Special Administrative Region (SAR) on Russky Island

A special administrative region (SAR) is a territory with a flexible tax and currency regulation regime for companies that have decided to transfer from a foreign jurisdiction to a Russian one.

Goals of the SAR

• Formation of favorable financial and administrative conditions for business development
• Attracting capital and investment in the Russian Federation
• Deoffshorization of the Russian economy
• Infrastructure development of the SAR territory
• Role of the management company

JSC "Far East and Arctic Development Corporation" is the management company of the SAR on the territory of the island. Russian in accordance with the Federal Law of 03.08.2018 No. 291-FZ "On Special Administrative Regions in the Territories of the Kaliningrad Region and Primorsky Krai".

For whom

An international company may be a foreign legal entity that is a commercial corporate organization and has decided to change its personal law.

An international fund may be a foreign unitary legal entity whose founders are not its participants and do not participate in the distribution of profits, and also do not have membership rights in it, which was created for specific purposes and which has decided to change its personal law in the manner established by such personal law.

International holding companies — these are the same international companies, but with a special legal status for the purpose of receiving tax benefits.

Advantages

Currency non-residents

• special conditions of currency control
• the right to transfer foreign currency and the currency of the Russian Federation without restrictions from their bank accounts (from bank deposits) in banks outside the territory of the Russian Federation to their bank accounts (to bank deposits) in authorized banks
• the right to transfer foreign currency and the currency of the Russian Federation without restrictions from their bank accounts (from bank deposits) in authorized banks to their accounts (to deposits) in banks outside the territory of the Russian Federation

Administrative preferences

• "Single window" regime for the investor
• Assistance in choosing a place of registration
• Legal and accounting services
• Possibility to build infrastructure facilities
• An international company or its subsidiary can be residents of the Free Port of Vladivostok and Priority Development Areas
• Possibility to apply the norms of foreign corporate law in the Charter of the MC until 01.01.2039
• Possibility to hide information about the founder and director in the Unified State Register of Legal Entities
• Possibility of arbitration of disputes

Tax benefits for all MCs in the SAR

• Determination of the tax value of shares/interests of subsidiaries at the market level on the date of redomiciliation to the SAR — when moving to the SAR before 01.01.2025;
• Prohibition of tax audits in the Russian Federation for tax periods before redomiciliation - indefinitely;
• No VAT is paid on the import of vessels into the Russian Federation (subject to registration in the Russian Open Register of Vessels) - indefinitely;
• No transport tax or property tax is paid on vessels/aircraft (subject to registration in the Russian Open Register of Vessels or the State Register of Civil Aircraft) - indefinitely;
• 0% on social contributions for crew members of vessels (subject to registration in the Russian Open Register of Vessels) - indefinitely; until 2027 (inclusive);
• Income from the operation of vessels is not taken into account when determining the tax base for profit tax (subject to registration in the Russian Open Register of Vessels) — no time limit;
• No tax is paid on the property of MK located outside the Russian Federation and used in the implementation of projects for geological study, exploration, and extraction of minerals under production sharing agreements, concessions, and licensing agreements — without time limits.

Tax incentives for companies with the status of MHC (including public MHC)

• Exclusion from the tax base for the MHC profit tax of the following income (expenses):

income (expenses) in the form of a positive (negative) exchange rate difference during the revaluation of foreign currency assets/claims in foreign currency/liabilities in foreign currency (exceptions: securities denominated in foreign currency) — without time limits;

income (expenses) from the implementation of projects for geological study, extraction, exploration of minerals, as well as work related to these projects in accordance with production sharing agreements, concession agreements, license agreements or other agreements (contracts) on risk terms with a foreign state (subject to certain conditions) - without time limits.

• Exemption of profit of a CFC at the level of an MHC as a controlling person - until 01.01.2029.
• Stabilization clause for income tax, corporate property tax, and transport tax — with no time limit.

Tax incentives for companies with the status of an MHC that meet the requirements of Article 284.10 of the Tax Code of the Russian Federation for the purpose of applying tax incentives

• When receiving dividends, interest, and royalties — 5%, for a period from 01.01.2023 to 01.01.2036;
• When paying dividends by public MHCs to foreign persons (for companies that received the status of an MHC before 25.02.2022, reduced rates may be applied until 31.12.2025 without complying with the requirements of Article 284.10 of the Tax Code of the Russian Federation) — 5%, for a period up to 01.01.2029;
• When paying dividends, interest and royalties (additional conditions: the receiving company is a direct beneficiary and is not located in a country from the "black list" of the Ministry of Finance of the Russian Federation) - 10%, for a period from 01.01.2023 to 01.01.2036;
• A reduced 15% threshold for the participation share for exemption of received dividends (for companies that received the status of an international holding company before 25.02.2022, it is possible to apply reduced rates until 31.12.2025 without complying with the requirements provided for in Art. 284.10 of the Tax Code of the Russian Federation) - 0%, no term limitation;
•  Exemption of profit from sale of subsidiaries (for companies that received the MHC status before 25.02.2022, reduced rates may be applied until 31.12.2025 without complying with the requirements provided for in Art. 284.10 of the Tax Code of the Russian Federation) — 20% for companies with 50% + real estate in the Russian Federation, no term limitation. (Additional conditions: year of ownership ≥ 15% of capital; share of real estate in the Russian Federation in the assets of the subsidiary ˂ 50%; the subsidiary is not in a country from the “black list” of the Ministry of Finance of the Russian Federation; the subsidiary is not contributed to the capital of the MHC and is transferred to it as a result of reorganization within 1 year after redomiciliation) — 0% for companies without 50%+ of real estate in the Russian Federation and subject to 1 year of ownership (with additional conditions) without time limits).

Become a member of the SAR

Requirements for foreign companies:

• Registration (creation) in accordance with your personal law no later than March 1, 2024
• Acceptance of investment obligations in the territory of the Russian Federation - at least 50 million rubles within 1 year from the date of state registration in the SAR
• Submission of an application for the conclusion of an agreement on the implementation of activities as a member of the SAR
• Registration in the state - member/observer of FATF, Moneyval and/or other regional associations
• Exclusion from the foreign register of legal entities within 2 years or within the period established by the decision of the Government Commission for Control over the Implementation of Foreign Investments in the Russian Federation
• Conclusion of an agreement on the implementation of activities in the SAR within 3 months from the date of state registration in the SAR

The following cannot become MCs:

• Credit institutions
• Non-credit financial institutions
• Payment system operators
• Payment infrastructure service operators
• Credit history bureaus
• Credit rating agencies
• Persons carrying out actuarial activities

Main documents:

• Application
  Application for state registration of the MC and a document confirming the state registration of a foreign legal entity
• A copy of the charter of the foreign legal entity, as well as the decision of the foreign legal entity to amend its personal law and to approve the charter of the MC
• Approved charter of the MC and annual financial statements
• A document confirming the authority of the person submitting the application to act without a power of attorney and the decision to determine the sole executive body
• Information on the beneficiaries of the foreign legal entity
• Certification of the foreign legal entity about the absence of circumstances that prevent state registration of the MC
• Documents required for registration of the issue of shares of the MC (upon registration as a JSC)
• Documents confirming the completion of the listing procedure of shares (only for PAO)
• Document confirming payment of state duty (requirement established from 04/26/2022)
• Documents confirming receipt of a legal address (Letter of guarantee from the owner of the premises, lease agreement, etc.).