Ruslan Vasutin is Partner, Head of Tax at DLA Piper LLP in St. Petersburg, Russia. Prior to joining DLA Piper LLP in 2005, Ruslan Vasutin worked at Ernst and Young Law, St Petersburg, Russia as a Senior Tax Manager. Prior to Ernst and Young Law, Ruslan was with the consulting and legal arm of Arthur Andersen until the group ultimately combined it’s practice with the Ernst and Young Law Group. Ruslan advises multinational companies on setting up businesses in Russia and represents them in signing investment agreements. In addition, he advises clients on transaction structuring and

reorganization of companies for financing attracting and IPO’s. He also has international expertise in tax planning and creation of holding vehicles for re-investing Russian capital, participates in tax disputes and coordinates legal and tax due diligence reviews.
Ruslan Vasutin is a graduate of St. Petersburg State University, St. Petersburg, Russia where he obtained his Law Degree with Honors in 1995. Ruslan also earned his Accounting Degree from St. Petersburg State University of Economics and Finance. He has also completed his Post Graduate Studies at the University of Economics and Finance and a US CPA Course Study Program. Ruslan is a member of the Executive Committee at the St Petersburg International Business Association for North-Western Russia (SPIBA). He was also co- Chairman of the Taxation Committee of the American Chamber of Commerce, St. Petersburg, Russia.

KJ- You have the benefit of a tax career developed firstly in an internationally recognized Big Four public accounting firm, and secondly in an internationally recognized law firm. Please tell us about the transition in your tax career from working in a public accounting firm to a law firm.

RV-Well, I felt that I was fortunate to start in a truly international accounting firm like Arthur Andersen because of the opportunity to learn what the unified standards and international approaches were at the time. An internationally recognized public accounting firm is a very good start as a tax professional and the Arthur Andersen practice was then very advanced in comparison to the other firms. After Arthur Andersen, I spent several years at Ernst and Young prior to coming to DLA Piper. My career transition from an international public accounting environment to an international law firm was an amazing transformation for me as a tax lawyer. The first thing I noticed in this transition to DLA Piper was that you feel much more visible in DLA Piper as a tax lawyer since you are in a firm of only four thousand people instead of the tens of thousands of professionals that one finds in an international public accounting environment. One environment can make you feel like a small cog in a large machine while the other environment can make you feel like a person who can make a valuable contribution to the development of a large organization. You really get a lot personally from a dynamic and fast growing global organization like DLA Piper. This is what was quite close to my heart as a tax professional developing my technical skills and career. In a law practice you will focus on tax planning, restructuring and reorganizations as a product while, in comparison, at a public accounting firm you are more restricted in SOX. It has been an amazing and rewarding career transition for me through these two different environments.

KJ-What prompted you to move from Arthur Andersen to Ernst and Young and then to DLA Piper ?

RV- The first thing that happened is that Arthur Andersen split into tax and legal practices in the 1990’s. It was decided that presenting tax is part of the legal package of services for some markets. This was an easier to sell service in the CIS market and in the Northwest region of Russia. After Arthur Andersen fell apart, the CIS practice moved to EY. Finally, all of the tax lawyers of EY Law in St. Petersburg moved to DLA Piper. That is how it all happened!


KJ- What does CIS mean?

RV- CIS is the acronym for the Commonwealth of Independent States and includes all the former Soviet Union Republics except for the Baltics.

KJ-What advice would you give to a client who wants to expand their business operations by entering Russia?

RV- The client must understand that the return on investment is higher in Russia than in many other countries because it is a quickly developing country. Therefore, it is really important to understand that the level of tax risk is also higher. It is a fantastic opportunity for small international firms because they come to Russia and typically try to be prepared. Therefore, they know what to ask before really making investments and before making any commitments in coming to Russia.

KJ- What is the tax rate in Russia for a corporation?

RV- The effective tax rate may differ. However, the standard tax rate is 24%. Russian tax laws are not so bad compared to many others. However, the Russian tax system is very subjective and selective. For example, two separate companies may have the same tax issues and one may be penalized by the tax authorities while the other company may to able to escape receiving any tax penalties. It is very subjective and much depends on the discretion of the particular tax inspector who applies the tax laws. There are so many issues that can be avoided simply by preparatory measures taken in advance. The advice that we give clients is to not wait until problems emerge; you should plan ahead and think the issues through in advance. This way of conducting business is very familiar to US multinationals. However, there are many other foreign investors that may take a more reactive rather than proactive mode when handling their tax matters.

