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Home > Funding and investing incentives in Russia 2017 > Regional opportunities and priorities: governmental support at the territorial level

Regional opportunities and priorities: governmental support at the territorial level

Special economic zones (SEZ)

Special economic zones (SEZ) is a large federal project aimed at regions development by direct foreign and Russian investments attraction to the hi-tech economy industries, import-substituting production, shipbuilding and tourism. 

Special economic zones are established for 49 years. SEZ resident retains a right to buy a land plot ownership at a discounted rate after they start production activitites. 

All the SEZ are endowed by the state with special legal status that provides a set of tax and custom preferences to the residents and also guarantees the access to ready-to-use engineer, logistic and business infrastructure. The costs of the project realized in SEZ are in average 30-40% less compared to Russia general practice. 

How to become a resident:

  • register a legal entity in the same municipality where special economic zone is located;
  • apply for resident status;
  • present the project to Supervisory Council. Members of Supervisory Council are presented by regional specialist that make the preliminary assessment of the project. If necessary a company makes amendments to business plan based on Supervisory Council recommendations;
  • undergo the procedure of Expert Council of the Ministry of Economic development. Members of Expert Council are presented by federal level specialists that conduct peer review of the project and decide on the status of the resident;
  • conclude a three way Agreement with the Ministry of Economic Development and Special Economic Zones JSC on conduct of activity in SEZ territory and receive the SEZ residence certificate.

What can be obtained:

  • free customs zones that means that import duties and VAT are not charged on equipment, parts and materials imported into SEZs, and export duties are not charged on goods produced in an SEZ and exported to countries outside the Customs Union (other than Russia, Kazakhstan and Belarus);
  • ready-to-use infrastructure;
  • favorable rental rates; 
  • simplified connection to utilities; 
  • quality business administration for the term of SEZ operation (49 years); 
  • tax benefits: 

- Income tax 
To the federal budget: 
0% for residents of technology and innovation SEZ until 2018; 
0% for residents of the tourist cluster until 2023.

 

To the budget of the constituent territory of the Russian Federation: 
0% to 13.5%, the term and rate is set by the constituent territory of the Russian Federation. 

- Property tax 
0% for 10 years. 

- Land tax 
0% for 5-10 years, the term may be extended by the law of the constituent territory of the Russian Federation. 

- Transport tax 
0% for 5-10 years, the term may be extended by the law of the constituent territory of the Russian Federation. 

- Insurance contributions
  21% until 2018; 
28% until 2019 (only for residents engaged in technology development and implementation).

Industrial SEZs are extensive territories in industrially developed regions. Proximity to industrial resources, available utility capacity, accessibilty to all forms of ground transport — these are only the most important of an industrial zone's advantages. Reduced expenses make the output of facilities in industrial zones more competitive on the Russian market.

There are 8 Industrial SEZs operating in Russia:

SEZ Alabuga (Republic of Tatarstan)
SEZ Lipetsk (Lipetskaya Oblast)
SEZ Moglino (Pskovskaya Oblast)
SEZ Lotos (Astrakhanskaya Oblast)
SEZ Uzlovaya (Tulskaya Oblast)
SEZ Titan Valley (Sverdlovskaya Oblast)
SEZ Togliatti (Samarskaya Oblast)
SEZ Kaluga (Kaluzhskaya Oblast)
SEZ Stupino Kvadrat (Moscow Oblast)
SEZ in the city of Vladivostok (Primorskiy Krai)

Technology implementation SEZs are located in major centers of science and education that have rich scientific traditions and recognized research institutions. Customs and tax benefits, the availability of professional staff, and a growing demand for new technologies and modernization in various sectors of the Russian economy make technology implementation SEZs attractive for venture capital funds as well as for developers and producers of high-tech products.

There are 6 Technology implementation SEZs operating in Russia:

SEZ in the city of St. Petersburg
SEZ in the city of Moscow
SEZ Istok (Moscow Oblast)
SEZ Dubna (Moscow Oblast)
SEZ Tomsk (Tomskaya Oblast)
SEZ Innopolis (Republic of Tatarstan)

Port SEZs are located in proximity to key transport routes and waterways. A logistics SEZ may become a site for shipbuilding, ship repairs and logistics services and also serve as a base for new land and sea delivery routes.

