On June 1, 2017, amendments to the Russian Town-Planning Code (the “Town-Planning Code”) will enter into force, which, inter alia, simplify and clarify the procedure for constructing linear facilities.

For example, in Article 41 of the Town-Planning Code as amended, cases are defined when preparing area planning documentation for construction of a capital construction facility is mandatory. In particular, construction and reconstruction of a linear facility is deemed one such case (subject to the exceptions defined in this article).

At the same time, the Russian Government can determine cases when preparing area planning documentation is not required for construction or reconstruction of a linear facility.

For example, on March 7, 2017, the Russian Government adopted Decree No.269, in which the following list of cases was set forth:

• Construction and reconstruction of linear facilities ensuring connection of capital construction facilities to existing electric and engineering networks, provided such connection does not require construction and/or reconstruction of existing electric and engineering networks, and provided that such linear facilities are:

1. power lines with voltage up to 35 kV inclusive, if the distance between the existing electric networks and the borders of the land plot on which the connected power receiving equipment is located does not exceed 300 meters in towns and town settlements and 500 meters in rural areas;
2. heat supply networks transporting water steam with working pressure of up to 1.6 MPa inclusive or hot water with temperature up to 150°C inclusive;
3. gas pipelines with rated working pressure up to 0.6 MPa, if the distance between the existing gas supply networks and the connection point measured in a straight line (the minimum distance) does not exceed 500 meters in rural areas and 300 meters within urban settlements;
4. water pipelines and conduits of all types with diameter up to 500 mm;
5. linear facilities for water disposal with diameter up to 1000 mm.

• Construction and reconstruction of a facility being part of an existing linear facility, provided such construction or reconstruction is carried out in the right-of-way area of an existing linear facility and does not change borders of areas with special conditions for territorial use defined in connection with the location of the existing linear facility, and the total area of such facility does not exceed 500 square meters, the height does not exceed 12 meters and the number of floors does not exceed 2.
• Construction and reconstruction of electric, communication and engineering networks, which are located within one city block/microdistrict.

Thus, starting from July 1, 2017, the procedure for construction and reconstruction of linear facilities will be simplified in certain cases.

At the same time, construction of linear facilities still produces many questions in practice. One such question is the classification of linear facilities as real estate or movable property.

In this connection, we would like to point out that the Real Estate Department of the Russian Ministry of Economic Development (the “Department”) in its letter No.D23i-4847 dated October 11, 2016, stated its position on the criteria for classifying linear facilities as real estate and movable property.

For example, the Department points out that “linear facilities, including underground facilities, which were commissioned as capital construction facilities in accordance with Article 55 of the Town-Planning Code, are most likely to be classified as real estate. Linear facilities which were not commissioned as described above, are most likely not real estate.

However, please note that some types of linear facilities will be classified as real estate pursuant to provisions of the law, like for example linear cable communication facilities in accordance with Article 8 of Federal Law No.126-FZ “On communications” dated July 7, 2003, are classified as real estate. Some linear facilities can also be part of a single real estate complex, which according to Article 133.1 of the Russian Civil Code is deemed immovable property involved in turnover as one facility.

Afterwards, the Russian Ministry of Finance (Letter No.03-05-04-01/62406 dated October 26, 2016) and the Federal Tax Service (Letter No.BS-4-21/21273 dated November 10, 2016) supported the position of the Department and recommended using it when applying tax deductions.

Elena Stepanova  Partner                                Moscow   Tel.: +7 (495) 970 10 90

Ilya Machavariani   Associate                Moscow   Tel.: +7 (495) 970 10 90

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Elena Stepanova or Ilya Machavariani, Moscow Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.

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