Anton Kabakov took part in a working group on improving investment climate

Last Tuesday June 19, 2018, Anton Kabakov, Partner at Forte Tax & Law, took part in a meeting of the working group on improving investment climate held to discuss how the business environment in St. Petersburg could be improved. The working group was set up within the Agency for Improvement of Business Environment run by the Government of St. Petersburg and headed by St. Petersburg Governor Georgiy Poltavchenko. This working group is putting forward proposals and initiatives related to investment policy in St. Petersburg and also considers matters of law, regional issues and analytical materials on behalf of business representatives.

One of the objectives of this meeting was to consider proposals to improve the legal regulation of investment activity and increase the attractiveness of St. Petersburg’s economy for foreign investors.

Forte Tax & Law proposed on behalf of St. Petersburg business community a number of changes to improve regional and federal legislation.

Forte Tax & Law team proposed the following to improve regional legislation:

• Introduction of an investment tax deduction to attract investments in the construction and renovation of production facilities: this measure should result in the modernization and technical refitting of plants, which meets the targets set by the President of Russia in his address to the Federal Assembly of the Russian Federation made on March 01, 2018;
• Movable property owned by organizations should be exempted from property tax as this would be an incentive to renovate and refit production facilities. Property tax levied on movable property owned by organizations is basically a tax on new investments and modernization of the manufacturing industry: the more an enterprise invests in its equipment, the greater taxes it has to pay. Such tax therefore discourages the modernization and refitting of production facilities.
• As an alternative to full exemption of movable property from “investment tax”, Forte Tax&Law proposed tax exemption for fixed assets recorded in balance sheets for a maximum of 3 years. Fixed assets with a manufacture date of no more than 3 years are currently exempted from tax St. Petersburg. Considering how long it takes to deliver, install and commission certain types of equipment, 3 years since their manufacture date have already elapsed often before investors can enjoy the granted exemption.

Both initiatives stroke a chord with the working group, and it was decided to further work on the introduction of these benefits in St. Petersburg.

One of the measures we proposed to address a federal matter was the exclusion from the law of the possibility to disqualify citizens without fair trial and ascertainment of guilt by prohibiting them to act as CEO or founder of legal entities for a certain period. Such “disqualification without court proceedings” by decision of tax authorities is permitted by the Law On State Registration of Legal Entities. Members of the working group confirmed during the discussion held at the meeting that disqualification as it is currently applied limits business activity and adversely affects the investment climate in the country.

A more detailed description of our initiatives can be found in the attached file. If you have any comments on our initiatives or would like to put forward your proposals to improve the investment climate in St. Petersburg or Russia, please email us. We will be happy to discuss them.