There is one Port SEZ operating in Russia. The SEZ on located in Ulianovsk Region.

Tourist and recreation SEZs are located in scenic areas and regions popular as tourist destinations. Tourist and recreation SEZs offer favorable conditions for tourism, sports activities, recreation and other forms of business.

There are 9 Tourist and recreation SEZs operating in Russia:

SEZ in Altaiskiy Krai
SEZ in the Republic of Buryatiya
SEZ Vorota Baikala (Irkutskaya Oblast)
SEZ in Tverskaya Oblast
SEZ in the Republic of Karachaevo-Cherkessia 
SEZ in the Republic of Kabardino-Balkaria
SEZ in the Chechen Republic
SEZ in the Republic of Ingushetia
SEZ in the Republic of Dagestan

Regulations: 

  • Federal Law dated July 22, 2005, No. 116-FZ "On special economic zones in the Russian Federation".

Priority social and economic development areas

PSEDA is an area in the constituent territory of the Russian Federation, where the Government of the Russian Federation by its decision set a special regulatory regime for business and other activity in order to create favorable conditions to attract investments and launch non-resource manufacture of goods, including export-oriented products.
The governance system of priority development areas envisages implementation of a "one-stop-shop" principle for the investor, i.e. the resident of the territory.

Who can apply:

The requirements for investors to participate in the PSEDA.

Territorial requirements: 

  • Must register in a priority development area PSEDA; 
  • No branch offices or separate subdivisions outside the PSEDA.

Requirements regarding the use of other preferential regimes:

  • May not apply special tax regimes
  • Must not be resident of special economic zones of any type or have Regional Investment Project status

Financial requirements

 
  • 500,000 RUB — the minimum amount of capital investment 

What can be obtained:

General tax incentives: 

  • 0-5% — income tax for the first 5 years after profit is first made; 12-20% for the next 5 years 
  • 0% — property tax (this preferential tax rate and its term are set by the regional authorities) 
  • 0% — land tax for 3 years (this preferential tax rate and its term are determined for each PSEDA by local authorities) 

Benefits on payments to extra-budgetary funds: 

  • 7.6% — reduced insurance contribution rate for 10 years from the date this status is obtained 

Accelerated VAT refunds 

  • 10 days — declarative procedure for VAT refunds (a guarantee agreement with the management company should be in place)
  •  

Customs benefits 

  • Free customs zone (duty-free and tax-free import and re-export) 

Financial support 

  • Funding the construction of PSEDA infrastructure out of state budget funds 

Industry tax incentives (for the mining industry) 

  • 0—0,8% — The deminisher for the MET, which characterize the territory of mining (Dtm), during a period of 10 years 

Other non-financial incentives:

  • a new, up-to-date system of support measures and guarantees for employees; 
  • specific regime of state control (supervision) and municipal control; 
  • priority connection to infrastructure facilities; 
  • provision of public services in PSEDAs (also by creating multifunctional centers by the management company); 
  • setting favorable rental rates for the use of immovable property by the residents of territories.

At the moment, there are 49 PSEDAs established in Russia:

2015

«Kangalassy» (Republic of Sakha (Yakutiya)) 
«Komsomolsk» (Khabarovskiy Krai) 
«Khabarovsk» (Khabarovskiy Krai) 
«Belogorsk» (Amur Oblast) 
«Priamurskaya» (Amur Oblast) 
«Nadezhdinskaya» (Primorskiy Krai) 
«Mikhailovskiy» (Primorskiy Krai) 
«Kamchatka» (Kamratskiy Krai) 
«Beringovskiy» (Chukotskiy AO) 

2016

 

