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In brief

Foreign Internet sites, web-pages, information systems and programs aimed at Russian audiences may be required to open local offices in accordance with a draft law being considered by the Russian parliament


Contents

  1. New requirements
  2. Possible consequences
  3. Status of the draft law
  4. Recommended actions

The new rules1 will apply to foreign companies or individuals if their daily audience in Russia is more than 500 thousand users, provided they meet one of the following conditions:

  1. the information resource is in Russian or uses the languages of Russia’s regions and nations,
  2. the information resource contains advertising aimed at Russian users,
  3. the foreign entity processes Russian users’ data, or
  4. the foreign entity receives money from Russian individuals or legal entities.

Roskomnadzor (the Russian telecoms supervisory body) may impose the new requirements on individual hosting providers, advertising system operators or information distribution organizers. 

New requirements

If the draft law is adopted, foreign entities will need to create local offices (a branch, representative office or legal entity at their choice).

This local office must represent the interests of the foreign entity in Russia and be liable for the information resource, including:

  • process enquiries,
  • implement the rulings of courts and state bodies,
  • represent the interests of the foreign entity in Russian courts,
  • ensure the blocking of restricted content on the information resource.

Foreign entities will also have to:

  1. provide an electronic feedback form on their information resource for use by Russian individuals and entities,
  2. register an account on the Roskomnadzor site.

Possible consequences

Failure to meet the new requirements may result in the following measures:

  • notifying users that the entity violates Russian law,
  • a ban on advertising of and on the information resource,
  • a ban on money transfers and payments to the foreign entity,
  • a ban on being included in search results,
  • a ban on the collection and cross-border transfer of personal data, 
  • full or partial blocking of the information resource.

Status of the draft law

Parliament is expected to discuss the bill in June 2021. If the law is adopted the obligation to create local offices will come into effect from 1 January 2022.

Recommended actions

Foreign entities whose information resources target Russian users are recommended to:

  • analyze the state of compliance with Russian law on personal data, protection of information and tax (including on imposition of VAT on electronic services),
  • assess the options for opening a local office in Russia,
  • analyze the tax consequences of opening a local office (including the additional risks of creation of a permanent establishment and the necessity to pay VAT on Russian operations),
  • make sure they are technically able to meet the new requirements (including creating and hosting a feedback form on the information resource).
English versionRussian version

1 The draft law was presented to the State Duma on 21 May 2021 and the full text is available at: https://sozd.duma.gov.ru/bill/1176731-7

Author

Denis Khabarov is highly recommended in the field of intellectual property by European Legal 500 – 2008, and has been recognized by European Legal Experts 2008 in the area of dispute resolution. He joined Baker McKenzie in 2001 and became partner in 2007. Prior to joining the Firm, Mr. Khabarov was an in-house attorney for the Moscow Companies Registration Authority, where he was in charge of the litigation practice. He currently serves as a member of the Moscow City Bar, the International Trademark Association (INTA) and International Anti-counterfeiting Coalition (IACC). Mr. Khabarov graduated from the Law Faculty of the Russian Peoples’ Friendship University in 2000, and was admitted to practice law in Russia in 2000.

Author

Alexander Monin is a partner in Baker McKenzie's Moscow office. He practices in the areas of trade and commerce, mergers and acquisitions, as well as private equity. He is recommended by European Legal 500 in its 2008 edition. Mr. Monin earned his Bachelor of Law and his Law Degree in International Law at the Moscow State Institute of International Relations, and was admitted to practice law in Russia in 1997. Mr. Monin focuses his practice on commercial agreements and contracts, private M&A transactions, private equity and anti-corruption matters. His practice also includes corporate counseling and governance for private companies.

Author

Arseny Seidov is a partner in the Tax Practice Group of Baker McKenzie's Moscow office. Prior to joining Baker McKenzie in 2003, he worked at a Russian audit firm, a major Swiss bank and the Moscow office of a major US law firm. Arseny has been consistently recommended by Chambers Global, Chambers Europe and International Tax Review among leading tax lawyers in Russia. Arseny heads the Working Group on Taxation of E-commerce at the Association of European Businesses, the Working Group on Taxation of Digital Economy at the American Chamber of Commerce and co-chairs the tax subgroup of the Innovation Working Group of the US-Russia Bilateral Presidential Commission. He also acts as Russia representative of Baker McKenzie's Digital Economy Group headquartered in Silicon Valley. Arseny is a frequent speaker at leading tax and IT-related conferences in Russia and abroad. Since 2007, he has been a visiting professor of international tax law at the Moscow State University for International Relations. He has authored over 40 publications.

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