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The Russian Arctic Becomes the World's Largest Economic Zone

On 13 July 2020, Russian President Vladimir Putin signed the array of federal laws on the system of preferences in the Arctic.

14 2020

The array prepared by the Ministry for the Development of the Far East and the Arctic includes the Federal Law 'On State Support of Entrepreneurship in the Arctic Zone of the Russian Federation', amendments to Part Two of the Tax Code of the Russian Federation related to the adoption thereof and certain legislative acts of the Russian Federation. The array was adopted by the State Duma of the Russian Federation on 7 July and approved by the Federation Council on 8 July.

Thanks to the adoption of the array of laws on the set of preferences, the Russian Arctic is becoming the largest economic zone in Russia and in the world with an area of almost 5 million square kilometres, with a single set of preferences that exceeds the best European and Asian ones.

Applications for obtaining the status of the Arctic zone resident will be accepted from 28 August, since the laws will enter into force 45 days after signing by the President and official publication. Documents can be submitted through the user account on the investment portal arctic-russia.ru. Entities eligible to apply for resident status in the Arctic zone are: legal entities (sole entrepreneurs) registered in the Arctic and planning to implement a new investment project or launch a new line of business with capital investments of at least RUB 1 million. Besides, the company should not have tax and fee arrears of more than 25% of the carrying amount of assets, the organisation should not be at the stage of bankruptcy, liquidation or reconstruction.

Read more Russian Federation Council Approves an Array of Laws on the Preference System in the Arctic

According to the array of laws, potential residents will have a zero rate of income tax payable to the federal budget for 10 years after receiving the first profit (for all types of business, except for mining). The laws also introduce reduced, up to 0%, rates of taxes on profit, property, and land, credited to the regional budget, and reduction of rates up to 1% under the simplified taxation system (specific parameters of such benefits will be set by the Arctic regions after the array of federal laws comes into force). The laws also provide for the reimbursement of part of the premium payments to state extra-budgetary funds up to a final rate of 7.6% for all types of business, except for mining.

Residents of the Arctic zone will also be granted a tax deduction from the mineral extraction tax in the number of investments made in the infrastructure necessary for the development of a new solid mineral deposit (the degree of depletion of reserves should not exceed 0.01% as of 1 January 2021), as well as investments in new enrichment and processing facilities. The laws provide for the setting of a 0% VAT rate with respect to icebreaking assistance, shipping and transhipment of export-oriented goods.

Read more Law on incentives for investors in the Arctic adopted

The laws allowed to finalise the land borders of the Arctic zone: it includes all the territories that, according to experts of the Russian Academy of Sciences, corresponded to the Arctic status. Among the newly included are: Kostomuksha town district, Segezhsky and Kalevalsky national municipal districts of the Republic of Karelia; Inta and Usinsk town districts and the Ust-Tsilemsky municipal district of the Republic of Komi; villages of Surinda, Tura, Nidym, Uchami, Tutonchany, Essei, Chirinda, Ekonda, Kislokan, Yukta of the Evenkiysky municipal district of the Krasnoyarsk Territory; Leshukonsky and Pinezhsky municipal districts of the Arkhangelsk Oblast.

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