According to the amendments to the Labour Code of the Russian Federation, which came into force on July 1, 2016, the so-called professional standards have become mandatory for certain categories of employers.

For most private firms professional standards are only advisory in nature. But in a number of exceptional cases, they become mandatory. One of them is the case of companies with foreign management.

Please see the Mosgo & Partners newsletter for more details.

1. GENERAL CASES OF MANDATORY APPLICATION OF PROFESSIONAL STANDARDS

A professional standard is a description of qualifications an employee requires to be eligible for a certain type of professional activity, including the performance of a specific labour function. The provisions of professional standards are taken into account, in particular, when defining the requirements to applicants for certain positions, during the preparation of job descriptions, in evaluating the results of the employee’s work, etc. The professional standards are developed and approved by the Ministry of Labour and Social Protection of the Russian Federation.

For most employers professional standards are advisory. Professional standards are developed by the Ministry of Labour and Social Protection of the Russian Federation.

Professional standards are obligatory for employers in the following cases:

1. If the employment involves performing work that entitles an employee to receive compensation and benefits – the standards apply to the job, specialization and profession titles (para. 2 Part 2 Article 57 of the Labour Code). This category includes hazardous work and work in special conditions.

2. If the legislation sets forth requirements to the qualifications for performing a specific labour function – the standards apply to the qualification requirements (Part 1 Article 195.3 of the Labour Code). Most cases in this category are represented by companies in the public sector. Private companies may fall into this category if they conduct specific types of activity, regulated by special procedures and often licensed.

   
   

In all other cases, professional standards are generally only advisory.

2. THE PROFESSIONAL STANDARDS MANDATORY FOR PRIVATE COMPANIES WITH FOREIGN CHIEF OFFICERS

However, in exceptional cases, professional standards are mandatory for ordinary commercial firms whose activities do not belong either to hazardous labour, or to the public sector, or to other licensed or specially regulated activities.

One of these cases is the organization of accounting in companies where the position of the chief officer (the sole executive body, General Director) is held by a foreign national.

Professional Standard for Accountants is mandatory for private firms with a foreign chief officer.

If the firm is managed by a foreign national, its accounting must be organized in one of the following ways:¹

• If the foreign chief officer holds a leave to remain or a temporary residence permit in Russia, he/she is entitled to entrust the accounting to himself/herself subject to simultaneous compliance with the following conditions:



         a.  the firm belongs to the category of medium-sized enterprises; and

         b.  the foreign chief officer is qualified in the field of Russian accounting under the requirements of the Russian Accounting Law.



• If the foreign chief officer is temporarily staying in Russia on the basis of a visa (even a long-term one), he/she has no right to retain the accounting function and must engage another person for that purpose. This can be:

         a.  a third-party individual providing services on the basis of a civil law contract: such an individual must be qualified in accordance with the requirements of the Accounting Law.

         b.  a third-party accounting firm: at least one member of such firm must have the qualifications corresponding to the requirements of the Accounting Law.

         c.  the worker assigned to the position of chief accountant. If a citizen of the Russian Federation is appointed to the position of chief accountant, no mandatory requirements apply to his/her qualifications. In case of a foreign national, the requirements are the same as those applicable to the foreign chief officer who has assumed the accounting function – that is, temporary or permanent residence in Russia and eligibility within the meaning of the Accounting Law.

In view of the amendments introduced into the Labour code of the Russian Federation on July 1, 2016, in all cases when the Accounting Law sets forth special qualification requirements for the employee, who is responsible for accounting as part of his/her function, the Professional Standard for Accountants approved by Order No. 1061n of the Ministry of Labour and Social Protection of the Russian Federation dated June 22, 2014 (the “Professional Standard for Accountants”), shall apply as mandatory.
   
Taking this into account, the firm with a foreign chief officer shall apply the Professional Standard for Accountants in the following cases:

1. Where the foreign chief officer assumes the accounting duties himself/herself: he/she shall have the prescribed qualifications.
2. Where the foreign chief officer engages an external firm as accountants. In this case, the Professional Standard for Accountants applies indirectly: when choosing the firm for the accounting position, the company shall take note of whether such a firm employs persons with the prescribed qualifications.
3. Where the foreign chief officer appoints another foreign national to the position of chief accountant, such a foreign national shall have the prescribed qualifications.

The Professional Standard for Accountants is mandatory for firms with a foreign chief officer in the following cases:

   a) where the foreign chief officer assumes the accounting functions himself/herself

   b) where the foreign chief officer delegates accounting to a third party firm;

   c) where the foreign chief officer appoints another foreign national to the position of chief accountant.

The requirements of the Professional Standard for Accountants are not mandatory, but advisory in the following cases:

1. where the foreign chief officer appoints the citizen of the Russian Federation to the position of chief accountant;

2. where the foreign chief officer engages an individual on the basis of a civil law contract for the accounting functions – in that case, such a person shall only conform to the requirements of the Accounting Law.




3. QUALIFICATION REQUIREMENTS FOR THE PERSON RESPONSIBLE FOR ACCOUNTING

The qualification requirements prescribed by the Accounting Law, and those prescribed by the Professional Standard for Accountants, have certain differences. Currently there is no uniform approach of courts as to how these differences can be reconciled, while the existing clarifications of the Ministry of Labour and Social Protection of the Russian Federation do not provide unambiguous answers. Nonetheless, if we summarize the provisions of the aforesaid two normative acts, it will appear that the person in charge of accounting in the firm shall meet the following requirements:


1. have a university degree (core or non-core);
2. in case of non-core higher education, have further education (secondary vocational education, proof of completion of professional development and retraining programs);
3. have at least 3 years of experience in the field out of the last 5 years of work (in case of persons with core higher education); or at least 5 years of experience in the field out of the last 7 years (in case of persons with non-core higher education);
4. have no unquashed or outstanding conviction.



4. LIABILITY FOR INCOMPLIANCE WITH THE PROFESSIONAL STANDARD FOR ACCOUNTANTS

In case of incompliance with the requirements of the professional standards, for example, in the absence of the necessary qualifications of the foreign chief officer where he/she assumes the accounting functions, or where such an officer appoints a foreign national without the requisite qualifications to the position of chief accountant, the firm and its chief executive officer may be held liable under Article 5.27 of the Russian Administrative Offences Code (for a violation of labour legislation). Other negative consequences are also possible, particularly in the field of immigration or tax legislation – but at the moment no consistent practice of their application has formed.



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¹Art. 7 of Federal law No. 402-FZ dated December 6, 2011 “On Accounting” (the “Accounting Law”), para. 3 Art. 14 of Federal law No. 115-FZ dated July 25, 2002 "On the Legal Status of Foreign Nationals in the Russian Federation".


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This newsletter shall not be viewed as legal advice. It is prepared for educational and informational purposes only. Mosgo & Partners is not responsible for any consequences of reliance on the information contained in this newsletter without specific professional advice.

© Mosgo & Partners. Moscow, 2016.