Doing Business in Russia

14 Doing Business in Russia entities or individual entrepreneurs which conclude an agreement to carry out their activities within the SEZ and are registered with the SEZ's authorities. The establishment and operation of SEZS in the Russian Federation is regulated by an agreement between the governments of Russia, Belarus and Kazakhstan', by Federal Law No. 116- FZ2, and by Federal laws that regulate particular SEZs (if any). Issues related to the establishment, operation and abolishment of free economic zones are referred to in national legislation, i.e. law No. 116-FZ, which provides for four types of SEZ: A technological implementation SEZ; An industrial and innovation SEZ; - A tourism and recreation SEZ; - A ports and logistics SEZ. The intended lifespan of a SEZ is 49 years. According to law No. 116-FZ, residents within a SEZ only have the right to engage in the activities specifically prescribed for that type of SEZ. Law No. 116-FZ contains an exhaustive list of the types of activities that can be carried out in each type of SEZ. Apart from the abovementioned SEZs, there are some combined SEZs in the Kaliningrad region (effective until 1 April 2031) and the Magadan region (effective until 31 December 2025). The residents of these SEZs have been allowed by special laws to conduct various types of activities. There are currently 28 SEZs operating in the Russian Federation. To become resident in a SEZ, applicants should submit an application and agree to comply with the requirements of their desired SEZ. The main requirements for candidates to take up residence in a SEZ are the following: The candidate should register on the specified territory of the SEZ. The business plan and the investment project should provide for a certain volume of investment to be made within a specified period (the actual investment amounts are not necessary on the date an application is submitted). The candidate is prohibited from registering branches or representative offices outside of the SEZ, unless the SEZ is in the Kaliningrad or Magadan regions. However, even in these regions, the candidate's main activities must be performed on the territory of the SEZ. Current legislation does not contain restrictions regarding the business reputation or credit history of the applicants, or limitations on sources of capital (i.e. companies with both Russian and foreign capital may become SEZ residents). Residents of all SEZs established in the Russian Federation enjoy customs incentives deriving from customs rules that designate SEZs as 'free customs zones'. This is regulated by an agreement that requires all activities to be performed within the SEZ and guarantees that the goods imported into the SEZ are exempt from import customs duties and import VAT, providing that certain requirements are met. SEZ residents also enjoy the following tax concessions: - Profits tax rate reductions and favourable treatment of certain expenses for profits tax purposes; Property tax and land tax exemptions during the concession period. Law No. 116-FZ contains a 'grandfather clause' under which the state guarantees that, should tax legislation be amended so that it has a negative effect on the taxpayers' positions, the amendments will not be applied to the residents of SEZs who took up residence in accordance with law No. 116-FZ. In general this guarantee applies for the period that an agreement to carry out activities within a SEZ is in force. Most Russian regions have adopted laws that provide tax concessions for certain investment activities. Novosibirsk 1 "On issues related to free (special) economic zones of the customs territory of the Customs Union and the customs procedure for the free customs zone" of 18 June 2010 2 Federal Law No. 116-FZ "On special economic zones in the Russian Federation" of 22 July 2005 KPMG © 2016 KPMG. All rights reserved.

View entire presentation