The Ust-Luga Oil Joint Stock Co.
źIncreasing the capacity of liquid cargo complex in the Ust Luga Commercial Port╗
The LSR. Reinforced Concrete Joint Stock Co.
źDevelopment of new reinforced concrete production facilities for producing concrete products in the Leningrad Region╗
The Rosterminalugol Joint Stock Co.
"Increasing the capacity of coal terminal in the Ust Luga Commercial Port"
Investment attractiveness of the Russian Federation, which strategic priority is to develop the automotive industry. Investment rating
As part of this analysis, the Samara, Novgorod and Leningrad Regions have been reviewed. The automotive industry in these Russian Regions is included in the priority sectors, as enshrined in the Regional socio economic development Programs and their investment strategies.

According to the research conducted by the Expert rating agency, the investment rating of the Nizhny Novgorod and Samara Regions is 2B (medium potential, i.e. moderate risk). Those Regions are in the 8th and 9th places of the investment potential rank leaving considerably behind the Leningrad Region. The Leningrad Region Investment rating is 3A1 (reduced potential, i.e. minimal risk) taking the 27th place in its investment potential, while it is the Region with the lowest investment risk (1st place out of 83 among the Russian Federation Regions).

Russian Region investment potential in 2013 (EXPERT Rating Agency)

Potential Rank

Risk Rank,

2013

Region (Entity of the Federation)

All-Russian Potential Share, 2013 (%)

2013 Potential Share Changes to those in 2012

Investment Component Potential Ranks in 2013

2013

2012

Labor

Consumer

Industrial

Financial

Institutional

Innovational

Infrastructural

Natural-resourceful

Touristic

8

8

35

The Nizhny Novgorod Region

1.972

0.009

11

10

12

11

9

4

32

56

11

9

9

16

The Samara Region

1.932

0.007

6

9

11

9

10

11

17

47

15

27

27

1

The Leningrad Region

1.087

0.012

25

29

23

29

30

26

6

46

20

 The Rating Methodology

The investment attractiveness rating of Russian regions is based on the official information issued by the ROSSTAT Russian Statistical Agency and the statistical data of Federal agencies: the Ministry of Communications, Ministry of Finance, Ministry of Natural Resources, Federal Financial Markets Service and the Central Bank.

The investment attractiveness rating is estimated in two parameters: the investment potential and the investment risk. The potential indicates the Region’s proportion in the national market. The risk parameter indicates the Regional problem extent to an investor. The total potential consists of 9 subtotal parameters, namely: employment, financial, industrial, consuming, institutional, infrastructural, natural resource, touristic and innovational. The integrated risk consists of 6 particular risks, namely: financial, social, administrative, economic, environmental and criminal. The contribution of each particular risk or potential in the final indicator is evaluated on the basis of questioning the representatives of expert, investment and banking communities.

The statistical data as of January 1, 2013 have been used in the rating.

Comparison of state support measures of investment activity in tax benefits

The Investment Legislation of the Samara, Nizhny Novgorod and Leningrad Regions is considered in this analysis.

In all the Regions under consideration, the investors are granted such benefits as property tax and tax on profits of their organizations in terms of those payable to the Regional budget. When establishing/acquiring new objects’ fixed assets (not the reconstruction of the production facilities) the preferential tax rates in those Regions are the same.

The preferential tax period in the Samara and Leningrad Regions depends on the amount of investments and on the investment project payback period in the Nizhny Novgorod Region, but exceeding 5 years. The longest period of preferential tax treatment for the automotive industry (eight (8) years) may be granted in the Leningrad Region with total investment exceeding 3 billion rubles.

The procedure of obtaining benefits in all the Regions consists in addressing to the Regional State executive bodies for getting the investment project approval with the subsequent transfer of documents to tax authorities.


Comparison of State support measures of investment activity with regard to Russian Federation tax benefits

 

The Nizhny Novgorod Region

The Samara Region

The Leningrad Region

Laws

  • The Law of the Nizhny Novgorod Region on December 31, 2004 No.: 180-z "About State support of investment activity in the Nizhny Novgorod Region"
  • Resolution of Government of the Nizhny Novgorod Region on February 26, 2006 No.: 56 "On procedure and conditions of granting  priority status to investment projects, concluding investment agreements and monitoring their implementation”

 

  • The Law of the Samara Region No.: 19-GD of March 16, 2006 "On investments and investment activity state support in the Samara Region"
  • The Law of the Samara Region of November  25, 2003, No.: 98-GD "On the organizations’ property tax in the Samara Region"
  • The Law of the Samara Region as of November 7, 2005 No.: 187-DG "On the reduced profits taxes  paid to the Regional budget"
  • The Order of the  Samara Region No.: 6 of March 30, 2007 "On approving business plans of investment projects of the organizations  claiming to obtain State support in the form of preferential tax treatment in the Samara Region"
  • The Law of the Leningrad Region No.:113-oz of December 29, 2012 "On State support of the  organizations engaged in investment activity in the Leningrad Region, and Amendments to Certain Legislative Acts of the Leningrad Region"
  • The Law of the Leningrad Region No: 98-oz of November 25, 2003 "On the Property Tax of Organizations"
  • Resolution of the Government of the Leningrad Region No: 129  of May 6, 2013 "Approving an exemplary form of the contract for granting the investment activity State support in the Leningrad Region”

Requirements to Investors / Investment Projects

The Project to be  admitted as prior is:

  • More than 100 million rubles;
  • Implemented in one of the subsidized regions of the Nizhny Novgorod Region;
  • Conforms with industry priorities.

