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20 years without taxes and a moratorium on inspections: proposals for investors in the Kuril Islands

Russian and foreign entrepreneurs expressed interest in investment projects in the Kuril islands. 

A meeting for investors, “The Investment potential of the Kuril Islands”, organized by the Ministry for the Development of the Russian Far East and Arctic, the Russian Far East and Arctic Development Corporation, and the Government of Sakhalin Region was held in Moscow.

The meeting was attended by heads of 25 Russian companies, delegates from 10 international companies and foreign countries, and 7 international business associations. The list of the Kuril Investment Day guests includes representatives of Chinese, Indian, Turkish and UAE companies, and diplomatic corps from Bahrein, Thailand, Kazakhstan, Malaysia, and China.

Investors expressed interest in projects to develop mariculture, tourism and the energy sector in the Islands. The Islands are among the 10 most favorable regions in Russia in terms of investment climate, and businesses can benefit from a wide range of state support measures.

In March this year, a new preferential tax regime for companies implementing projects in the Kuril Islands came into force. Businesses will be exempted from profits tax, property tax, transport tax and land tax for a period of 20 years. The preferential measures also include reduced rate of 7.6% for social insurance contributions, also for a period of 20 years, and the application of free customs zone procedure in the Kuril Islands.

“The Kuril Islands offer the most attractive tax discounts for entrepreneurial activities of any region in Russia. It is no exaggeration to say that the Kurils are a truly magical place. When you arrive there you feel as if you are on a different planet. The nature is unique, it’s a self-contained ecosystem. There are traditional industries, for example a fishing facility. And there is a huge potential for the development of tourism. There is a huge interest in the entire chain of islands, and this has opened up good opportunities for business. All investors who make the decision to carry out projects on the Kuril Islands will be offered support provided in part by the Russian Government and the development institutes,” said Alexei Chekunkov, Minister for the Development of the Russian Far East and Arctic.

Valery Limarenko, Governor of Sakhalin Region, thanked Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District, for his support in ensuring the expedited consideration and approval of the law on the special tax regime for the Kuril Islands.

“The law was adopted quickly, and it has come just at the right time. Investment in the Kuril Islands will enable businesses to secure a share in key Asian markets in the fishing, logistics, alternative energy and tourism sectors. The Islands’ fishing industry is growing. I would also like to emphasize the importance of mariculture. This is a growth industry of the future - mariculture products have a much higher market value than fish products. As for the development of tourism, we have done research and selected the sites for hotels, health resorts and thalassotherapy centers. We are ready to extend the utilities infrastructure and double its capacity. We are offering more than 140 potential sites for investment projects. We will work individually with every investor and provide support at all stages,” Mr. Limarenko added.

Nikolai Zapryagaev, Acting General Director of the Russian Far East and Arctic Development Corporation (FEDC), pointed out that there will be no minimum investment threshold and that all investors - small, medium sized and large businesses alike - will be able to obtain state support under the Kuril Islands preferential regime.

“The Russian Far East is a unique macro-region with great potential for the development of projects in any sector, and it is supported by a range of measures to speed up economic growth and increase living standards. Over the last 8 years, 65 laws and 330 regulations have been adopted to support entrepreneurial activities, and special regimes have been established for the Advanced Special Economic Zone (ASEZ), the Free Port Vladivostok (FPV), the Special Administrative Regions (SAR) and the Arctic Zone of the Russian Federation (AZRF). The FEDC, under the guidance of the Ministry for the Development of the Russian Far East and Arctic and Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District, operates the ASEZ and the FPV, serving as a reliable partner for entrepreneurs and supporting them in their projects. We have 10 effective instruments at our disposal, from tax breaks to grants of land and the extension of infrastructure. As a result, the ASEZ and the FPV now have more than 2,600 residents, and almost 500 of these are now operational and have started up their businesses. The investors have contributed a total of 2.3 trillion rubles to the economy of the macro-region. Moreover, as of the end of 2020, for the Far Eastern region as a whole, residents’ contributions to investments in starting capital amounted to almost 30 percent. But we are always working to improve the existing preferences. And the law on special conditions for entrepreneurial activity in the Kuril Islands is just one example of this. It offers the most profitable regime for doing business in the whole of Russia,” Mr. Zapryagaev emphasized.

According to the speaker in the meeting, the validity term for the tax breaks and lower social contributions has been doubled, from 10 to 20 years, and the procedure for obtaining the status of resident under the special regime has been simplified as much as possible - the investor only needs to inform the tax authorities that it has registered a legal entity in the Islands, and there is no need to submit the normal package of documents; moreover, special regimes for supervising investors’ activities and allocating land plots will be introduced.

The representative of the FEDC summarized the situation: “As we have seen in Sakhalin Region, businesses make good use of the available preferential regimes, including tax breaks, land grants and the creation of infrastructure for projects, the option to raise funding, subsidized loans, free customs zones and assistance in resolving personnel issues. The Ministry for the Development of the Russian Far East and Arctic has also launched a new infrastructure-related support mechanism: the Far Eastern Concession, and the first social facilities under this Concession were approved in 2022 by the Government Commission in Magadan Region. 25 of the 93 projects on Sakhalin Island are now operational and new businesses have been launched in the tourism, transportation and logistics sectors, mineral deposits have been developed, mining operations have been launched, as has food production. It is extremely important that we develop a portfolio of investment projects with specific investors, parameters and marketing policies as it is the investors who act as catalysts for the removal of the restrictions on developing the territory at the state level. We will solve the problem of transport access to the islands and organize the infrastructure.”

Among the advantages of doing business in the Kurils, investors participating in the meeting noted the Islands’ advantageous location in the Asia-Pacific region. The Kurils are adjacent to major maritime trading routes. The volume of cargo shipped between East Asia and ports in North America alone, a route that passes by the ports of Hokkaido and Honshu, is measured in hundreds of millions of tons.

The Kuril Islands also have an important strategic significance for Russia. In the last five years, the state has invested approximately 50 billion rubles in their development. Capital investment from the private sector accounted for approximately 22 billion rubles.

Министерство инвестиционной политики Сахалинской области является органом исполнительной власти Сахалинской области, осуществляющим функцию агентства инвестиционного развития, отвечающего за продвижение инвестиционных проектов в регионе в рамках реализации проекта по внедрению в России единого механизма поддержки инвестиций в субъектах Российской Федерации – регионального инвестиционного стандарта.

Телефон: +7 (4242) 671-765
Адрес электронной почты: mininvest@sakhalin.gov.ru