Russia Plans Tax Incentives For Hi-Tech Industry

by Tatiana Smolenskaya, Tax-News.com, Moscow

14 January 2005

Russian President Vladimir Putin has announced the government’s intention to establish new technology parks in up to 10 special economic zones, which would benefit from tax breaks and reduced customs duties on imported equipment.

The new technology parks form a central part of the Kremlin’s ambitious plan to transform Russia into one of the top ten hi-tech economies by the year 2010.

According to IT and Communications Minister Leonid Reiman, who accompanied Putin at a government meeting held in Akademgorodok, a scientific centre near the Siberian city of Novosibirsk, the state will invest 18 billion rubles (US$645 million) into the IT sector over the next five years in order to achieve this goal.

"As a result of the program's realization, the volume of the IT market will grow to $40 billion, while high-tech manufacturing will take a 5 percent share of GDP," Reiman announced.

To encourage private enterprises to set up in the new technology parks, which are to be 100% state-owned, Economic Development and Trade Minister German Gref was reported as announcing that a number of tax incentives will be available, including import duty exemption for equipment intended to be used in products destined for export.

Additional tax breaks may include lower property and profit taxes, while profit tax could be 25% of the standard taxation rate. Some firms in the special zone may also be entitled to a reduced rate of Unified Social Tax.

However, Gref added that companies located in the special zones would be subjected to tax inspections once every three years, and transgression of the tax laws could result in revocation of companies' licences to operate in the zones.

Gref has that said he expects draft legislation to be submitted to the cabinet by March.

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