KJ-What you are saying is that investors in the Russian market should be exploring what type of structure they want to set up prior to coming into the country. Is this correct?

RV- Exactly. What people need to be aware of is what they could end up with if they decide to invest in Russia. Much of my experience comes from the practical side of conducting business in Russia; this is experience that cannot be learned from reading a book on tax laws. You need to have the whole picture before considering any investment in Russia. What we do is provide complex advice on investing in Russia that handles all the tax and legal angles and provides an integrated approach. In helping investors come to Russia, we help them to avoid very costly mistakes and administrative headaches years down the line.

KJ-Please tell us who the main taxing authorities are in Russia.

RV-The Ministry of Taxes used to be the main taxing authority. However, this has changed and now the Ministry of Finance is in charge these days as they set the guidelines for the way taxes are being administered. The inspecting body is the Ministry of Taxes which is being controlled by the Ministry of Finance. The Ministry of Taxes is the body which simply levies the taxes rather than set any guidelines.
The Ministry of Taxes has various subdivisions across the country, and each subdivision has local tax authorities in each territorial district.

KJ- What is the best way to deal with the taxing authorities in Russia?

RV- It is always recommended as a rule that you should have someone with you when talking with the tax authorities, ideally someone from a law firm or public accounting firm. It is best to have a professional who can deal with the Ministry of Finance or the Ministry of Taxes and step into the process to handle everything with them. Often we have Power of Attorney and thus are able to go and meet with the authorities in order to obtain tax rulings for our clients.

KJ- What are some of the fastest growing business sectors in Russia?

RV- There is a significant amount of industrial investment in Russia where multinational companies are actually moving their manufacturing facilities to Russia. For example, the automotive industry has become a fast growing sector of the economy in Russia with multinationals entering the market, this has included US companies like General Motors and Ford as well as the Japanese manufacturer Toyota.

KJ- What cities do the majority of multinationals gravitate to in Russia?

RV-Moscow, being the capital of Russia, is very strong in the financial and distribution sectors of the economy and, as a result, attracts such firms. However, if you look at the industrial and manufacturing sectors, then I think you can equally say St. Petersburg and the Moscow region. Over the past five years, St Petersburg and the area surrounding it, has attracted a significant amount of industrial investment.

KJ- What are Russia’s primary exports?

RV- Oil, gas and steel are certainly the largest commodities in terms of volume exported from Russia these days. Russia still does not have many deep processing facilities which is why we are still a raw material country. Even when we have processed goods to export they are exported to a larger extent into former USSR Republics like Kazakhstan Belarus and others. However, raw materials like oil, gas and steel are exported everywhere around the world.

KJ- What are people surprised about when conducting business in Russia?

RV-I think they are surprised about everything! It is fair to say that the approaches and the mentality are very different in Russia. For most of my professional life I have served as a foreign consultant or mediator. Naturally, I began to understand the different approaches and how foreign people would view a range of issues. Therefore, my goal is to bridge the approaches of two different countries and try and find a working compromise between the two countries tax authorities.

Let me give you an example, you may have a Russian Tax Inspector or a Russian Tax Director reporting to a CFO in London or another multinational and they may approach it from the standpoint simply saying, “This is impossible” or “This is a problem, we have a huge issue” and the CFO who is sitting in London says he does not know what this person is talking about. My key focus is to get them to fully understand the matter, then to make sure that the issue is not exaggerated and, finally, to see that it is presented in the best light. It is about providing a true and clear picture about the particular tax issues to the company and then to solve them.

KJ- Your English is flawless! Where did you learn English?

RV- Although I studied English in school, I basically learned through my business environment. Many Russians who learned other languages at school forget it unless they have the opportunity to continue to use it. Personally, I wanted to make certain that I was working in an environment where I could continue to practice my English skills. I treated learning English as an instrument that would help me in my professional career. Learning the language of your clients helps you to better understand their life, their real concerns and where they are coming from on issues.

KJ- One last question! What is it like to live in St Petersburg, Russia?

RV- St Petersburg is a truly European city with a fairly good infrastructure. In fact, it is quite a convenient place for an expatriate to live!

KJ- Ruslan, thank you for taking the time to answer our questions. Your perspective is valuable to the Tax Intelligence Report readers around the world and we genuinely appreciate the time you gave to share your experiences.