Target Medicals Ltd., upon the decision of the Skolkovo Foundation, received an official status of the project Participant and included into the Registry List under the number of 1120423.
Federal Law No. 243-FZ has amended the Russian Tax Code with the aim of promoting and supporting investors’ activity in the Skolkovo innovation center. The changes provide for benefits on an unprecedented scale for participants in the Skolkovo project.
Project participants receives the following benefits:
- VAT exemption
- profit tax exemption
- property tax exemption
- exemption from compulsory insurance contributions to the social and medical funds
- reduced rate of contributions to the Russian Pension Fund.
Applied procedure for the benefits
An organizations are not liable for profit tax, so it does not need to keep tax accounting records until its annual revenues exceed one billion rubles. From the year in which that figure is exceeded, the organization needs to keep tax accounting records so as to calculate its taxable profit. That profit is liable to tax at a zero rate until, whether over one or several years, 300 million rubles of profit have been taxed at the zero rate, at which point the organization will begin to pay tax at the generally applicable rate. The property tax benefit will also terminate at the same time, while the organization will begin to pay VAT from the period during which it passes the 300 million rubles limit.
The organization may use the VAT and profit tax benefit for no more than ten years from when it gains the status of a project participant. This 10-year restriction does not, however, apply to the property tax benefit.
From 2011, the rate for insurance contributions on payments to the employees of project participant companies is set at 14%. This will go in full to the Pension Fund, and no contributions to the social or medical funds will be levied. This benefit also has a ten-year lifespan, but is subject to the same conditions as the VAT exemption discussed above.
While participants in the Skolkovo projects have revenues of less than 1 billion rubles, they are exempted from the obligation to keep full accounting records.
Moreover, Federal Law No. 244-FZ dated 28 September 2010 “On the Skolkovo innovation center” provides that, in certain cases, amounts of VAT and customs duty paid on goods (except for excisable goods) imported to Skolkovo will be reimbursed under the procedure laid down in budgetary legislation. This law provides for special subdivisions of the tax authorities and authorities of the extra-budgetary funds to be created within the Skolkovo center. These subdivisions will be responsible for record keeping and supervision in relation to project participants.
Participants should also pay particular heed to:
- benefits of a general nature granted to organizations undertaking research and development (R&D) in Russia. This makes it possible: to deduct expenses in full; to deduct expenses connected with certain types of R&D multiplied by a factor of 1.5; to amortize tangible fixed assets multiplied by a factor of 3; not to pay VAT when foreign contractors perform R&D in Russia or when rights to R&D are transferred to foreign licensors; and to make use of VAT benefits granted to scientific organizations and granted in respect of specific types of R&D. These benefits may be used both before gaining Skolkovo project participant status and after that status expires;
- the possibility of paying dividends to the foreign members of companies participating in such projects with a withholding tax rate of 5%, allowable under many Russian double taxation treaties. When the dividends received are subsequently exempt from tax in the recipient’s country, these benefits are an attractive incentive for foreign investors to invest.