adult population 70.20 0.00 Source: Doing Business database. Doing Business 2016 Russian Federation 79 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 Extent of shareholder rights index (0-10) (or at least a large private company with Shareholders’ rights and role in major corporate multiple shareholders). decisions  Has a board of directors and a chief executive Extent of ownership and control index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Governance safeguards protecting shareholders from undue board control and entrenchment specifically required by law. Extent of corporate transparency index (0-10) The transaction involves the following details: Corporate transparency on ownership stakes,  Mr. James, a director and the majority compensation, audits and financial prospects shareholder of the company, proposes that the company purchase used trucks from Extent of shareholder governance index another company he owns. (0–10)  The price is higher than the going price for Simple average of the extent of shareholders rights, used trucks, but the transaction goes forward. extent of ownership and control and extent of corporate transparency indices  All required approvals are obtained, and all required disclosures made, though the Strength of investor protection index (0–10) transaction is prejudicial to Buyer. Simple average of the extent of conflict of interest regulation and extent of shareholder governance  Shareholders sue the interested parties and indices the members of the board of directors. Doing Business 2016 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 5.70 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 66 in the ranking of 189 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 2016 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 2016 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 2016 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) 5.70 5.70 Extent of conflict of interest regulation index (0-10) 5.00 5.00 Extent of disclosure index (0-10) 6.00 6.00 Shareholders Shareholders Which corporate body can provide legally sufficient approval excluding excluding 3.0 3.0 for the Buyer-Seller transaction? (0-3) interested interested parties parties Existence of a Existence of a Is disclosure by the interested director to the board of conflict without 1.0 conflict without 1.0 directors required? (0-2) any specifics any specifics Disclosure on Is disclosure of the transaction in published periodic filings Disclosure on the 1.0 the transaction 1.0 (annual reports) required? (0-2) transaction only only Disclosure on Is immediate disclosure of the transaction to the public Disclosure on the 1.0 the transaction 1.0 and/or shareholders required? (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) 2.00 2.00 Can shareholders sue directly or derivatively for the damage Yes 1.0 Yes 1.0 caused by the Buyer-Seller transaction to the company? (0-1) Can shareholders hold the interested director liable for the Not liable 0.0 Not liable 0.0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body Liable if liable for the damage cause by the transaction to the Liable if negligent 1.0 1.0 negligent company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a No 0.0 No 0.0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0.0 No 0.0 plaintiff? (0-1) Is the interested director fined and imprisoned or disqualified upon a successful claim by the shareholder No 0.0 No 0.0 plaintiff? (0-1) Doing Business 2016 Russian Federation 83 Only in case of Can a court void the transaction upon a successful claim by a Only in case of 0.0 fraud or bad 0.0 shareholder plaintiff? (0-2) fraud or bad faith faith Ease of shareholder suits index (0-10) 7.00 7.00 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? No 0.0 No 0.0 (0-1) Can the plaintiff obtain any documents from the defendant Any relevant Any relevant 3.0 3.0 and witnesses during 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 during 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) 6.30 6.30 Extent of shareholder rights index (0-10) 7.00 7.00 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? Must changes to the voting rights of a class of shares be No 0.0 No 0.0 approved only by the holders of the affected shares? Assuming that Buyer is a limited company, does the sale of Yes 1.0 Yes 1.0 51% of Buyer’s assets requires shareholder approval? Assuming that Buyer is a limited company, can shareholders representing 10% of Buyer’s share capital call for an Yes 1.0 Yes 1.0 extraordinary meeting of shareholders? Assuming that Buyer is a limited company, must Buyer obtain its shareholders’ approval every time it issues new No 0.0 No 0.0 shares? Assuming that Buyer is a limited company, do shareholders automatically receive preemption rights every time Buyer Yes 1.0 Yes 1.0 issues new shares? Extent of ownership and control index (0-10) 6.00 6.00 Is the CEO prohibited from also being chair of the board of Yes 1.0 Yes 1.0 directors? Must the board of directors include independent and No 0.0 No 0.0 nonexecutive board members? Can shareholders remove members of Buyer’s board of Yes 1.0 Yes 1.0 directors without cause before the end of their term? Must Buyer’s board of directors include a separate audit No 0.0 No 0.0 committee? Must a potential acquirer make a tender offer to all Yes 1.0 Yes 1.0 Doing Business 2016 Russian Federation 84 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? Assuming that Buyer is a limited company, can shareholders remove members of Buyer’s board of directors without cause Yes 1.0 Yes 1.0 before the end of their term? 