On March 9, 2022, a new preferential tax regime for companies implementing projects in the Kuril Islands came into force. The corresponding federal law, which amends the second part of the Tax Code of the Russian Federation, was signed by the Russian President Vladimir Putin.
“The new preferential tax regime will attract investors, help develop the Kuriles, benefit the economy of the Far East and the country, will allow building new industrial production, creating tourist and social facilities, creating new jobs, and ultimately will benefit people,” said the Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary envoy to the Far Eastern Federal District Mr. Yury Trutnev.
Investors registered on the territory of the Kuril Islands after January 1, 2022 are exempt from income and property tax for 20 years from the date of registration as a taxpayer (but no later than December 31, 2046). Transport and land taxes have been zeroed out. Insurance premiums are set at 7.6%.
Organizations implementing projects on preferential terms should not have separate divisions outside the Kuril Islands, and their share of income from passive activities (rent, interest income) should not exceed 10%.
The preferential tax regime does not apply to the implementation of intermediary, agency activities, the production and (or) processing of excisable goods, the extraction and (or) processing of hydrocarbon raw materials, and the catching of valuable species of crustaceans. All other activities are permitted.
The investment potential of the Kuril Islands is in such areas as fish processing, energy, tourism and recreational services, transport and logistics. The corresponding portfolio of investment projects is formed by the regional government and the Russian Far East and Arctic Development Corporation.
As the Far East and Arctic Development Corporation explained, in order to apply tax benefits under the preferential regime, it is not required to obtain a special status - it is enough to send a notification to the tax authority. The organization that intends to take advantage of these benefits must notify the tax authority within 30 days.
For participants in the preferential tax regime in the Kuriles, it is also planned to introduce a free customs zone (FCZ) procedure. Under the FCZ regime, foreign goods will be imported without payment of import customs duties and VAT. For organizations applying a preferential tax regime, land plots in the Kuriles will be provided in a simplified (accelerated) procedure. Proposals to change federal legislation have been prepared and will be considered by the State Duma of the Russian Federation before the end of the spring session.