Russia’s customs authorities continue to assess duties on the royalty value of some imported audiovisual materials, rather than solely on the physical value of carrier medium. This is contrary to standard international practice. Such assessments are a form of double taxation, since royalties are also subject to withholding, income, value-added and remittance taxes.
As a general matter, foreign legal entities and Russian legal entities with foreign participation exceeding 50% are prohibited from: 1) sponsoring television and radio channels as well as television and radio programs; 2) establishing broadcasting organization channels capable of being received reliably in more than half of Russia’s territory or by more than half of Russia’s population; and, 3) broadcasting to more than half of Russia’s population. The law also forbids the transference of stock in a channel or radio or television program that results in over 50% foreign ownership. MPAA opposes such restrictions because they are discriminatory, reduce consumer choice, and unreasonably favor local investors.
The Mass Media Law bans foreign entities or persons from establishing certain media platforms, including television and radio companies. Existing media companies covered by the law with foreign participation must take measures to limit the foreign share of participation to no more than 20%. In cases of non-compliance, foreign shareholders could lose important rights within the company, and the law could affect the company’s existing business arrangements. As noted, MPAA opposes these types of restrictions which reduce consumer choice and unreasonably favor domestic investors.
Advertising Ban on Pay-TV – Russia has enacted new legislation that bans advertising on pay- and scrambled-signal channels. While the law has no practical effect on state-owned television channels, it will have a significant impact on cable and on-demand services, including those operated by foreign companies. MPAA opposes such laws, as they interfere with the market and hinder the growth of the pay-TV industry.
Proposed legislation would introduce large fees for theatrical distribution, while another proposed measure would limit the percentage of screens that can be occupied by a single film. MPAA opposes these restrictions, which, if adopted and implemented, would constrain the flexibility of distributors and exhibitors to serve Russian audiences.
The 1996 Law on State Support of Cinematography provided a VAT exemption for films granted a national film certificate. National film certificates are granted to Russian-made films. The RF Tax Code (Article 149 p. 21) specifies VAT is exempt for works (services) on film production by cinematography organizations, as well as exploitation rights (including distribution and exhibition) of film products that are granted the national film certificate.
Thus any legal entity distributing a domestic film is exempt from VAT, provided that such entity is a cinematography organization. As part of its accession to the WTO, Russia obligated itself to provide national treatment for taxes on similar products. Therefore, the Government of Russia appears to be in violation of this obligation, as it is currently applying a value-added tax to non-Russian films and not to domestic films.
Russia is host to a number of illicit sites that cater to English-speaking audiences, negatively impacting markets worldwide. Given Russia’s improved bandwidth performance, streaming sites are now the principal form of infringing site in Russia, accounting for 46% of infringing sites. Many pirate sites have moved to foreign hosting locations after the implementation of the so-called “Internet Anti-Piracy Law.” The recently-enacted “Third Anti-Piracy Law” would allow blocking mirror sites of pirate websites as well, which should substantially improve the effectiveness of the law. Infringement on Russian social media platforms is also a significant concern to rights holders.
Russia needs to increase its enforcement activity well beyond current levels to provide adequate and effective enforcement of IPR violations, including the imposition of criminal deterrent penalties. The recently-enacted amendment to the Anti-Piracy law should constrain the ability of wrongdoers to simply modify their internet sites and continue to operate in violation of the law.
Further, a critical element of the U.S.-Russia bilateral IPR agreement is Russia’s obligation to provide for effective enforcement of IPR online; Russia will need to take effective action on the basis of its amended legal framework to meet this obligation. Meanwhile, the government’s special sub-unit within Department K previously dealt exclusively with IP internet cases, but they are no longer taking responsibility for these matters.
Judicial action against unauthorized camcorders in theaters continues to be challenged by the private copy exception, despite amendments clarifying that the private copy exception is not applicable. MPAA continues to urge the government bodies reviewing IP legislation to revisit this issue.