TAX BREAKS IN THE RUSSIAN FAR EAST

Tax breaks in the Russian Far East are introduced on October 02, 2013 On September 30, 2013, Russian President Vladimir Putin signed a law (Federal Law No. 267-FZ of September 30, 2013) that will provide tax breaks for investment projects in a number of Far Eastern and Siberian regions. The law came in force on January 01, 2014.

What territory does the tax breaks cover?

  • The new law allows investors in the 13 eligible regions to use a lower rate for corporate Profit Tax (the specific rates of taxes payable to a regional budget will be set by the laws of the relevant Russian regions). In contrast to the regular 20% rate, the beneficial tax rate may equal 0% during the first five years from the date the first income from sales of goods under an investment project is generated and then 10% during the following five-year period.

  • In addition, reduction ratios have been introduced with respect to the Mineral Resources Extraction Tax (Royalty) rate for participants of regional investment projects pertaining to a whole range of mineral resources, including gold, copper, etc. Such reduction ratios will apply to the rate beginning from the first year of production for the following timeframes: 0,0 for the first two years; then 0.2 until the end of the fourth year; then 0.4 until the end of the sixth year; then 0.6 until the end of the eighth year and 0.8 until the end of the tenth year.

  • The bill calls for minimum capital investment volumes and investment completion dates in accordance with a given investment project: US$ 1,5 million over a maximum period of three years, OR; US $15 million over a maximum period of five years.

LTI – local tax incentives, providing the taxpayer status with profit tax and mineral extraction tax (royalty) incentives according to article 25.9 of the RF Tax Code. Preferential tax rates for the LTI-status projects:

Tax Rates (PDF)

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