Russian Manufacturers to Enter “Special Investment Contracts” with Government

Russia’s government has finalized the main parameters of a new version of ‘special investment contracts’ at a meeting attended by Finance Minister Anton Siluanov, Deputy Prime Minister Dmitry Kozak and Presidential Aide Andrei Belousov on Monday, June 25, a source participating in the meeting told TASS.

The new format stipulates that producers of prime goods for the Russian market will be able to enter into ‘special investment contracts’.

“The government had a meeting on June 25, where a position was staked out on key parameters of ‘special investment contracts’. The position that dominated was promoted earlier by Deputy Prime Minister Dmitry Kozak, and envisions ‘special investment contracts’ allowed only on public tender results regarding projects producing unique goods in Russia, as well as constructing and upgrading manufacturers of high-tech products,” the source said.

A representative of Deputy PM Kozak confirmed that the meeting had been held.

The mechanism of ‘special investment contracts’ developed by the Industry and Trade Ministry together with the Economic Development Ministry primarily for industrial projects, was introduced in 2015. Local or foreign companies, as well as individual entrepreneurs, can enter into such contracts with an authorized executive authority (Ministry of Industry and Trade, regional government).

In exchange for the obligation to invest in a particular industrial project, they can particularly receive tax preferences in the form of a full exemption from the property tax or a reduction in the rate of income tax to 0% (it reaches 20% by default), as well as receive guarantees of non-taxation load for the contract period.

However, in a move to ‘restart’ Russia’s investment cycle, the government has decided to expand the number of sectors covered by the mechanism. Vedomosti business daily wrote that the Finance Ministry and the Economic Development Ministry have agreed an option envisioning state subsidies provided for investors using the ‘special investment contracts’ instrument, totaling up to 50% of their capital expenditures.

Both ministries share the view that preferences should be extended to producers of goods unique in Russia, and those making products going for export and yielding at least 15% of the return.