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 pay dividends within a maximum period set by law after the Yes 1.0 Yes 1.0 declaration date? Extent of corporate transparency index (0-10) 6.00 6.00 Must Buyer disclose direct and indirect beneficial ownership No 0.0 No 0.0 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 30 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 a detailed notice of general meeting be sent 30 days before the No 0.0 No 0.0 meeting? Assuming that Buyer is a limited company, can shareholders representing 5% of Buyer’s share capital put items on the Yes 1.0 Yes 1.0 agenda for the general meeting? 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 2016 Russian Federation 85 PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS 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, Using a case scenario, Doing Business records the sales tax or goods and service tax) taxes and mandatory contributions that a medium- Method and frequency of filing and payment 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. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax transactions made over the year. Information is also payable compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if the simple average of the distance to frontier scores required for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate . 3 Profit or corporate income tax All financial statement variables are proportional to Social contributions and labor taxes paid by 2012 income per capita. To make the data the employer comparable across economies, several assumptions Property and property transfer taxes are used. Dividend, capital gains and financial  TaxpayerCo is a medium-size business that transactions taxes started operations on January 1, 2013. Waste collection, vehicle, road and other taxes  The business starts from the same financial  Taxes and mandatory contributions include position in each economy. All the taxes corporate income tax, turnover tax and all and mandatory contributions paid during labor taxes and contributions paid by the the second year of operation are recorded. company.  Taxes and mandatory contributions are  A range of standard deductions and measured at all levels of government. exemptions are also recorded. 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. 3 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 2016 Russian Federation 86 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with average of the 2 largest business cities. See the chapter taxes in Russian Federation—and how much do firms pay on distance to frontier and ease of doing business in taxes? On average, firms make 7.00 tax payments a ranking at the end of this profile for more details. year, spend 168.00 hours a year filing, preparing and Globally, Russian Federation stands at 47 in the ranking paying taxes and pay total taxes amounting to 47.00% of of 189 economies on the ease of paying taxes (figure profit (see the summary at the end of this chapter for 8.1). The rankings for comparator economies and the details). Most indicator sets refer to a case scenario in regional average ranking provide other useful the largest business city of an economy, except for 11 information for assessing the tax compliance burden for economies for which the data are a population-weighted businesses in Russian Federation. Figure 8.1 How Russian Federation and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2016 Russian Federation 87 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 DB2016 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 2016 Russian Federation 88 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 the assumptions and transactions that the company summary below, along with the associated number of completed during its 2nd year of operation. payments, time and tax rate. Respondents are asked how much taxes and mandatory contributions the business must pay and how these taxes are filed and paid. 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 gross Pension fund contribution 1 online 0.22 24.19 salaries taxable Corporate income tax 1 online 53 0.2 8.9 profits Federal obligatory medical online and gross 0 0.051 5.49 insurance fund contributions jointly salaries gross Social security insurance 1 online 76 0.029 3.12 salaries online and gross Accidents tax 0 0.025 2.82 jointly salaries book value Property tax 1 online 0.022 of 2.08 property cadastral value of Land tax 1 online 0.3%-1.5% 0.47 the land plot Doing Business 2016 Russian Federation 89 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 engine various Transport tax 1 online capacity of 0.05 rates vehicles value not Value Added Tax 1 online 39 0.18 0 added included online and gross Personal income tax 0 0.13 0 withheld jointly salaries Totals 7.00 168.00 47.10 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 