Energy Firms to Miss Out on Far East Start-Up Tax Break

MOSCOW, January 29 (RIA Novosti) – Energy, tobacco and alcohol producers will be denied the preferential tax regime the government is introducing for start-up businesses in the Russian Far East, according to draft amendments to the Tax Code published by the Finance Ministry on Tuesday.

Russian President Vladimir Putin announced plans in late 2012 to offer a preferential tax regime for fledgling companies in the Russian Far East and the Trans-Baikal area to spur the region’s economic, social and demographic development and promote value-added industries.

Putin proposed setting a zero rate for the 2 percent federal profit tax during the first ten years of operation of new production facilities. Regional authorities have the right to establish a zero rate for the local 18 percent profit tax during the first five years of start-up operations and set it at a level of at least 10 percent in the subsequent five years.

The document posted on the Finance Ministry’s website sets out the criteria for investment projects eligible for tax breaks, but excludes oil and gas extraction and services, ethyl alcohol production, tobacco and other excisable goods from the list, with the exception of cars and motorcycles.

Non-profit organizations, banks, insurers, private pension funds, professional securities market participants and clearing houses will also be excluded from the list.

Start-ups should have investments of at least 150 million rubles ($5 million) during the first three years of operation or 500 million rubles ($16 million) during the first five years of activity, according to the Finance Ministry’s amendments.

Putin said in November 2012 he was ready to rejuvenate government plans to create a mega state corporation to develop Russia’s depressed eastern Siberia and Far East.

“We have no right to consider the Far Eastern regions exclusively as raw materials-oriented, we need to ensure their modern and balanced development,” he said.


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