Law and Reality: June 2006 Newsletter #37

This newsletter updates businesses on changes in legislation or proposed changes in legislation, as well as providing brief reports of business experience dealing with government officials, tax and customs administration, registration, licensing, and the court system so that others can benefit from the experience. Only brief summaries are given. If you would like more information or to contribute to the next issue of “Law & Reality” please contact the IBC Office Lawyer, Ms. Gulnara Akhmatova at (0 312) 680-920, 681- 649 or email to gulnara@ibc.

№37/П1	Law – Tax legislation					Commentary – implications for business
Status:	Submitted by Deputies	Draft JK	Adopted by the Government	Принят ЖК	Shall enter into force in 3 months	Which Business Sector:	Oil business
Statute Number:	461					Which Legal Registration:	All types of legal forms
Statute Name:	Resolution of the Government of the Kyrgyz Republic of June 27, 2006 “On Approval of Regulation “On Procedure of Recording and Control over Oil Products and Application of Control Seals in the Territory of the Kyrgyz Republic”					Comments:	Introduction of control and recording of oil products and application of control seals
Important Dates:	Regulation shall enter into force upon expiration of three months as of the date of publication					For information of businesses: The present Regulation shall enter into forces upon three months as of its date of publication. This means that starting from the indicated date it is prohibited to release oil-products from petroleum depot and gas stations without filling in the invoice and sealing tanks (reservoirs) for oil products transportation, with control seals. Economic entities shall independently bear financial costs on establishing control seals
The present Regulation defines the procedure of application of control seals and control over movement of oil products (some goods indicated in HS EurAsEC. Please, see the codification in the Regulation) through mandatory application of invoices, sealing of tanks, blanks of strict reporting, as well as recording of logs on sale of oil products at the gas stations and reports on purchase of oil products in the domestic market. The present Regulation grants powers to the tax bodies on carrying out random cameral inspections of legal entities. The tax bodies are also obliged to record inflow and release of oil products at petroleum depot. Adoption of the present Regulation demonstrates the strengthening of the state control of business, increase of reporting and financial costs for businesses. The Regulation contradicts the statement the President made during his recent visit to Kazakhstan that we have “good legislative framework that allows the private sector working efficiently”. The text of the Resolution and Regulation can be obtained by sending request to the following email address: gulnara@ibc.kg

№37/П2	Law – Tax and Customs Legislation					Commentary – implications for business
Status:	Draft Govt	Draft JK	Adopted by the Government.	JK Appr	In force	Which Business Sector:	All types of activities
Statute Number:	№ 449					Which Legal Registration:	All legal forms
Statute Name:	Resolution of the Government of the Kyrgyz Republic “On Approval of Regulation on the Procedure of State Registration of Private Property Right to Land Plots under Buildings and Facilities Privatized Prior to Effectuation of the Land Code of the Kyrgyz Republic”					Comments:	The Resolution of the Government of the KR has been issued to implement some normative and legal acts. The Resolution is aimed at formation of favorable investment environment.
Important Dates:	Of June 20, 2006.					For information of businesses: The present Regulation was adopted due to a need to define the procedure of state registration of property right to land plots located under privatized buildings and facilities, and for interested entities – arrangement of relevant title docume
In accordance with the above Regulation the private property right to land plot shall be recognized as the right of individuals and legal entities except for state, municipal land users who obtained the right to land plot in permanent use prior to effectuation of the Land Code of the KR to land plots assigned under buildings, facilities, as well as for their construction. The present Regulation has been adopted to implement the Law of the KR “On Interpretation of point 7 Article 6 of the Land Code of the Kyrgyz Republic”. The Regulation defines the procedure for state registration of land plots. Privatization documents for a building or facility are considered to be title documents to a land plot. Privatization documents and cadastre plan shall serve as a basis for registration of right of ownership to land plot and further arrangement and issuance of a state act on private property right to land plot. The text of the Regulation is available in Toktom legal database, please, also send a request to the following email address: gulnara@ibc.kg
Possible action for business managers to consider: It is necessary to verify title documents for real estate objects and land plots and to register property rights, if necessary.

№37/П3	Reality –Taxation					Commentary – implications for business
Situation:	Tax	Draft JK	Adopted by the Government.	JK Appr.	Court	Which Business Sector:	All areas of activities
Company’s Name	“Kyrgyzenergo” JSC					Which Legal Registration:	All legal forms
Date:	Tax payment requirements 2001-2002					Comments:	Incompetence of employees of tax service often results in distraction of state and private time and money.
What happened:	“Kyrgyzenergy” JSC has defended its right through the court					For information of businesses: It is known that active position of economic entities is the best method of protection of their interests. It also creates a specific behavioral pattern among the both parties to legal tax relations.
State Tax Inspectorate of Pervomai district brought forward tax payment requirements (TPR) to the bank account of «Kyrgyzenergo” regarding direct debit. “Kyrgyzenergo” JSC objected to the decision of the STI and filed a complaint with the court. The JSC justified its position claiming that the order issued by STI contradicts the Tax Code as direct debit of tax amounts through TPRs is not stipulated therein. Moreover, according to the Civil Code of the KR the bank does not have the right to administer funds of its client. The Bank can carry out the direct debit from the client’s bank account only based on the client or court decision. The court issued a decision in favor of the economic entity.
Possible action for business managers to consider: 1) It is necessary to defend business interests through the help of qualified specialists.