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Preferences for investors

The Crimea and the Primorsky Krai (Vladivostok) are two special economic zones which were formed in 2015. Let us consider the order of participant’s registration, the list of preferences, including tax, and the performance of the given status for the years 2015-2016. 

The preferences

Recently there has been some tendency for the creation of special economic zones in Russia. Such entities can include certain areas of one or more federated states. The activities to organize such zones are aimed at the formation of the conducive financial climate and for the development of business environments and the attraction of the larger volume of investments in the country’s economy.

The preferences regarding taxation, migration, customs legislation, investment regulations etc. have been provided for companies.

Currently, in our opinion, the most advantageous for the foreign investors are special economic zones, organized in the Primorsky Krai (Vladivostok), the Republic of Crimea.

The Federal law has been enacted for the purposes of the project implementation and the development of the Primorsky Krai, according to which the status of Free port is granted to the city of Vladivostok.

In both regions the zero tax rate is stipulated for the federal budget income tax, land tax, property tax, and also tax rates on insurance premiums and the regional budget profit tax have been reduced. 

The following principal preferences are stipulated for the residents of the Free port of the city of Vladivostok:

Expense subsidies on customs duties, taxes and levies goods-wise needed for the project’s realization have been provided, among other matters, for Crimean investors. 

Eligible project participants: who are they? 

Both sole proprietors and legal entities of any patterns of ownership registered on the free zone territories and applied for the participation in business operations may receive the residents status. The investment policy statement with the commitment of 47 000 USD for the first three years of business activity for Crimea residents, business plan for the entrepreneurs of the Free port of Vladivostok must also be filed. 

Success and failure

 Let us consider the results of the free zone economic organization by the example of the Free port of Vladivostok, which has been operating for a little over than a year and is created for the purpose of international business relationships development. Within that period 96 investors have applied for the participation in the project, 76 of them have been already registered as residents. The investment volume will add up to over 3 billion USD together with prospective investors. Generally the majority of applicants are Russian companies, but there are a certain number of Chinese and Japanese investors willing to participate. Mainly large businesses take part in the project. However, the territory authorities are hoping for small business to be engaged in the project this autumn after coming into forcethe legislation concerning continuous operations of border entry points, single window system at the crossing of freight of Russian state border, implementation of freight e-declaration and “green channel” policy and easy visa processing for foreigners.   

Summary 

Project realization is rather challenging. Therefore, the regional authority’s priority is to constantly improve the existing framework of dealing with entrepreneurs to create the most comfortable working environment, build up trusting business relationships. 

In conclusion, the creation of free economic zones promotes the economic development of the Russian regions, the creation of jobs, attraction of investors, foreign ones in particular. Currently these markets can be referred to as prospective and appealing for business.

Published: economic newspaper «ЭЖ-ЮРИСТ» №37 (939) 2016 of 22.09.2016
Jalya Guseynova, the Managing Partner of the Group of Companies Alanta Partners, Moscow

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