Foreign Investment Into Russia’s Special Economic Zones

Tempo de leitura: 1 minuto

Knight Frank, the international real estate consultancy, has issued data showing that the total investment volume in Russia’s Special Economic Zones (SEZ) over the past decade amounted to 304.6 billion rubles. (US$4.14 billion).

SEZ are industrial and manufacturing parks, often located near strategic infrastructure such as ports and rail connections, and offer incentives for businesses, including foreign investors, to establish operations.  These come in the following guises:

No Duty On Imported Goods Into The SEZ

This allows the processing of imported component parts into the SEZ without having the immediate burden of incurring import duties or VAT. This allows a window to incorporate such items into a finished product which may incorporate other imported and Russian domestic items. An example could be in the shoe manufacturing industry, with rubber soles imported from Vietnam, canvas uppers from Armenia, leather from India, and metal components from Russia. These can then be manufactured into the finished item and either be sold onto the Russian market (when VAT and import duty on the component parts applies) or reexported to other markets. This tax burden delay helps with the production cash flow overheads.

Profits Tax And Other Tax Incentives 

These vary from SEZ to SEZ, however in Russian SEZs it is normal for businesses within SEZs to have a Profits tax rate of 2-5% (as opposed to the national 20% rate) for a period of typically 5 years although in certain industries it can be longer. This is obviously advantageous and helps businesses lower their tax burden and improve their available cash for further expansion and development. Tax reductions may also apply for VAT in addition to local taxes on property and land use rights and so on. Some SEZ offer lower individual income taxes to encourage the employment of personnel.

Lower Utilities Rates

Some SEZ also offer lower than normal business operating costs such as cheaper electricity and water use rates.

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