gross Pension fund contribution 1 online 0.22 24.19 salaries taxable Corporate income tax 1 online 53 0.2 8.97 profits Federal obligatory medical online and gross 0 0.051 5.49 insurance fund contributions jointly salaries gross Social security insurance 1 online 76 0.029 3.12 salaries online and gross Accidents tax 0 0.025 2.82 jointly salaries book value Property tax 1 online 0.022 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 value not Value Added Tax 1 online 39 0.18 0 added included online and gross Personal income tax 0 0.13 0 withheld jointly salaries Totals 7.00 168.00 46.80 Source: Doing Business database. Doing Business 2016 Russian Federation 90 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 document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost (USD) & time to extra costs and delays for exporters and (hours) importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting -Required by origin, destination and transit and importing goods. Under the new methodology economies introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with Border compliance – cost (USD) & time (hours) three sets of procedures—documentary compliance, border compliance and domestic Customs clearance and inspections transport—within the overall process of exporting Inspections by other agencies or importing a shipment of goods. The ranking of Port or border handling economies on the ease of trading across borders is determined by sorting their distance to frontier Obtaining, preparing and submitting documents scores for trading across borders. These scores are during clearance, inspections and port or border the simple average of the distance to frontier handling scores for the time and cost for documentary Domestic transport* compliance and border compliance to export and Loading and unloading of shipment import. Transport between warehouse and terminal/port To make the data comparable across economies, a Transport between terminal/port and border few assumptions are made about the traded goods Obtaining, preparing and submitting documents and the transactions: during domestic transport Time Traffic delays and road police checks while shipment is en route  Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as * Although Doing Business collects and publishes data on the 22 × 24 = 528 hours). If customs clearance time and cost for domestic transport, it does not use these takes 7.5 hours, the data are recorded as is. data in calculating the distance to frontier score for trading Alternatively, suppose that documents are across borders or the ranking on the ease of trading across submitted to a customs agency at 8:00 a.m., borders. are processed overnight and can be picked up Cost at 8:00 a.m. the next day. In this case the time  Insurance cost and informal payments for which no for customs clearance would be recorded as receipt is issued are excluded from the costs 24 hours because the actual procedure took recorded. Costs are reported in U.S. dollars. 24 hours. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 Russian Federation 91 Assumptions of the case study  Shipping cost based on weight is assumed to be  For each of the 189 economies covered by greater than shipping cost based on volume. Doing Business, it is assumed that a shipment travels from a warehouse in the largest business city of the exporting economy to a  If government fees are determined by the value of warehouse in the largest business city of the the shipment, the value is assumed to be $50,000. importing economy. For 11 economies the data are also collected, under the same case  The product is new, not secondhand or used study assumptions, for the second largest merchandise. business city.  The exporting firm is responsible for hiring and  The import and export case studies assume paying for a freight forwarder or customs broker (or different traded products. It is assumed that both) and pays for all costs related to international each economy imports a standardized shipping, domestic transport, clearance and shipment of 15 metric tons of containerized mandatory inspections by customs and other auto parts (HS 8708) from its natural import government agencies, port or border handling, partner—the economy from which it imports documentary compliance fees and the like for the largest value (price times quantity) of auto exports. The importing firm is responsible for the parts. It is assumed that each economy above costs for imports. exports the product of its comparative advantage (defined by the largest export  The mode of transport is the one most widely used value) to its natural export partner—the for the chosen export or import product and the economy that is the largest purchaser of this trading partner, as is the seaport, airport or land product. Precious metal and gems, live border crossing. animals and pharmaceuticals are excluded from the list of possible export products,  All electronic submissions of information requested however, and the second largest product by any government agency in connection with the category is considered as needed. shipment are considered to be documents obtained, prepared and submitted during the export or import  To identify the trading