The Russian Arctic has become the world’s largest economic zone
On July 13 Vladimir Putin has signed a package of federal laws on the system of Arctic preferences. The package was prepared by the Ministry for Development of the Russian Far East and Arctic. It includes the Federal Law “On State Support for Entrepreneurial Activities in the Arctic Zone of the Russian Federation”, and related amendments to Part 2 of the Russian Tax Code, as well as amendments to certain legislative acts of the Russian Federation. The package was adopted by the State Duma on July 7 and approved by the Federation Council on July 8.
Due to the adoption of this package, the Russian Arctic is becoming the largest economic zone not only in Russia, but in the whole world. It is almost 5 million square kilometers that have a single set of preferences exceeding the best European and Asian ones.
The conditions for obtaining the status of the Arctic Zone resident and, accordingly, the access to the state support measures are the following: registration of a legal entity or an individual entrepreneur in the Arctic, planned implementation of a new investment project or launch of a new type of economic activity with capital investments of not less than ₽1 million, absence of taxes and fees exceeding 25% of the book value of the assets. In addition, the company should not be in the process of bankruptcy, liquidation or reorganization.
A zero rate of income tax will be applied for 10 years after the first profit (for all types of activities except mining) of the potential residents. Reduced rates of income, property, and land taxes credited to the regional budget are also introduced, as well as reduced rates up to 1% under the simplified taxation system. The specific parameters of such benefits will be set by the Arctic regions after the federal law package comes into force. It is also planned to reimburse a part of expenses on insurance premiums payment to state extra-budgetary funds up to the rate of 7.6% for all types of activities except mining.
The residents of the Arctic Zone will also have a right to receive a tax deduction from the Mining Resources Extraction Tax. It’s value will be defined by the amount of the investments, made in infrastructure, necessary for the development of a new solid minerals deposit (the degree of reserves depletion should not exceed 0.01% on January 1, 2021), as well as by investments in new enrichment and processing facilities. The laws provide for a VAT rate of 0% for icebreaking, sea transportation and transshipment services for export cargo.