24 May 2016

    Russian President Vladimir Putin has approved the law “On Amending Parts One and Two of the Russian Tax Code”, introducing new tax breaks for investors in Russia’s Far East.

    In the words of Head of the Ministry for the Development of the Russian Far East Alexander Galushka, “a fundamentally new model is being introduced: the investor receives a tax break following a pre-alert procedure: after achieving a certain level of investment in a project, the investor can benefit from a tax break following notification. No need to prove anything for public officials, to be entered on to some registers or sign any agreements. You invest your money in Russia’s Far East – and you are eligible for preferential taxation.”

    “If any investor puts RUB 50 million over three years into some projects in Russia’s Far East, or RUB 500 million over five years, it will enjoy income tax breaks and preferential taxation in the extraction of mineral resources for ten years,” explained Minister for the Development of the Russian Far East Alexander Galushka. Investments made since 1 January 2013 will be taken into account.

    For 10 years following receipt of the first profits from an investment project, the entrepreneur does not pay the profit tax part going to the federal budget – 2%. The regional part of the profit tax is fixed by Russia’s Far East authorities for the first 5 years. It may range from 0% to 10% for the next 5 years, but will not be less than 10% of the rate credited to the Russian Region’s budget (18%).

    Mineral Extraction Tax (MET) breaks are calculated as follows: for the first two years, the investor is fully exempted from MET, the preferential taxation regime being effective for 10 years. During this time, the tax break amount goes down by 20% every 2 years.

    Any production or manufacturing firm, apart from companies producing excisable goods (with the notable exception of car and motorcycle manufacturers), as well as oil and gas companies, may benefit from tax breaks in Russia’s Far East.

    Profit tax breaks will be available starting on 1 January 2017, while MET tax breaks will be available already starting on 1 July 2016. These terms will apply until 1 January 2029.