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Russia's 'Silicon Valley' Gets Green Light

by Tatiana Smolenskaya,, Moscow

15 September 2010

The Russian Duma passed a bill on tax breaks for Skolkovo, president Dmitry Medvedev’s “Silicon Valley” innovation project, in the second of three readings. An amendment from the first reading now allows the project timing to be accelerated by offering the tax incentives to prospective participants before they take up residence in Skolkovo. Other amendments in the legislation were reported to be technical in nature.

Special taxation procedures provide for exemption from profit tax, VAT and property tax for 10 years. However project participants shall not be entitled to exemption from VAT and property tax after their cumulative amount of profit exceeds RUB300m (USD9.8m) or from the beginning of the year following the year in which the amount of turnover exceeds USD1bn. Income tax becomes payable after turnover exceeds RUB1bn.

The bill also also provides for employees’ mandatory pension, health and social insurance to be reduced to 14%, and reimbursement of customs duties on goods, and excisable imports for research purposes.

Special governmental offices will be set up in Skolkovo, exercising powers in the field of internal affairs, tax control, customs, consumer protection and welfare rights, intellectual property, patents and trademarks.

Qualifying participants are to engage in research in the following areas: energy efficiency and energy conservation, nuclear technology, space technology, especially in the field of telecommunications and navigation systems, medical technologies (equipment, drugs), strategic technology and computer software.

Some well-known companies including Siemens AG, Cisco Systems Inc. and Nokia Oy have already agreed to participate in the project. Victor Vekselberg, the billionaire entrepreneur appointed by president Medvedev to oversee the project, says that he expects to commission several pilot projects by the end of the year, and prior to Skolkovo’s opening, project work could already get started on companies’ existing premises.

TAGS: Russia | tax | trademarks | patents | property tax | tax incentives | commerce | intellectual property | employees | corporation tax | e-commerce | manufacturing | legislation | tax breaks | trade | telecoms

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