#1фрп Special Investment Contracts [SPIC) Reload of the mechanism#2| PROPOSED LEGISLATIVE CHANGES CONCERNING SPIC (1) The Government of the Russian Federation is preparing amendments to the Federal Law "On industrial policy", Tax and Budget Codes as related to new conditions and regulations on special investment contracts (SPIC)'. CONCEPTUAL CHANGES: םםםם GOAL: creation or modernization of (including best available techniques introduction) and/or mastering production development and (or) implemen- tation of modern techniques² new REGIONAL AND MUNICIPAL INVOLVEMENT: involvement of a constituent of the Russian Federation and municipal government depending on the measures requested by the investor involvement of a constituent of the Russian Federation and municipal government is obligatory new EVALUATION OF APPLICATIONS FOR SPIC CONCLUSION: as available competitive selection. new ACCESS TO SUBSIDIARY INCENTIVES: within budgetary provisions for the financial year new for the duration of SPIC Draft amendments can be reviewed at the federal web-portal http://regulation.gov.ru. 2Modern technique is a manufacturing technology for a product which is competitive in the world market or which doesn't have Russian-made equivalents. The list of modern techniques is approved by the Government of the Russian Federation with the involvement of state authorities, business society and industrial groups. 2#3| PROPOSED LEGISLATIVE CHANGES CONCERNING SPIC (2) CHANGES OF THE CONDITIONS: DURATION OF SPIC: up to 10 years up to 15 years (investment ≤ 50 bln RUB] up to 20 years (investment > 50 bln RUB) INVESTMENT VOLUME: from 750 mln RUB (without VAT) new from 1 bln RUB (without VAT] MULTIPLE INVESTORS: I investor only multiple investors are possible new new PROFIT TAX: application of the preferential rate when at least 90% of revenue is generated by SPIC product sales new possibility to apply the preferential rate to the tax base from SPIC products VOLUME OF STATE SUPPORT: no limitations tax and non-tax project-related budgetary expenses - no more than 50% of capital invest- ment new 3#4IAMENDMENTS TO THE FEDERAL LAW "ON INDUSTRIAL POLICY" (1) Reason for tender: initiator's proposal TENDER INITIATORS INITIATORS' PROPOSALS Russian Federation OPEN COMPETITIVE TENDER Constituent of the RF jointly with the RF and municipal government Investor 1 The decision to hold competitive tender is based on the results of public hearing of the investment project 2 Investor agrees upon the production site with the constituent of the Russian Federation and municipal government in advance Type of industrial products + (optional) intellectual property owned by the Russian Federation to be introduced under SPIC Type of industrial products + production site + (optional) intellectual property owned by the Russian Federation to be introduced under SPIC SPIC project + (optional) intellectual property owned by the Russian Federation to be introduced under SPIC 2 4#5| AMENDMENTS TO THE FEDERAL LAW "ON INDUSTRIAL POLICY" (2) Reason for tender: military, special or double-purpose production engineering to ensure national defense and security CLOSE COMPETITIVE TENDER TENDER INITIATORS Russian Federation Constituent of the RF jointly with the RF and municipal government Investor agrees upon the production site with the constituent of the Russian Federation and municipal government in advance INITIATORS' PROPOSALS Type of industrial products + (optional) intellectual property owned by the Russian Federation to be introduced under SPIC Type of industrial products + production site + (optional) intellectual property owned by the Russian Federation to be introduced under SPIC 5#6| AMENDMENTS TO THE FEDERAL LAW "ON INDUSTRIAL POLICY" (3) SPIC is concluded by the decision of the President of the Russian Federation No application on intent to take part in the open tender is submitted as a result of public hearing of the project [30 calendar days) COMPETITIVE TENDER IS NOT HELD, IF: Project initiated by the Investor belongs to military, special or double-purpose production technology Application from only 1 Investor is submitted for the tender 6#7| TAX CODE AMENDMENTS I. TAXPAYER - SPIC PARTY investor that entered into SPIC with the Russian Federation new Organization implementing the project II. NON-DETERIORATION OF TAX CONDITIONS regarding all the taxes paid by the investor will not apply to VAT and excise duties new as part of federal SPIC III. PROFIT TAX BENEFIT applies to the entire tax base