No lower investment volume standard  is set.

Investment Memorandums are concluded on the basis of investment projects with more than 650 Mln. Ruble volumes. The Investment Memorandum is concluded for the investment project’s payback period not exceeding seven years.

The investing volume shall be 300 Million Rubles at least for three consecutive calendar years with the exception of Lodeynoye Pole, Podporozhye and Boksitogorsk areas, which volume of investments is 50 Million Rubles.

 

An investor shall carry out the activities specified in Law No.: 113-oz (closed list). The revenues of these economic activities shall exceed 70 percent of company’s total revenues.

The exemption on property tax

  • Zero percent tax rate on new fixed assets;
  • 0.55-1.65 % tax rate at modernization, reconstruction of fixed assets, depending on object’s   appreciation (from 25% to 100%).

Fixed assets shall get privileges on the quarterly list approved by the Investment Policy Ministry of the Nizhny Novgorod Region.

The organizations involved in investment activity are tax- exempt.

The exemption is valid from the month, when the property is set on accounting as a fixed asset.

The companies using the State support according to the Regional Law No.: 113-oz are tax-exempt with regard to the property (established, acquired by implementing the investments) and/or with regard to the property initial value in case of its reconstruction through investment implementation.

The exemption is valid from the first day of the quarter’s first month in which the State support provision contract is concluded.

Tax exemption on profits

Tax exemption 2.0%-4.5%  in the Russian Federation budget.

Depending on the proceeds from the priority investment project in total revenue (from 2% to over 81%).

The tax rate in the Russian Federation budget is reduced from 18% to 13.5%.

This rate is applied to goods sale profits (rendering works, services) carrying out the investment project since the beginning of the reporting period, when the profit of the investment project implementation is obtained and determined according to tax records.

The tax rate in the Russian Federation budget is reduced from 18% to 13.5%.

This rate is applied to the Company’s entire profit.

Tax benefit period

 

The payback period, but not more than five years from the date determined by the investment agreement, but not before the entry into force of the Law of the Nizhny Novgorod Region on approving the agreement.

The period of executing infrastructure projects can be increased, but not more than in two years.

When the volume of investments is:

up to 100 Mln. Rubles, it is two (2) years;

from 100 to 500 Mln. Rubles – four (4) years

500 Mln. Rubles and more – five (5) years.

The benefit application period is increased in two years in case of carrying the project out in monoprofile urban districts of the Samara Region.

When the volume of investments is:

From 300 to 500 Mln. Rubles, it is four (4) years;

 From 500 to 3000 Mln. Rubles, it is five  (5) years;

More than 3000 Mln. Rubles (except producing machines and equipment, cars), it is six (6) years;

 More than 3000 Mln. Rubles (except producing machines and equipment, cars), it is eight (8) years.

Procedure of  obtaining tax benefits

Based on the Resolution of the Governor’s Investment Council the ORDER is issued on recognizing the priority of the investment project for the Nizhny Novgorod Region.

The Investment agreement shall be approved by the Federal Tax Service Office. Then, the Project (application) and the Investment agreement shall be considered by the Legislative Assembly of the Nizhny Novgorod Region; the corresponding Law is adopted by the Legislative Body of the Nizhny Novgorod Region. The Investment agreement granting the tax incentive state support shall be approved by the Resolution of the Nizhny Novgorod Region.

The “Single Reception Office” has been established for processing documents starting from December 2013. It is also used for obtaining the status of priority investment project in the Nizhny Novgorod Region

 

 

The investor shall provide the authorized body of the Government of the Leningrad Region with the  package of documents specified in 113-oz.

The contract is signed by the Governor of the Leningrad Region on behalf of the Leningrad Region within not more than 35 working days after submission of the documents

The Tax Incentive Application Form

  • A written application;
  • The project description (technical-economic, financial and legal basis of  investment activity and description of practical actions);
  • Quarterly investment schedule with corresponding input objects;
  • Financial statements for the previous reporting  period;
  • Finally, an independent auditor report on the  presented annual financial statements;
  • Tax authority statement about absence of debts.

The following is to be submitted to the Ministry of Economic Development, Investments and Trade of the  Samara Region:

  • Application on coordinating  the business plan;
  • Business plan on paper and on electronic media with open calculation of the investment project figures;
  • List (register) of the objects’ fixed assets established and/or acquired in  implementing the project;
  • Copies of the documents confirming investment costs and initial value formation;
  • Copies of licenses.

The following documents for concluding a contract  shall be submitted to the public body authorized by the Government of the Leningrad Region:

  • Business plan of the investment project;
  • Total volume investment calculation;
  • "Circulating balance sheet on the account 01" and the "Account Card 01";
  • Draft of the Project;
  • The Company’s commitment letter proving the implementation of the Regional Law requirements.

Reports to be submitted to the authorized state power body

The following documents are to be provided quarterly:

  • A progress report;
  • Property inventories;
  • Information on paying taxes by a taxpayer;
  • Statistical reports;
  • An explanatory memorandum.

No information

The following documents shall be filed annually:

  • A balance sheet copy;
  •  A tax return copy for the property tax and income tax return for the profits tax;
  • Information about the product sales revenue;
  • Information about the tax benefit amounts;
  • Information about the amount of accrued and paid taxes and other obligatory payments.