«Yuzhnaya Yakutiya» (Republic of Sakha (Yakutiya))
«Togliatti» (Samarskaya Oblast) 
«Krasnotur'insk» (Sverdlovskaya Oblast) 
«Anzhero-Sudzhensk» (Kemerovskaya Oblast) 
«Yurga» (Kemerovskaya Oblast) 
«Usolie-Sbirskoe» (Irkutskaya Oblast) 
«Naberezhnye Chelny» (Republic of Tatarstan) 
«Krasnokamensk» (Zabaikalskiy Krai) 
«Yuzhnaya» (Sakhalin Oblast) 
«Gorny Vozdukh» (Sakhalin Oblast) 
«Bolshoy Kamen» (Primorskiy Krai) 
«Amuro-Khinganskaya» (Evreyskaya АО) 
«Nadvoitsy» (Republic of Kareliya) 
«Gukovo» (Rostovskaya Oblast) 

2017

«Abaza» (Republic of Khakasiya) 
«Chusovoy» (Permskiy Krai) 
«Bakal» (Chelyabinskaya Oblast) 
«Emva» (Republic of Komi) 
«Kumertau» (Republic of Bashkortostan) 
«Belebei» (Republic of Bashkortostan) 
«Selenginsk» (Republic of Buryatiya) 
«Kurily» (Sakhalin Oblast) 
«Nikolaevsk» (Khabarovskiy Krai) 
«Svobodny» (Amur Oblast) 
«Neftekhimichesky» (Primorskiy Krai) 
«Vyatskie Polyany» (Kirovskaya Oblast) 
«Tutaev» (Yaroslavskaya Oblast) 
«Ruzaevka» (Republic of Mordoviya) 
«Petrovsk» (Saratovskaya Oblast) 
«Sarapul» (Republic of Udmurtiya) 
«Cherepovets» (Vologodskaya Oblast) 
«Novotroitsk» (Orenburgskaya Oblast) 
«Dimitrovgrad» (Ulianovskaya Oblast) 
«Sarov» (Nizhegorodskaya Oblast) 
«Kaspiysk» (Republic of Dagestan) 
«Dorogobuzh» (Smolenskaya Oblast) 
«Kirovsk» (Muemanskaya Oblast) 
«Lesnoy» (Ryzan Region) 
«Sosenskiy» (Kaluga Region) 
«Verkhniy Ufaley» (Chelyabinsk Region)

Regulations: 

  • Federal Law dated December 29, 2014, No. 473-FZ "On the priority social and economic development areas in the Russian Federation".

Regional investment projects (RIP)

RIP is a project focused on the manufacture of goods, which satisfies all of the following requirements:

  • production of goods in one of the constituent territories of the Far Eastern federal district, in Buryatia, Tyva and Khakassia Republics, in the Irkutsk Region, and in the Zabaykalskiy Krai or the Krasnoyarsk Territory;
  • the project cannot be focused on oil and gas production, processing and transportation; production of excise goods (except for passenger cars and motorcycles); and activity, for which the corporate income tax rate is set at 0%;
  • there shall be no buildings and structures owned by individuals or companies, except for project participants, located on the land plots allocated for project implementation (except for access routes, communications, pipelines, electric cables, drainage and other infrastructure facilities);
  • the volume of capital investments shall not exceed RUB 50 mn (with the investment period of up to 3 years) or RUB 500 mn (with the investment period of up to 5 years). The minimal volume of capital investments may be increased by the law of the constituent territory of the Russian Federation;
  • each RIP is implemented by a sole participant.

Benefits for the investor:

The following corporate income tax rates may be set for RIPs, under the condition that the income generated through the sale of goods produced as a result of RIP implementation is at least 90%:

  • 0% to the federal budget within 10 tax periods starting from the tax period, when the first income from the sale of the produced goods was reported;
  • not more than 10% to the budget of the constituent territory of the Russian Federation within 5 tax periods starting from the tax period, when the first income from the sale of the produced goods was reported, and at least 10% within 5 following tax periods.

Regulations:

  • Tax Code of the Russian Federation (Part One) dated July 31, 1998, No. 146-FZ (Chapter 3.3).