partners and export process. product for each economy, Doing Business collected data on trade flows for the most  A port or border is defined as a place (seaport, recent four-year period from international airport or land border crossing) where merchandise databases such as the United Nations can enter or leave an economy. Commodity Trade Statistics Database (UN Comtrade). For economies for which trade  Government agencies considered relevant are flow data were not available, data from agencies such as customs, port authorities, road ancillary government sources (various police, border guards, standardization agencies, ministries and departments) and World Bank ministries or departments of agriculture or industry, Group country offices were used to identify national security agencies and any other government the export product and natural trading authorities. partners.  A shipment is a unit of trade. Export shipments do not necessarily need to be containerized, while import shipments of auto parts are assumed to be containerized. Doing Business 2016 Russian Federation 92 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Border indicator refers to a case Globally, Russian Federation stands at 170 in the ranking study scenario of a warehouse in the largest business city of 189 economies on the ease of trading across borders of an economy (except for 11 economies for which the (figure 9.1). For more information on distance to frontier data are a population-weighted average of the 2 largest and ease of doing business ranking, please see the business cities) trading with the main import and export Distance to frontier and ease of doing business ranking partner through the economy’s main border crossing. chapter. Figure 9.1 How Russian Federation and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 Russian Federation 93 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 DB2016 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 2016 Russian Federation 94 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, land, air or City: Moscow, Saint Petersburg some combination of these). The information on the time and cost to complete export and import is The details on the predefined set of procedures, and the collected from local freight forwarders, customs associated time and cost, for exporting and importing a brokers and traders. 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 1125 1125 219 (USD) Time to export: Documentary 43 43 31 compliance (hours) Cost to export: Documentary 500 500 144 compliance (USD) Time to import: Border compliance 96 96 23 (hours) Cost to import: Border compliance 1125 1125 202 (USD) Time to import: Documentary 43 43 27 compliance (hours) Cost to import: Documentary 500 500 108 compliance (USD) Source: Doing Business database. Doing Business 2016 Russian Federation 95 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 8708: Parts and HS 8708: Parts and HS 72 : Iron and HS 72 : Iron and Product accessories of accessories of steel steel motor vehicles motor vehicles Trade partner Italy Germany Italy Germany Domestic transport time (hours) 20 20 4 4 Domestic transport cost (USD) 958 958 246 246 Saint Petersburg Saint Petersburg Saint Petersburg Saint Petersburg Border port port port port Distance (km) 724 724 8 8 Domestic transport speed 35.9 35.9 2.0 2.0 (km/hour) Domestic transport cost per 1.3 1.3 30.7 30.7 distance (USD/km) Source: Doing Business database. Documents to export Acceptance order (priemnii akt) Bill of lading (konosament) Commercial invoice (schet-faktura) Consignment note/ CMR waybill (tovarno- transportnaya nakladnaya) Customs Export Declaration (tamojennaya deklaraciya) Declaration of origin (Statement of manufacturer - zayavlenie proizvoditelya)/ Certificate of Origin Export/loading order (eksportnoe/pogruzochnoe poruchenie) Packing list (upakovochnii list) Sales purchase contract (dogovor kupli- prodaji/kontrakt) Documents to import Acceptance order (priemo-sdatochnii order) Doing Business 2016 Russian Federation 96 Bill of lading (konosament) Certificate of conformity (sertifikat sootvetstviya) Commercial invoice (schet-faktura) Consignment note (tovarno-transportnaya nakladnaya) Customs Import Declaration (tamojennaya deklaraciya) Document of warehouse (dokument ucheta skalda) Letter from the bank certifying opening of letter of credit (izveshenie/dokument banka podtverjdayushii otkritie akkreditiva) Packing list (upakovochnii list) Sales purchase contract (dogovor kupli- prodaji/kontrakt) 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 2016 Russian Federation 97 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 2016 Russian Federation 98 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Time required to enforce a contract through businesses know they can rely on the courts if a new the courts (calendar days) 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 court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees 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 has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) 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 sales contract between 2 domestic businesses. The  The value of the dispute is 200% of the case study assumes that the court hears an expert on income per capita or the equivalent in local the quality of the goods in dispute. This distinguishes currency of USD 5,000, whichever is greater. the case from simple debt enforcement. To make the  The seller sues the buyer before the court data comparable across economies, Doing Business with jurisdiction over commercial cases worth uses several assumptions about the case: 200% of income per capita or $5,000.  