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Russian Federation Corporate - Tax credits and incentives

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At present, there are several types of incentives in Russia:

  • Regional incentives granted by regional or local authorities with respect to taxes paid to their budgets.
  • Special tax regimes in special economic zones (SEZs).
  • Regional investment projects and special investment contracts.
  • Advanced Development Zones (ADZs).
  • The free port of Vladivostok.
  • Incentives related to certain activities (e.g. R&D and information technology [IT] related activities).
  • Incentives related to specific projects (e.g. Skolkovo, 2018 FIFA World Cup).

The incentives are briefly described below.

Also note that Russian tax law provides for special tax regimes to support small and medium-sized enterprises (SMEs). These include unified and simplified tax regimes, as well as a unified agricultural tax.

Regional incentives

Many industrial regions of Russia offer numerous tax and non-tax incentives and benefits to investors.

Regional incentives in the form of reduced tax rates (primarily the given region’s portion of CIT, property tax, and transport tax) are granted to certain classes of taxpayers, typically large investors or entities operating in specific industries. The reduced regional rates introduced before 1 January 2018 will apply until the date of their expiry but not later than 1 January 2023. Local land tax incentives are frequently available for such investors as well. The size of an entry investment is usually in the range of around RUB 50 million to RUB 150 million. Some regions require a lesser amount, and some do not require any minimal amount at all (it is subject to negotiation).

There are also several notable non-tax incentives, including the allocation of budget subsidies, partial compensation of capital expenditures, provision of guarantees to banks, simplified access to infrastructure facilities, lower rental charges, and administrative and legal support, among others.

Special economic zones (SEZs)

The following types of SEZs have been established in Russia:

  • Industrial zones.
  • Technical research and implementation zones for scientific projects.
  • Tourism and recreation zones for the development and effective use of Russia’s wealth of tourist attractions.
  • Port zones.

The minimum amount of investment to be eligible for such incentives are:

  • RUB 120 million. The investment of RUB 40 million should be made within the first three years from the date of obtaining resident status for residents of industrial zones.
  • RUB 400 million within three years from the date of obtaining resident status in a port zone in cases of port facilities construction (RUB 120 million in case of reconstruction).

Moreover, most regions provide their own incentives with respect to CIT and transport tax.

In addition, reduced social contribution rates are available for residents of industrial zones if they are engaged in R&D.

Residents of SEZs may also enjoy free customs zones.

Advanced Development Zones (ADZs)

ADZs have been initially established to develop the Russian Far East. Currently, ADZs are expanded to some other Russian regions such as ADZs in Republic Komi, Smolensk region, etc. ADZs offer special terms for companies operating in various industries (e.g. agriculture, textiles, chemicals, pharmaceuticals, furniture, telecommunications, education, science and technology, etc.), including CIT and property tax incentives, free customs zones, project financing, and simplified rules for hiring foreign employees. In particular, residents of ADZs are provided with the following tax incentives:

  • Zero rate on the federal portion of CIT for a five-year period.
  • Reduced regional portion of CIT (not more than 5% during the first five years of profitable sales and at least 10% during the subsequent five years). Specific rates are established by regional law.
  • Reduced social contributions (7.6% instead of the standard 30%) during a ten-year period.

Free port Vladivostok

Residents of the port enjoy the following tax incentives:

  • Zero rate on the federal portion of CIT for a five-year period.
  • Reduced regional portion of CIT (not more than 5% during the first five years of profitable sales and at least 10% during the subsequent five years). Specific rates are established by regional law.
  • Reduced social contributions (7.6% instead of the standard 30%) during a ten-year period.

Activities incentives

The following 'activities' incentives are available to taxpayers in Russia:

  • Reduced CIT rate for IT companies in several regions.
  • Certain R&D services are exempt from VAT.
  • Certain R&D service-related expenses, as listed by the government, are deductible using a coefficient of 1.5.
  • Fixed assets used in science and technology may be depreciated with an accelerated coefficient of up to 3.
  • Reduced rates for contribution payments to social funds are established for IT companies.

Special project incentives

Participants in the Skolkovo Innovation Centre enjoy a number of benefits, the main ones of which are: exemption from CIT and property tax, as well as from VAT liability, and reduced rates for mandatory social fund contributions.

The same approach is applicable to FIFA and its contractors.

Regional investment projects and special investment contracts

There are two types of contracts that may be concluded directly with the Russian Federation: a special investment contract and a regional investment project. Investors who have concluded such contracts may enjoy a reduced CIT rate and a number of non-tax incentives, including privileges regarding rental payment for land plots, 'grandfather' clauses, etc.

Foreign tax credit

Credit relief is available for foreign taxes paid up to the amount of the Russian tax liability that would have been due on the same amount under Russian rules.

Last Reviewed - 25 January 2019

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