Industrial parks

An industrial park is a complex of real property facilities managed by a specialized management company, which consists of a land plot(s) with operating, administrative, warehousing and other buildings, structures and constructions, provided by utilities and transport infrastructure required to create new industrial production, which also enjoys the required regulatory regime to perform its operating activity. There are about 120 industrial parks in the territory of Russia. These include 72 operating industrial parks, fully prepared to host residents, and 48 parks at the stage of design and construction.

The information about all industrial parks, their status and key characteristics is published annually in the industrial review “Russian Industrial Parks” at www.indparks.ru, and is also available in the online version of the geo-informational system “Russian Industrial Parks”.

Key requirements to industrial parks:

  • the land and the buildings of the industrial park shall be suitable to locate industrial production;
  • existence of a management company legally capable to provide infrastructure facilities for residents’ possession or rent, with at least 80% of its revenue generated by the management of the industrial park and provision of services to residents;
  • the area of the park amounting to more than 8 ha, with at least 50% dedicated to locate industrial production;
  • availability of utility infrastructure with at least 0.15 MW per ha, but not less then 2 MW.

Services of an operating industrial park for investors:

  • provision of production spaces (land plot or a ready-to-use premise) for rent and/or ownership;
  • connection to utilities, including the sources of power, gas, heat and water supply, water discharge and water treatment facilities;
  • design and construction of industrial facilities according to the investor’s requirements;
  • operation and servicing of utilities and industrial infrastructure;
  • additional services, which may include security and cleaning, administrative, transportation, legal, consulting, HR and other services.

Benefits for investors:

  • ready-to-use utility infrastructure and available connection points;
  • administrative support provided by the management company and regional authorities;
  • tax benefits (if provided in the legislation of the constituent territory of the Russian Federation);
  • potential synergy with neighboring enterprises (production chains).

Regulations:

  • Federal Law dated December 31, 2014, No. 488-FZ “On industrial policy in the Russian Federation”;
  • “GOST R 56301-2014. National standard of the Russian Federation. Industrial parks, Requirements” (approved and adopted by the Order of Rosstdandart dated December 12, 2014, No. 1982-st).

Industrial clusters

An industrial cluster is a community of industrial enterprises interconnected through their relations in this area due to proximity and functional dependence, and located in one or several constituent territories of the Russian Federation. An industrial park is created based on the agreement between the regional administration and a specialized industrial park entity.

Benefits for the investor:

  • a subsidy to reimburse some (up to 50%) costs in the implementation of joint projects focused on the manufacture of industrial products of the cluster with the purpose of import substitution.

Regulations:

  • Federal Law dated December 31, 2014, No. 488-FZ “On industrial policy in the Russian Federation”;
  • Resolution of the Government of the Russian Federation dated January 28, 2016, No. 41 “On the approval of the Rules for the provision of subsidies from the federal budget to the members of industrial clusters to reimburse some costs incurred in the implementation of joint projects focused on the manufacture of industrial products of the cluster with the purpose of import substitution”;
  • Resolution of the Government of the Russian Federation dated July 31, 2015, No. 779 “On industrial clusters and specialized entities of industrial clusters”.

Regional innovation clusters

A regional innovation cluster is a community of enterprises and companies (cluster members) located in the limited territory, which is characterized by the existence of:

  • a scientific and production chain in one or several industries (key types of business activity), which unites cluster members;
  • a mechanism to coordinate the activity and cooperation of cluster members within the activity of the specialized entity;
  • synergy effect, which manifests itself through the improvement of economic efficiency and productivity of each enterprise/company through high level of their concentration and interaction.

Benefits for the investor:

  • consultative support;
  • professional re-training, advanced training, also in the form of internship for employees of companies;
  • provision of consultations to member companies on the matters related to the development of innovative investment projects;
  • arrangement of exhibitions and fairs, and participation of the representatives of member companies in exhibitions, fairs and communication events;
  • development of innovation and education infrastructure facilities in the territory of the regional cluster.

Regulations:

Resolution of the Government of the Russian Federation dated April 15, 2014, No. 316 “On the approval of the state program of the Russian Federation “Economic development and innovative economy”.