The dispute concerns a lawful transaction  The seller requests a pretrial attachment to between two businesses (Seller and Buyer), secure the claim. both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest business city.  The judge decides in favor of the seller; there is no appeal.  The buyer orders custom-made goods, then fails to pay.  The seller enforces the judgment through a public sale of the buyer’s movable assets. Doing Business 2016 Russian Federation 99 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 5 in the ranking of enforcement takes 307.00 days and costs 16.50% of the 189 economies on the ease of enforcing contracts (figure value of the claim. Most indicator sets refer to the 10.1). The rankings for comparator economies and the largest business city of an economy, except for 11 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 2016 Russian Federation 100 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 DB2016 DB year Reform Russia made filing a commercial case easier by introducing an DB2012 electronic case filing 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 2016 Russian Federation 101 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 Court name - court, under the assumptions about the case Moscow Arbitrazh Court Moscow: described above (figure 10.2). The time and cost of resolving the standardized dispute are identified Commercial (Arbitrazh) through study of the codes of civil procedure and Court name - Saint Court of St. Petersburg other court regulations, as well as through Petersburg: and Leningard questionnaires completed by local litigation lawyers (and, in a quarter of the economies covered by Moscow, Saint Doing Business, by judges as well). City: Petersburg Figure 10.2 Time and cost of contract enforcement in Russian Federation and comparator economies Source: Doing Business database. Doing Business 2016 Russian Federation 102 Table 10.2 Details on time and cost for enforcing contracts in Russian Federation Europe & Central Indicator Moscow Saint Petersburg Asia average Time (days) 310.00 300.00 481 Filing and service 30.0 30.0 Trial and judgment 160.0 150.0 Enforcement of judgment 120.0 120.0 Cost (% of claim) 15.00 20.00 26.2 Attorney fees (% of claim) 10.0 15.0 Court fees (% of claim) 5.0 5.0 Enforcement fees (% of claim) 0.0 0.0 Source: Doing Business database. Doing Business 2016 Russian Federation 103 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. 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 2016 Russian Federation 104 Table 10.3 Details of the quality of judicial processes index in «dsGetData.Economy_Name» Answer Score Answer Score (Saint (Saint (Moscow) (Moscow) Petersburg Petersburg ) ) Quality of judicial processes index (0-18) 12.50 12.50 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 4. Are new cases assigned randomly to judges? Yes 0.5 Yes 0.5 Case management (0-6) 5.0 5.0 1. Time standards 1.0 1.0 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 Yes Yes 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? 4. Is a pretrial conference among the case management techniques used before the competent Yes 1.0 Yes 1.0 court? Doing Business 2016 Russian Federation 105 Answer Score Answer Score (Saint (Saint (Moscow) (Moscow) Petersburg Petersburg ) ) 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) 3.0 3.0 1. Arbitration 1.5 1.5 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— No No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements Yes Yes usually enforced by the courts? 2. Mediation/Conciliation 1.5 1.5 2.a. Is voluntary mediation or conciliation available? Yes Yes Doing Business 2016 Russian Federation 106 Answer Score Answer Score (Saint (Saint (Moscow) (Moscow) Petersburg Petersburg ) ) 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 2016 Russian Federation 107 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 In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) framework index. The index tests whether economies determines the maximum value that can be adopted internationally accepted good practices in recovered four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of economies on the ease of resolving account insolvency is determined by sorting their distance to Present value of debt recovered frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency Commencement of proceedings index (0-3) proceedings of individuals and financial institutions. The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through Reorganization proceedings index (0-3) a study of laws and regulations as well as public information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 Russian Federation 108 RESOLVING INSOLVENCY Where does the economy stand today? According to data collected by Doing Business, resolving (figure 11.1). The resolving insolvency indicators are insolvency takes 2.00 years on average and costs 9.00% based on detailed information collected through of the debtor’s estate. The average recovery rate is 41.70 questionnaires completed by insolvency experts, cents on the dollar. Most indicator sets refer to a case including lawyers, practitioners (administrators, trustees), scenario in the largest business city of an economy, accountants and judges. Data on the time, cost and except for 11 economies for which the data are a outcome refer to the most likely in-court insolvency population-weighted average of the 2 largest business procedure applicable under specific case study cities. assumptions. Data on provisions applicable to judicial liquidation and reorganization is based on the current Globally, Russian Federation stands at 51 in the ranking law governing insolvency proceedings in each economy. of 189 economies on the ease of resolving insolvency Figure 11.1 How Russian Federation and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 Russian Federation 109 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-2014 lending rates. Doing Business 2016 Russian Federation 110 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 appoint a Moscow, temporary administrator. Temporary administrator will convene the Proceeding Saint liquidation first creditors’ meeting, where the creditors will decide whether to Petersburg 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 sold Outcome Saint piecemeal sale 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 6 more Moscow, months (art. 124 of the Law on Insolvency (Bankruptcy)). Therefore, the Time (in Saint 2.0 time dictated by law is 19 months. However, in practice, liquidation years) Petersburg proceedings are extended more than once 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. Moscow, - Fees of insolvency representative during liquidation proceedings (for Cost (% of Saint 9.0 16 months) will be RUB 1,202,057. estate) Petersburg - Payments for services of professionals hired by insolvency 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, Moscow: 41.3 cents on the dollar Recovery rate, Saint Petersburg: 42.7 cents on the dollar Source: Doing Business database. Doing Business 2016 Russian Federation 111 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 11.2)? even viable businesses are liquidated. This is starting to Table 11.2 How has Russian Federation made resolving insolvency easier—or not? By Doing Business report year from DB2011 to DB2016 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 2016 Russian Federation 112 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 11.50 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 indicators are recorded as “no practice”. Doing Business 2016 Russian Federation 113 Table 11.3 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) 11.50 11.50 Commencement of proceedings index (0-3) 2.50 2.50 (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) 5.00 5.00 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 (b) Yes over ordinary 1.0 ordinary 1.0 commencement credit? unsecured unsecured Doing Business 2016 Russian Federation 114 Answer Answer Score Score (Saint (Saint (Moscow) (Moscow) Petersburg) Petersburg) creditors but creditors not over but not secured over creditors secured creditors Reorganization proceedings index (0-3) 1.00 1.00 (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 divided 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) 3.00 3.00 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 2016 Russian Federation 115 LABOR MARKET REGULATION Doing Business has historically studied the flexibility of regulations as well as secondary sources are reviewed to regulation of employment, specifically as it relates to the ensure accuracy. areas of hiring, working hours and redundancy. This year Doing Business has expanded the scope of the labor To make the data comparable across economies, several market regulation indicators by adding 16 new assumptions about the worker and the business are questions, most of which focus on measuring job quality. used. Over the period from 2007 to 2011 improvements were The worker: made to align the methodology for the labor market  Is a cashier in a supermarket or grocery store, regulation indicators (formerly the employing workers age 19, with one year of work experience. indicators) with the letter and spirit of the International  Is a full-time employee. Labour Organization (ILO) conventions. Ten of the 189  Is not a member of the labor union, unless ILO conventions cover areas now measured by Doing membership is mandatory. Business (up from four previously): employee The business: termination, weekend work, holiday with pay, night work,  Is a limited liability company (or the equivalent protection against unemployment, sickness benefits, in the economy). maternity protection, working hours, equal remuneration  Operates a supermarket or grocery store in the and labor inspections. economy’s largest business city. For 11 economies the data are also collected for the Between 2009 and 2011 the World Bank Group worked second largest business city. with a consultative