May 04 2016
The conclusion of special investment contracts was made possible in 2015 by the Federal Law on Industrial Policy. Special investment contracts can form the basis of investment incentives to promote industrial development.
While foreign investors can conclude special investment contracts, contracts will be primarily concluded with foreign investors that manufacture products not manufactured in Russia. Whether such products are already being manufactured locally will be determined in accordance with Resolution 719 on the Criteria for Classifying Industrial Products as Having No Equivalent Manufactured in the Russian Federation, dated July 17 2015. The conclusion of special investment contracts with respect to other products is not excluded.
Several foreign companies and the responsible state authorities – especially the Ministry of Industry and Trade – have already negotiated the conclusion of special investment contracts. In these negotiations, the authorities have been competent and flexible interlocutors.
In a special investment contract an investor that is committed to establishing, modernising or operating a production facility in Russia will be granted certain benefits (eg, tax and customs benefits) by the Russian Federation or the federal states of the Russian Federation. The affected municipality may also be included in the contract.
According to Resolution 708 on Special Investment Contracts for Selected Industries, dated July 16 2015, the minimum investment for which appropriate documentary evidence (eg, a loan agreement) must be provided is Rb750 million (approximately €10 million).
Special investment contracts can be concluded for almost all production sectors, excluding the production of alcohol-containing foods and alcohol and tobacco products. The term of a special investment contract may not exceed 10 years.
The following guarantees are given to the investor for the term of a special investment contract:
The investor must apply to the responsible authority for the conclusion of a special investment contract (the Ministry of Industry and Trade, if the contract is being concluded with the Russian Federation). The application must be accompanied by documents evidencing the planned investment amount, a list of requested support and a list of the investor's liabilities. In addition, it must include detailed information on the planned production activities, including:
If the investor intends to manufacture products that have no equivalent in the Russian Federation (as will frequently be the case with foreign investors), the investor must prove this with appropriate documentation.
Within 30 business days, the Ministry of Industry and Trade will send the application with a preliminary opinion to an interdepartmental commission to review whether the conclusion of a special investment contract is possible. The interdepartmental commission will make a decision within a further 60 business days and inform the responsible authority accordingly. If the decision is positive, a draft of the special investment contract will be attached to the decision. Within 10 business days of receiving the draft, the investor must sign the contract, refuse to sign or suggest changes. Any amendments must be discussed within a further 10 business days. If the investor does not respond to the decision within 20 business days, refusal to sign will be assumed.(1)
Resolution 708 provides the basis for the content of a special investment contract. The sample contract provides for the following provisions:
The sample contract contains a framework that must be completed with the details of the investor's planned project. Thus, there is considerable scope to design each individual special investment contract.
The willingness of the responsible state authorities to grant incentives depend primarily on the extent of their interest in the investment project. If the interest is great, the state authority can grant extensive tax and customs relief and, potentially, necessary legislative amendments. The following obligations regarding public tendering procedures are also possible:
Even penalties imposed on the public contracting party may be agreed in the event of breaches of duty. However, the amount of the penalties cannot exceed the total amount of the investor's expenditure caused by the loss of public incentives.
For further information on this topic please contact Thomas Mundry or Stefan W Weber at Noerr by telephone (+7 495 799 56 96) or email (firstname.lastname@example.org or email@example.com). The Noerr website can be accessed at www.noerr.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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