Investment projects planned for implementation in the Far East and the Baikal Region (FE&BRIP)

FE&BRIP are the projects aimed to ensure production of produce goods, works and (or) provision of services, which are executed in the constituent territories of the Russian Federation located in the Far East and the Baikal Region, and which satisfy all of the following requirements:

  • the goals of the investment project comply with the goals of the federal special-purpose programs and state programs, which govern the development of the Far East and the Baikal Region, and other strategic documents defining the areas of social and economic development of these regions;
  • state support is required to create and upgrade infrastructure facilities of business enterprises;
  • compliance with the requirements of federal laws and regulations of the Government of the Russian Federation, which apply to the territories of the Far East and the Baikal Region.

Requirements to the investor:

  • experience in the implementation of investment projects, reaching the target ROI and other economic efficiency indicators;
  • the amount of private investments in the implementation of the investment project shall be at least RUB 1 bn;
  • the net present value of the investment project shall be negative in case of no state support and ≥0 in case such state support is provided (if the investor claims provision of state support in the form of budget investments and subsidies in infrastructure facilities);
  • the investor shall have no past-due debts on money liabilities to the Russian Federation and on mandatory payments to the budgets within the Russian budget system;
  • there shall be no insolvency (bankruptcy) proceedings initiated against the investor.

Benefits for the investor:

  • provision of federal budget funds for budget investments in state (municipal) property;
  • provision of subsidies to legal entities in order to create and reconstruct infrastructure facilities and perform technological connection of power consuming equipment to power grids and gas equipment to gas distribution networks.
  • Resolution of the Government of the Russian Federation dated October 16, 2014, No. 1055 “On the approval of the methodology for selection of investment projects planned for implementation in the territories of the Far East and the Baikal Region”.

Regulations:

  • State Program of the Russian Federation “Social and economic development of the Far East and the Baikal Region” (Resolution of the Government of the Russian Federation dated April 15, 2014, No. 308);
  • Federal Special-Purpose Program “Economical and social development of the Far East and the Baikal Region until 2018” (Resolution of the Government of the Russian Federation dated April 15, 1996, No. 480);
  • Resolution of the Government of the Russian Federation dated October 16, 2014, No. 1055 “On the approval of the methodology for selection of investment projects planned for implementation in the territories of the Far East and the Baikal Region”.

Free Port of Vladivostok

The Free Port of Vladivostok is a port area, which enjoys special customs, tax, investment and related regulation regimes. It is being created for the period of 70 years in the territories of the so-called Vladivostok agglomeration and other individual territories of the Primorye Territory, which includes 15 municipal entities in total.

Benefits for the investor:

  • a free customs zone regime for residents;
  • accelerated issue of permit documentation for capital investment facilities (not more than 40 days);
  • provision of land plots without tender procedures;
  • simplified visa regime;
  • foreign labor permits without quotas;
  • accelerated control inspections (not more than 15 days);
  • accelerated VAT refund (10 days);
  • tax benefits:

Income tax

  • 0% to the federal budget;
  • Not more than 5% to the budget of the constituent territory of the Russian Federation.

Property tax

  • 0% during 5 years and 0.5% during the following 5 years.

Land tax

  • 0% during 5 years.

Insurance contributions

  • Total contributions at 7.6% during 10 years (for residents registered within 3 years after the law is adopted).

Criteria for resident selection:

  • registration in the territory of the Free Port;
  • the minimum capital investments of RUB 5 mn within the term not exceeding 3 years from the date of inclusion in the registry;
  • the investment project planned for implementation, or the type of business shall be new for the entrepreneur;
  • acceptable types of activity;
  • no defaults on taxes and levies, no bankruptcy, restructuring or liquidation proceedings.

Regulations:

  • Federal Law dated July 13, 2015, No. 212-FZ “On the free port of Vladivostok”;
  • Resolution of the Government of the Russian Federation dated October 20, 2015, No. 1123 “On the approval of criteria for selection of residents of the free port of Vladivostok”.

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