1. www.pg p law.ru 8 June 2012 Russian tax innovations 2012 Denis Schekin, PhD in Law, Senior Partner of the law firm Pepeliaev Group

2. Слайд www.pgplaw.ru 2 General nature of the situation The real tax policy of the Russian government 1) Possible budget deficit and instability of oil prices 2) Financial crisis of the pension system and an increase in the retirement age. 3) Increase of the state budget’s social obligations by reason of elections and re- armament program. 4) Increase of certain taxes (mineral extraction tax, excise duties, social contributions). 5) Introduction of rules, which allow the tax base to be broadened. Russian tax innovations

3. Слайд www.pgplaw.ru 3 Transactions which are controlled on the correctness of the prices: 1) Transactions with foreign related parties - for any amount. 2) Transactions with offshore companies - from 2 million dollars. 3) Transactions involving export/import of crude oil, petroleum, metals, fertilizers, precious stones - from 2 million dollars. 4) Transactions with Russian related parties: in 2012 - from 100 million dollars; in 2013 - from 66 million dollars; from 2014 - from 33 million dollars. 5) A number of other transactions. Significant expansion of the tax authorities’ powers to determine the market price Introduction of pricing agreements with the tax authority New rules on transfer pricing Russian tax innovations

4. Слайд www.pgplaw.ru 4 Special regime for consolidated taxpayers was introduced for the largest companies. This allows income tax to be paid from the total financial results of the holding structure. Transfer pricing rules are not applied to the transactions within consolidated taxpayers. This regime is used by: 1) Gasprom, 2) Lukoil, 3) Rosneft, 4) Novatek There is a total of 11 holding structures. Consolidated taxpayer Russian tax innovations

5. Слайд www.pgplaw.ru 5 The changes in the tax treaty with Cyprus were ratified (effective from January 1, 2013): 1)Extensive information exchange, 2)Restriction on the use of incentives. Changes should be expected in the use of Cypriot companies for tax planning in Russia. Amendments to the tax treaty with Cyprus Russian tax innovations

6. Слайд www.pgplaw.ru 6 1) The case of coal company "Northern Kuzbass" - Resolution of the Presidium of the Supreme Arbitration Court SAC) of the Russian Federation, November 15, 2011 № 8654/11: Permissibility of applying national thin capitalization rules (interest being reclassified as dividends for tax purposes) if there is an international treaty regarding the tax base for income tax of the Russian company Is vital for structuring of foreign loans 2) Case of Ulyanovsk Motor Works - Resolution of the Presidium of the Russian SAC, April 3, 2012 (Ruling of the Russian SAC, February 1, 2012 № 15483/11). Ability to recover, both from the Russian company and the tax agent, tax which was not withheld when the payment was made to the foreign company. Is vital for making payments to foreign companies Important court cases Russian tax innovations

7. Слайд www.pgplaw.ru 12, Krasnopresnenskaya Nab., Entrance 7, World Trade Center-II, Moscow, 123610 Tel.: +7 (495) 967 0007 Fax: +7 (495) 967 0008 E- mail: info@pgplaw.ruinfo@pgplaw.ru Denis Schekin, Senior Partner d.schekin@pgplaw.ru Golden Shpalernaya Business Center, 54, Shpalernaya St., St.Petersburg, 191015 Tel: +7 (812) 640 60 10 Fax: +7 (812) 640 60 20 E-mail: spb@pgplaw.ruspb@pgplaw.ru Russian tax innovations Thank you for your attention Contact details 7