group—including labor lawyers,  Has 60 employees. employer and employee representatives, and experts  Is subject to collective bargaining agreements if from the ILO, the Organisation for Economic Co- such agreements cover more than 50% of the operation and Development (OECD), civil society and the food retail sector and they apply even to firms private sector—to review the methodology for the labor that are not party to them. market regulation indicators and explore future areas of  Abides by every law and regulation but does not research. grant workers more benefits than those mandated by law, regulation or (if applicable) A full report with the conclusions of the consultative collective bargaining agreements. group, along with the methodology it proposed, is available on the Doing Business website at: http://www.doingbusiness.org/methodology/labor- market-regulation. Doing Business 2016 presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market 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 Doing Business 2016 Russian Federation 116 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 wage to the average value added per worker (the ratio of contracts are prohibited for permanent tasks; (ii) the an economy’s GNI per capita to the working-age maximum cumulative duration of fixed-term contracts; population as a percentage of the total population), and (iii) the minimum wage for a cashier, age 19, with one (v) the availability of incentives for employers to hire year of work experience; (iv) the ratio of the minimum employees under the age of 25*. 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 420.7 264.9 (US$/month) Ratio of minimum wage to value added per worker 0.3 0.2 Incentives for employing workers under age 25? No No Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Russian Federation 117 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 percentage of hourly pay); (iv) the premium for overtime for workers with 1 year of tenure, 5 years of tenure, and work (as a percentage of hourly pay)*; (v) whether there 10 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? 0.0 0.0 Whether nonpregnant and nonnursing women can work the same Yes Yes night hours as men Restrictions on weekly holiday? 1.0 1.0 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. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Russian Federation 118 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 2016 Russian Federation 119 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 2016 Russian Federation 120 LABOR MARKET REGULATION Job quality Doing Business 2016 report presents, for the first time, on-the-job training at no cost to the employee; (viii) data on 12 job quality areas: (i) whether the law whether a worker is eligible for an unemployment mandates equal remuneration for work of equal value; protection scheme after one year of service; (ix) the (ii) whether the law mandates nondiscrimination based minimum duration of the contribution period (in months) on gender in hiring, (iii) whether the law mandates paid required for unemployment protection; (x) whether an or unpaid maternity leave; (iv) the minimum length of employee can create or join a union; (xi) the availability maternity leave in calendar days (minimum number of of administrative or judicial relief in case of infringement days that legally have to be paid by the government, the of employees’ rights; and (xii) the availability of a labor employer or both); (v) whether employees on maternity inspection system. If no maternity leave is mandated by leave receive 100 % of wages; (vi) the availability of five law, parental leave is measured if applicable. fully paid days of sick leave a year; (vii) the availability of 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 On-the-job training? No No Unemployment protection after one year of employment? Yes Yes Minimum contribution period for unemployment protection (months)? 0.0 0.0 Can employee create or join union? Yes Yes Administrative or judicial relief for infringement of employees' rights? Yes Yes Labor inspection system? Yes Yes Source: Doing Business database. Doing Business 2016 Russian Federation 121 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 Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate. indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 Russian Federation 122 identical to the simple average used by Doing Business . The nonlinear transformation is not based on any 4 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 . overall tax system. Instead, it is mainly empirical in 5 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). 4 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. 5 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 2016 Russian Federation 123 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 189. 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 2016 Russian Federation 124 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 189 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 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 189 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 DB2016 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 2016 Russian Federation 125