The new rules for regulating special investment contracts
The former regulation provided that the investor creates or upgrades and/or masters the production of industrial goods in order to increase the localisation level of these goods. Now a SPIC must be aimed at the implementation or at the development and implementation of modern technologies in order to master mass production of industry products. The list of ‘modern technologies’ is approved by the Russian Government. Currently the Russian Ministry of Industry and Trade collects proposals from the business community concerning the list of such technologies.
A SPIC shall be entered into based on the results of an open or closed competition. At the same time an open competition can be held, including at the investor’s initiative. An application to enter into a SPIC is assessed based on the volume of goods produced throughout the contract, the level of localisation and the timeframe during which technologies were implemented. A competition is not held if only one application has been submitted for entering into a SPIC. Closed competitions are held when the project relates to developing and implementing technologies of military, special and dual designation for producing industrial goods necessary for ensuring national defence and state security.
On the part of a public entity the Russian Federation, a Russian constituent entity and municipal unit jointly enter into a SPIC. Therefore, the stability of doing business is ensured at all levels.
A SPIC is entered into for a term not exceeding 15 years for implementation of projects in which investments do not exceed RUB 50 billion, and for a term not exceeding 20 years for the implementation of projects in which investments exceed RUB 50 billion. And while earlier the minimum threshold of investments was not less than RUB 750 million, the new regime does not establish a minimum threshold.
- 0% tax rate to be paid to the federal budget;
- a reduced tax rate may be set for the tax to be paid to the budgets of the Russian constituent entities.
From 1 January 2020, a SPIC participant will gain a choice
- to apply reduced tax rates to the whole tax base complying with the condition about the share of income (90%) from the sale of goods produced within the framework of the SPIC;
- or to apply reduced tax rates to the tax base from the activity associated with the implementation of the SPIC, provided that it is booked separately.
The way of determining the tax base must be enshrined in the accounting policy and cannot be changed throughout the entire term of SPIC.
The opportunity to use reduced tax rates will be available before the end of the reporting period or the tax period in which the volume of support of the SPIC participant from budgets of all levels (including the budget’s income that has not been received) exceeds 50% of its investments made in the investment project. Earlier, the law contained no such restriction in terms of applying reduced tax rates.
The law has removed the restriction concerning the effect of tax benefits – an easing until 2025, which was previously provided for, has now been excluded.
What to think about and what to do
Pepeliaev Group’s lawyers are ready to provide comprehensive legal assistance in view of the amendments to legislation, and to advise on all issues of SPICs and public-private partnerships.
 Federal Law No. 269-FZ dated 2 August 2019 comes into force on 2 September 2019 except for provisions for which other timeframes are established.