Ship repair will save on taxes – Newspaper Kommersant No. 7 (7452) dated 17.01.

The government may cancel VAT on ship repair works. The condition, according to the authorities, will be investment agreements, according to which ship repair enterprises undertake to invest a fifth of their annual revenue for seven years in their own development. If this condition is not met, VAT will be charged. According to industry participants, zeroing VAT is an extremely urgent measure that will improve the financial situation of enterprises, but additional steps are needed to support the industry.

As it became known to Kommersant, the commission on legislative activity is considering a draft law on nullifying VAT for ship repair enterprises (“Kommersant” saw the document). Now zero VAT is valid for the repair in the Russian Federation of sea vessels, river-sea vessels and inland navigation vessels, but applies only to maintenance and, as stated in the explanatory note, minor repair work on ships that are not decommissioned for repair purposes. And for repairs at docks and shipyards, as well as for ships that are not decommissioned and moored at shipyards, and not at ports, a VAT rate of 20% is applied.

The document provides for the provision of zero VAT only on the terms of the conclusion by the ship repair enterprise of an investment agreement with the Ministry of Industry and Trade and the Ministry of Finance on the development of its own capacities for a period of seven years. According to the terms of the agreements, the enterprise must, during the term of their validity, annually invest an amount equal to at least 20% of the cost of repair services provided in the previous year. If the agreement is terminated, VAT for previous periods is charged. The document enters into force after 90 days from the date of official publication, but not earlier than the beginning of the first regular tax period for VAT. Ilya Zharsky, managing partner of the expert group Veta, explains that we are talking about the beginning of the quarter.

“In the current economic situation, including in connection with the refusal of a number of foreign contractors to service Russian ships, the issue of developing domestic ship repair is especially relevant,” Viktor Evtukhov, deputy head of the Ministry of Industry and Trade, told Kommersant. “The application of the VAT tax rate of 0% will allow domestic enterprises ship repair industry, which will conclude an investment agreement with the Ministry of Industry and Trade and the Ministry of Finance, to apply tax deductions for VAT. This will eliminate the diversion of funds from the financial turnover of enterprises and allow them to invest resources in the development of their own production capacities.” He noted that the possibility of concluding investment agreements will appear only after the entry into force of the law.

President of the All-Russian Association of Fisheries Enterprises, Entrepreneurs and Exporters (VARPE) German Zverev says that the association has long been proposing this measure to support ship repair. “The cost of services of any ship repair plant consists of the cost, profitability and VAT,” he explains. “In accordance with paragraphs. 23 p. 2 art. 149 of the Tax Code of the Russian Federation, work on the repair and maintenance of ships during the period of stay in ports, as well as services for the classification and survey of ships are not subject to taxation. Such work at dumping prices is carried out by small companies that have a zero VAT rate, but do not bear the burden of maintaining ship repair fixed assets. In the national program for the socio-economic development of the Far Eastern Federal District for the period up to 2024 and for the future up to 2035, such a measure of state support was provided for.” At the same time, in his opinion, this measure alone is not enough for the development of ship repair in Russia and the provision of orders for domestic enterprises. He says that VARPE also proposed to simplify the administrative regulations of the Federal Customs Service when registering ship components and to allow its duty-free importation for ship repair on the territory of the Russian Federation.

Linking the zero VAT tax break to investment projects in ship repair is an effective tool for the development of this segment, believes Alexei Osintsev, President of the Association of Fishing Fleet Owners (ASRF). “Domestic ship repair enterprises cannot serve modern high-tech vessels that are being built today for our industry,” he says. “It is necessary to create a modern base in the country for their service. We have five years for this – until the first dock repairs “under the class” of the Maritime Register.

In his opinion, the inclusion of ship repair and shipbuilding in the list of industries for which duty-free import of equipment will be allowed, preferential lending for investors in the development of ship repair, can also become effective support measures. “According to ASRF estimates, the creation of ship repair clusters in Kamchatka, Primorye, Murmansk and Kaliningrad will require about 20 billion rubles. investment,” he adds.

It is rather difficult for now to say how effectively the benefit will stimulate the development of the industry specifically in terms of modernization, says Ilya Zharsky, but for a number of large and largest ship repair enterprises, such a benefit will reduce the funds that are diverted from circulation due to VAT.

The head of Infoline-Analytics, Mikhail Burmistrov, considers the zeroing of VAT as an extremely urgent measure. He notes that although there are various support measures in shipbuilding, including investment quotas, preferential leasing, and a recycling grant, they are critically insufficient in the field of ship repair. At the same time, despite the fact that the largest shipbuilding plants are 100% loaded with orders, the financial condition of ship repair enterprises is significantly worse, and the supply of orders is far from optimal. According to the expert, without reducing the tax burden on ship repair in the face of difficulties with the supply of ship equipment due to sanctions, the situation will quickly deteriorate.

Natalya Skorlygina