On July 22, 2005, the Russian federal government adopted the law "On Special Economic Zones in the Russian Federation" (No. 116-FZ) to provide procedures for the establishment and operation of special economic zones in Russia.
Along with this law, special economic zones are regulated by a range of legislative acts including international agreements of the Russian Federation. Primary acts include:
- Treaty between the Customs Union member countries within the EurAsEC regarding free (special) economic zones in the customs territory of the Customs Union and customs procedure of the free customs zone (Saint Petersburg, June 18, 2010)
- Order of the Ministry of Economic Development and Trade of the Russian Federation No. 132 dated April 23, 2007 "On Approval of the Administrative Procedure of the Federal Agency for Management of Special Economic Zones on Fulfillment of a Public Function "Maintenance of register of special economic zone residents"
- Customs Code of the Customs Union
- Tax Code of the Russian Federation
Under these various laws, acts, and treaties, the following types of special economic zones (SEZ) are available in the Russian Federation:
- Industrial and production zones
- Technology and innovation zones
- Tourist and recreational zones
- Port zones
Currently, the following SEZ have been already established and operate efficiently:
- A technology and innovation SEZ "DUBNA" (Moscow region). The main profiles are information technologies, nuclear, physical and nanotechnologies, bio- and medical technologies, composite materials, and design of complex technical systems.
- A technology and innovation SEZ "Saint Petersburg." The main profiles are information technologies and communications, pharmaceutics and medical technologies, energy efficiency, and precision instruments industry.
- A technology and innovation SEZ "Zelenograd" (Moscow). The main profiles are microelectronics, energy saving technologies, biotechnologies, information and communication technologies, laser and plasma technologies.
- A technology and innovation SEZ "Innopolis" (Kazan). The main profiles are information and communication technologies, electronic technologies, nanotechnologies, biotechnologies, and medical technologies.
- A technology and innovation SEZ "Tomsk" (Tomsk). The main profiles are information technologies and electronics, nanotechnologies and new materials, medicine and biotechnologies, and resource-saving technologies.
In addition to these, there are many more SEZ available in Russia.
Benefits of a Special Economic Zone
SEZ residents are provided with different benefits in payment of customs fees and duties, taxes, insurance premiums, and lease payments. Most SEZ residents are exempt from income tax, property tax, and land tax for a certain period (five years or eight years, depending on the tax type and SEZ), and upon expiration of this period, for example, an income tax rate is much less than a usual rate gradually increasing every 5-6 years, but still remaining less than a usual rate.
Both Russian and foreign companies may be SEZ residents.
SEZ activity is controlled and managed by specially established management companies.
How to Become a Special Economic Zone Resident
Foreign companies may become SEZ residents by establishing a subsidiary legal entity in the constituent territory (municipal entity) of the Russian Federation where a SEZ has been established and operates. Besides establishment of a legal entity, it is also necessary to prepare and submit to the management company an application for obtaining a status of the SEZ resident, a business plan, and a set of documents.
A company will then have to defend its investment project first in the Supervisory Council of SEZ and later in the Expert Council. Following successful completion of these stages, a three-party agreement for carrying on business in the SEZ territory is reached between the applicant company, the Ministry of Economic Development and Trade of the Russian Federation, and the relative management company.
Consult Jus Privatum for Assistance With Special Economic Zones
The Russian business attorneys at Jus Privatum can help foreign companies take advantage of the benefits offered by special economic zones is Russia. Contact us today to find out how we may be of assistance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.