Benefits for investors in the Arctic: What's New?
Any entrepreneur registered in the Arctic who is ready to implement a new investment project and invest at least RUB 1 million will be able to obtain resident status.25 september 2020
According to TASS, the State Duma passed a package of bills prepared by the Ministry for the Development of the Russian East, providing for incentives for investors who plan to implement new projects in the Arctic territories.
According to the documents, any entrepreneur registered in the Arctic who is ready to implement a new investment project and invest at least RUB 1 million will be able to obtain resident status, which involves a number of tax benefits and non-tax preferences. An investment project is deemed new if, on the date of sending the application, the volume of capital investments made during the implementation of the project does not exceed 25% of the total capital investments provided for by the business plan of this project.
It is envisaged that the management of the Arctic zone is carried out by the state commission for the development of the Arctic, the composition of which is determined by the Government of the Russian Federation, and by the authorised federal agency (Ministry for the Development of the Far East) and the management company (JSC Far East Development Corporation). The state commission shall monitor the economic processes in the Arctic zone, review and take measures to develop the constituent entities of the Russian Federation and municipalities in the Arctic zone and improve the investment and business climate in these areas.
Criteria for selecting residents of the Arctic zone are set. One of them will be the amount of capital investment, and a list of costs that will be taken into account when determining it. In particular, the costs of new construction, technical upgrade, upgrades of fixed assets, building restoration, purchase of machinery and equipment will be taken into account. The features of carrying out the state environmental impact assessment in relation to capital construction projects, the construction and reconstruction of which is supposed to be carried out in the Arctic zone, are established.Read more Law on incentives for investors in the Arctic adopted
There are special deadlines for the provision of municipal services in the field of urban development activities, as well as special deadlines for certain administrative procedures for the provision of municipal services in the field of urban development: to issue an urban development plan for a land plot located in the Arctic zone, a deadline of 10 business days is set. The Government of the Russian Federation is empowered to approve the state support programme for the traditional economic activities of indigenous minorities carried out in the Arctic zone.
According to the financial explanation of the basic law of the package, the document 'will create conditions for attracting private investments in the Arctic zone of the Russian Federation in the amount of at least RUB 6.7 trillion by 2030 and creating 28 thousand new jobs in the indicated period'. The basic law of the package will enter into force 45 days after publication.
The bill, devoted to tax benefits, provides for a zero VAT rate for the sale of goods placed under the customs procedure of the free customs zone for residents of the Arctic zone: it sets a list of documents to be submitted to the tax authorities to confirm the validity of the application of such a rate.
Also, the draft supplements the list of goods, in the sale of which VAT is taxed at a tax rate of 0%, including shipping (transportation) by sea of goods from the point of departure on the territory of the Russian Federation to the point of unloading or transhipment of the goods to ships for their further export from the Russian Federation, as well as work (services) on icebreaking assistance for sea vessels (this includes ensuring the safety of navigation in the waters of the Northern Sea Route).Read more Investors in the Russian Arctic zone offered a broad package of tax benefits
As for income tax, a separate category of taxpayers is introduced here — a resident of the Arctic zone, which must meet certain requirements in order to apply reduced tax rates on corporate income tax. It is envisaged to establish a zero rate on corporate income tax in respect of crediting to the federal budget, provided that the law of a constituent entity of the Russian Federation sets a reduced rate on corporate income tax in terms of crediting to the budget of a constituent entity of the Russian Federation. These corporate income tax rates will be applied for 10 tax periods starting from the tax period in which, in accordance with the tax accounting data, the first profit was received from activities carried out in the performance of an operation agreement, subject to a number of conditions.
A taxpayer who has received the status of a resident of the Russian Arctic zone can reduce the amount of mineral extraction tax by the amount of the tax deduction, determined by a special formula. The tax deduction will be applied for new subsoil plots. A new subsoil block will be considered to be a section located completely within the Arctic zone of the Russian Federation, in which the degree of depletion of a particular mineral reserve is less than or equal to 0.001 in accordance with the data of the state register of mineral reserves as of 1 January 2021, or the reserves of such a mineral are absent in the state register of mineral reserves as of the corresponding date. A subsoil plot shall be deemed to be a new subsoil plot and the tax deduction shall be applied in respect of each type of extracted minerals separately.
The tax deduction shall apply from 1 January 2021 through 31 December 2032.
The amount of tax deduction shall be determined as the amount of expenses actually paid by the taxpayer starting on 1 January 2021 to the last day of the tax period (inclusive), in which the tax deduction is applied for the acquisition, construction, manufacture, delivery of fixed assets, and bringing such facilities to a state in which they are suitable for use, as well as expenses under utility connection agreements, investment contracts and other similar agreements concluded solely with respect to fixed assets with organisations involved in the construction and operation of such facilities. The amount of tax deduction may not exceed 50% of the amount of tax payable in the tax period in which the tax deduction is applied.
Residents of the Arctic zone
According to the amendments, the Arctic zone also means lands and islands that may be discovered in the future, are not territories of foreign states, are located in the Arctic Ocean north of the coast of the Russian Federation to the North Pole within the meridian 32 degrees 4 minutes 35 seconds east of Greenwich, passing along the east side of Vaida Bay through the triangulation pillar on Cape Kekursky, and the meridian 168 degrees 49 minutes 30 seconds west of Greenwich, passing in the middle of the strait separating the Ratmanov Island and Krusenstern Island from the group of Diomede Islands in the Bering Strait.
In accordance with budget laws, pursuant to the terms and procedures determined by the Government of the Russian Federation, residents of the Arctic zone shall be reimbursed for a part of the premium payments to state extra-budgetary funds. In accordance with budget laws, the Government of the Russian Federation shall establish other measures to support residents of the Arctic zone, including the subsidies for the reimbursement of the interest rate on loans raised for the purpose of carrying out activities in accordance with the agreement on investment activities, as well as the provision of subsidies for the reimbursement of expenses for the payment of coupon on bonds issued as part of the implementation of investment projects provided for by the agreement on investment activities in the Arctic zone.