of the investors - federal SPIC parties whose income from SPIC products accounts for more than 90% of all income new new » applies to the entire tax base of the organization that imple- ments the project under federal SPIC² >> applies to the tax base from operations as part of SPIC with regard to the organization that implements the project under federal SPIC¹ ་ income from SPIC products accounts for more than 90% of all income or ▸ income from SPIC products is less than 90% of all income; in this case, tax budgetary expenses are ≤ 25% of SPIC project investment 'Investor is not: a member of a consolidated taxpayers' group; resident of special economic zone or territory of priority social and economic development; participant (successor of the participant) of the regional investment project. Does not apply special tax regimes. 2 The chosen tax rate application method must be formalized in the accounting practices and may not be revised during the SPIC effective period 7#8ISPIC MECHANISM RELOAD STAGES¹ 1st stage Amendments to the Federal Law "On industrial policy", Tax and Budget Codes have been adopted SPIC CONCLUSION PROCEDURE » GOVERNMENT of the Russian Federation approves: SPIC conclusion rules, including competitive selection procedure and bidders' application evaluation method requirements to the structure and content of SPIC reports 2nd stage » AUTHORIZED BODIES³ approve: 3rd stage form of proposal for SPIC conclusion SPIC monitoring and control ▸ SPIC register administration 4th stage START OF THE NEW MECHANISM, ANNOUNCEMENT OF THE FIRST TENDERS MODERN TECHNOLOGY LIST » GOVERNMENT of the Russian Federation approves the method for enlisting modern technologies » AUTHORIZED BODIES are in charge of: collecting proposals for enlisting modern technologies ▸ determining authorized organizations² » GOVERNMENT of the Russian Federation approves the modern technology list 1 The slide shows approximate stages 2 Organizations authorized to draw conclusions on manufacturability of a product that is competitive in the world market or which doesn't have Russian-made equivalents, based on the claimed technology 3 Field-specific sectoral ministries 8#9| RECOMMENDATIONS FOR BIDDERS Due to SPIC mechanism restart, application processing is suspended. However, at this conjuncture, the Bidder is advised to conduct preliminary assessment of project conformity to conceptual requirements of the updated mechanism Project concept Products list/structure of participants/localiza- tion/presence and scope of rights for intellectual property Financial structure confirmation of sources of financing Informing federal executive bodies on the project discussion of the project configuration/joint follow-up revision of regulatory framework Market analysis uniqueness of technology and product compared to Russian and global counterparts Partricipation conditions for constituents of the RF and municipal governments review of regional instruments and conditions ofSPIC participation 9#10LIST OF SIGNED SPICS 25 special investment contracts signed » "AstraZeneca Industries" (LLC) Kaluga Region » "BIOCAD" (CJSC) Saint Petersburg » "VESTAS MANUFACTURING RUS" (LLC) Ulyanovsk Region »"Vilo Rus" (LLC) Moscow Region »"WINDAR RUS" (LLC) Rostov Region » "GEROPHARM " (LLC) Saint Petersburg »"HMS Livgidromas" (JSC) Orel Region »"DMG MORI AG" (Group) Ulyanovsk Region » "EuroChem-VolgaKaliy" (LLC) Volgograd Region »"EuroChem-North-Wes" (JSC) Leningrad Region »"EuroChem UKK " (LLC) Perm Territory »"ISUZU SOLLERS" (LLC) Ulyanovsk Region "Interpak-M" (LLC) Chelyabinsk Region » "KAMAZ" (PJSC), "DAIMLER KAMAZ RUS" (LLC) Republic of Tatarstan »"Claas" (LLC) Krasnodar Territory »"Kovrov Electromechanical Plant" (OJSC) Vladimir Region >> "MAZDA SOLLERS Manufacturing Rus" (LLC) Primorye Territory »"Mercedes Benz RUS" (JSC) Moscow Region »"NovaMedica" (LLC) Kaluga Region » "Sanofi Russia" (JSC) Orel Region » "Transneft Siberia" (JSC) Tyumen Region >> "TTM" ((LLC) Tomsk Region >> "TULACHERMET-STAL" (LLC) Tula Region » "Hamilton Standard - Nauka" (CJSC) Tver Region » "OCTAPHARMA-PHARMIMEX" (LLC) Ryazan Region 10#11■ DATA ON SPICS SIGNED KEY INDICATORS 268,4 bln RUB total volume of investment P 106,6 bln RUB volume of tax contributions DISTRIBUTION BY ECONOMIC SECTORS (PCS.) 6 4 4 4 18 9815 08 number of jobs PHARMACEUTICS/MEDICINE MACHINE TOOL MANUFACTURING AUTOMOTIVE INDUSTRY CHEMICALS MACHINE BUILDING AGRICULTURE AND SPECIAL MACHINE BUILDING AIRCRAFT INDUSTRY METALLURGY/MATERIALS 3 2 1 1 11