Dear Executives,

We would like to inform you that on November 23, 2011 the State Duma passed amendments to the laws governing employers’ social contributions (“social tax”).

Rates & Scales

According to these amendments, the rates and scales of the social contributions have changed. The maximum rate is lowered from 34% to 30% and will be imposed on salaries of up to 512,000 rubles per annum for 2012 and 573,000 rubles per annum for 2013 (currently the limit is 463,000 rubles). At the same time, there is a highly regrettable adverse change according to which there will be an additional 10% contribution to the Pension Fund on all salaries above the specified limit.

This means that the tax burden on businesses will grow. This fiscal increase will affect most qualified employees whose salary exceeds 40,000 rubles per month. Though certain categories of taxpayers will enjoy special benefits together with certain categories of small businesses and IT companies.

Expat Salaries

Expats’ salaries (remuneration for work) will also be subject to employers’ social contributions provided that the following two conditions are met simultaneously:

• Foreign nationals temporarily reside in Russia, and

• Foreign nationals have entered into an employment agreement for an indefinite period or for period of at least 6 months.

In 2010 and 2011, expat salaries were not subject to social contributions. However this will concern only the part that goes towards pension contributions, which is 22% (of the total 30%) on salaries under the established limit (please see above). The additional 10% contribution to the Pension Fund will also apply to expats’ salaries. However, despite pension contributions being collected on expats’ salaries, expats will not be granted any pension rights, except for expats with a permanent residence permit.

Important note: expats with a work permit for “highly qualified specialists” will continue benefiting from full exemption.

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