International companies are expanding the entrance – Newspaper Kommersant No. 60 (7505) dated 04/07/2023

A draft law has been submitted to the State Duma that allows companies moving to special administrative regions (SAR) to make the necessary investments in order to receive tax benefits not only in infrastructure facilities, but also in movable property or in the form of a cash contribution. In general, the project fine-tunes the CAP mechanism, providing for a more flexible approach to the conditions for the “actual presence” of international holding companies. Experts believe that such changes will save holding companies from the need to engage in construction: such activities are uncharacteristic for them, and therefore difficult.

A group of senators submitted to the State Duma a bill that once again simplifies the conditions for the “moving” of international holding companies to “Russian offshores” – special administrative districts on the Russky Islands in Primorye and Oktyabrsky Islands in Kaliningrad, created to return capital to the Russian Federation and protect them from sanctions (now there are about 160 companies). The initiative, according to the explanatory note, is aimed at addressing “problematic issues identified during the analysis of law enforcement practice” – and the government supported it. In fact, the project implements the plans of the Ministry of Finance to fine-tune the SAR regime – softening the approach to the requirements for the “presence” of companies in the SAR, necessary to receive benefits introduced in 2022 against the backdrop of EU statements about the possibility of including the Russian Federation in the black list of tax jurisdictions (which ultimately and happened – see “Kommersant” dated February 14). We are talking about investment requirements of at least 300 million rubles. for three years in the infrastructure of the SAR, office ownership from 50 sq. m, as well as at least 15 employees.

The key novelty is the variability in the ways of investing the funds necessary to receive benefits.

In addition to the construction and reconstruction of infrastructure, the project allows residents to transfer movable property to the region or municipality where the ATS is located, for example, cars (except cars), equipment, tools for using infrastructure facilities. Another option is a cash contribution to support the construction of infrastructure – as previously reported in the Ministry of Finance, we can talk about funds created by the regions. In order to avoid disagreements, a procedure for agreeing on the chosen form of investment is introduced: if no objections are received from the region within a month, then the proposal of the MHC is considered approved.

The approach to the requirements of “actual presence” for the application of benefits is somewhat softened – the presence of an office and staff will be assessed not at the time of registration of a resident in the SAR, but at the date of receipt of income during the first tax period. It is very difficult to fulfill these conditions right away – it is assumed that the new approach will give more time to find workers and premises. At the same time, the possibility of using offices outside the SAR, but within Kaliningrad and Vladivostok, is extended for two years – until 2028.

As Galina Naumenko, tax partner of Technology of Trust, notes, “the project introduces important changes that eliminate the difficulties faced by companies that have come to the SAR” – for example, the right to make a cash contribution to an organization that will develop infrastructure projects will “remove residents from the obligation to engage in construction, that is, activities that are unusual for holdings in general. Kept partner Alexander Tokarev also notes this: this will save holding companies, which are targeted by benefits, but for which this activity “may be quite a complicated matter,” from issues related to construction.

The negative point, the expert adds, is that the investment objects will have to be given to the region – “that is, it is impossible to build a business center and operate it by leasing the premises to other MHK.”

Maria Baeva, corporate practice partner at LEVEL Legal Services, notes a more flexible approach in terms of access to benefits (it is reasonable to assess their fulfillment after the company has started working in the SAR and making a profit) and the variability of investment forms, which “is a favorable factor when making decision to move to the SAR. But the expert does not expect a significant increase in the number of residents. As Alexander Tokarev explains, “the bill, unfortunately, does not soften the requirements for the level of presence, which business would like to see.”

Evgenia Kryuchkova