The Ministry of Economy noted a three-fold increase in the relocation of companies to the SAR over the past two years

Currently, 125 companies are registered in special administrative regions (SAR) on Oktyabrsky Island in Kaliningrad and Russky Island in Vladivostok, of which 95 moved to Russian jurisdiction in 2021-2022. This was told by the First Deputy Minister of Economic Development Ilya Torosov, speaking at the conference “Vedomosti” “Tax results of the year.”

“If in the previous year 27 participants redomiciliated (changed their corporate registration – Vedomosti), then this year there were 68 new companies. Now in SAR [зарегистрировано] 125 companies: on Oktyabrsky Island – 109 and one fund, and on Russky Island – 15 international companies,” Torovosov said. According to him, the Ministry of Economy expects that by the end of the year there will be 130 residents in the SAR.

SARs allow you to change your corporate registration – to carry out a full migration of foreign companies to Russia and receive tax benefits. Now the largest residents of the SAR are mainly subsidiaries or holding structures of such international groups as En +, UC RusalUralchem, PIK, Sodruzhestvo agricultural complex, Yandex fund, Gazprombank, Sovcombank“Ribbon“. On Russky Island, Vostochny Bank, two structures SUEK and the subsidiary of Rosneft, Interros Capital, billionaire Vladimir Potanin, which controls a 31.5% stake in Norilsk Nickel.

“We are glad that we have this institution. It helped us, which is why we have been doing it since 2018. If we were working on it urgently now, we would not have achieved such an effect. The whole platform was ready – the necessary tax decisions and corporate legislation were adopted, and for the last year we have been fine-tuning and only expanding to new institutions that appear,” Torosov noted.

The main goal of the SARs is to apply the best world practices in corporate law, the First Deputy Minister noted: business can keep all the conditions that were in effect in a foreign jurisdiction in the territory of the SAR. This year, the Ministry of Economics has simplified the re-domiciliation for businesses in terms of preparing documents, and the institution of inheritance and lifetime funds of businessmen has also appeared, he said. In addition, tax and legislative preferences have been extended for another 10 years, until 2039.

According to Torosov, the biggest challenge of this year’s changes is that businesses can move simply by making the decision to do so. An important condition is to have the right to move, since it is impossible to move directly to Russia from some jurisdictions (for example, from the Netherlands), so transit redomiciliation has been created (through third countries), Torosov said.

At the same time, this is not a cheap solution, he noted: it is necessary “to close all obligations there, open it here, move, negotiate with a shareholder, delist somewhere, transfer shares to a Russian depository somewhere.” Before the sanctions, this process took up to a year, after the decision on simplified relocation was made, the period was reduced, the First Deputy Minister noted.

Amendments to the Tax Code, improving the ATS regime, were submitted to the State Duma on March 10 this year – almost immediately after the introduction of sanctions against Russia.

They opened access to the regime for “younger” companies created before March 1, 2022. Initially, the possibility of redomiciliation was provided only for organizations that were actually created before 2017.

Businessmen were also allowed to transfer personal funds to the SAR – lifetime and posthumous.

The main incentives for the ATS are to reduce income tax to 5% on income received and to 10% on income paid by the MHC (dividends, interest and royalties). Reduced rates will be valid until 2036. To receive benefits, you need to invest 300 million rubles. in the construction of social, transport, energy and engineering infrastructure in the SAR region for three years. The company must hire from 15 employees and rent an office from 50 sq. m – comply with the requirement of substance (eng. “content”, “essence”).

In addition, income from participation in projects for geological exploration, mining, etc. under production sharing agreements and similar agreements with foreign countries is exempt from income tax. Positive “paper” exchange rate differences will also be exempt from taxes, which is especially important in the context of currency fluctuations. The state guarantees the invariability of the conditions for income tax, property tax and transport tax (stabilization clause). Companies that have moved from abroad will be able to use the usual foreign corporate law for another 10 years – until January 1, 2039.