12.10.2015 — Vladivostok Free Port Invites Foreign Investors and Offers Tax Benefits

The Federal law establishing Vladivostok and the surrounding area as a free port came into force on October 12, 2015. This law, alongside with the Federal law “On the territories of advanced social and economic development”, is an important means to improve the investment climate in Russia. The law is aimed at attracting foreign investors to the Russian Far East and establishes numerous benefits for residents of the free port.

The Federal law No.212-FZ establishing Vladivostok and the surrounding area as a free port came into force on October 12, 2015. Those investors that decide to open a representative office and run a business within the territory of the free port of Vladivostok will receive a number of benefits. They will enjoy a special regulation and state support, control and management treatment.

The free port area covers 15 large municipalities in the South of the Primorsky Krai, including the territory of the Vladivostok city district. Thus, the free port comprises the most economically and socially developed districts of the Primorsky Krai, and more than two thirds of the Primorsky Krai population live there.

Notably, during the Eastern Economic Forum, that took place at the beginning of September 2015, the Russian President proposed to expand the free port area by including other territories of the Russian Far East. The Russian Government is planning to discuss this proposal in the nearest future.

Among other things, residents of the free port will receive the following benefits:

  • Taxes and other obligatory payments: residents of the free port will enjoy a preferential tax treatment. Thus, the corporate income tax shall not exceed 5% during the first 5 years. The total social contributions rate shall not exceed 7.6% as opposed to the standard 30% rate.
  • Customs treatment: The territory of the free port shall be considered a free customs zone. In practice that may result in a zero customs duty rate imposed on goods and equipment.
  • Simplified administrative procedures: time frames of administrative procedures shall be reduced, a single point of contact service will be provided thereby facilitating relations with state authorities.
  • Simplified visa requirements, as well as simplified rules of foreign labour engagement are provided for by the new law.
  • Control and monitoring: a special procedure of state inspections will be effective within the free port area. The supervisory board of the free port will be in charge of protecting the free port residents from excessive attention of controlling state authorities.

The new law also provides for the possibility of special regulation of medical and educational activity, however the relevant secondary legislation is yet to be developed.

The free port of Vladivostok is a significant event not only for the Primorsky Krai, but also for Russia as a whole. Establishing a representative office and running business in the Far East may open new opportunities and growth prospects. However, it is advisable that all possibilities and risks are assessed before the relevant decision is made.