Ministry of Industry and Trade of Russian Federation

(MINPROMTORG Russia)

Special investment contract as a government package of economic

benefits to investors localizing industrial production in Russia

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- Decree of 16.07.2015 № 708 -special investment contractoperating mechanism

-Decree of 31.07.2015 № 719 –criteria to define a product as havingno analogs produced in RussianFederation («MADE IN RUSSIA»criteria)

- Decree of 24.07.2015 № 751 -criteria to define comparingconditions for industrial activities inRussia and abroad

- Decree of 31.07.2015 №779 – industrial cluster policy

- Decree of 04.08.2015 №794 – industrial park policy

Decree of 25.07.2015№757 established theGovernment system ofindustrial information andits operating principles

The Government decree of 19.06.2015 № 608 defined Russian Ministry of industry and trade as the public

authority responsible for industrial policy

Policy on industrial

development of territories

Amendments to legislation

Authorized government

body for industrial policy

Industrial activity in

Russia

Government system of industrial

information

Legislative basis “The Federal law of

31.12.2014 №488-FZ on industrial

policy in Russia”

Federal law of 13.07.2015 № 249 amended the Federal law № 223 (on procurement)

Amendments (in the State Duma) to the Tax Code (confirms the “grandfather

clause” for investors in Russia)

Amendments (in the State Duma) to the Federal law № 44 (on

procurement)

Recent amendments to the federal legislation that established legal foundations for the Special investment contract

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Special investment contract in a nutshell

Special “tax haven” regime for investors in Russian industrial and technologysector established by federal, regional and municipal authorities

Flexible mechanism aimed at balancing strategic priorities of the governmentindustrial policy and interests of industrial and technology investors

Clear written long-term “rules of the game” guaranteed to investors byRussian government

Special investment contract is a unique Russian government tool to boost financial attractiveness of Russian industrial and technology sector for

investors that move production or transfer technology to Russia

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Special investment contract

Federal authorities Provide Investor with access to land and infrastructure, cut or lift federal taxes and provide direct financial support (e.g. R&D)

Regionalauthorities

Provide Investor with access to land and infrastructure and

cut or lift regional taxes

Facilitate and support Investor’s municipal activities according to municipal mandate

Municipal authorities

All necessary conditions and clauses put by the

government authorities and investor in the Special

investment contract (in accordance with the Decree of the Russian Government

of 16.07.2015 № 708)

Investor

obligations:• Establishing production facility in Russia• Establishing industrial or technology

partnership or joint venture with a Russian industrial or technology company to transfer technology to Russia

• Launching production of specified in the Special investment contract products in Russia

• Launching R&D activities in Russia or with a Russian partner

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The Russian Federation

Region in Russian Federation

City in Russian Federation

Investor

Industrial company

Other possible participants(credit, public utilities, etc.)

Public side Private side1. Tax incentives and direct support2. Guaranteed stable business

environment in Russia

1. Acting in accordance with the terms of the Special investment contract signed (meaningful percentage of production and R&D localized in Russia)

Establishing sustainable high-tech production facility in Russia

Localizing production or transferring best available technologies to industrial production facilities in Russia

Increasing industrial production output in Russian industrial facilities (including local content supply chain development)

Developing industrial sectors defined by the government as strategically important

TARGET LONG-TERM EFFECTS

Special investment contract

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Duration(investment project’s payback

period or up to 10 years)

Product(defined as of strategic priority

by Russian government)

Total investment

(more than 11 million EURO)

Project timeline

(resources committed by investor and schedule of localizing production or technology

transferring to Russia)

Incentives requested by Investor (tax exemption, preferences, etc.) that apply to the project through

the duration of the special investment contract

Reporting process (agreed principles and reporting standards to check the fulfilment of obligations by investor and the

government)

SPECIAL INVESTMENT

CONTRACT

1) Documents confirming that the investment project is qualified for the special investment contract (i.e. confirming the above key elements)

2) The list of incentives and government support, which investor requests for the purpose of the special investment contract

3) The list of commitments with respect to the investment project from the investor and other private parties involved in the special investment contract as sides

4) Description of the investment project (amount and timing of planned investments, list of key performance indicators, etc.)

Investor provides:

Special investment contract: Key elements

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Special investment contract: Milestones

Negotiations are held to discuss and fix all

disagreements

The investor signs the special investment contract

The investor decides not to sign the special investment contract

or does not respond

The investor submits a statement of disagreement

The contract is signed by other participants (i.e. all private and

public parties involved)The contract is not signed

The conclusion of the Interagency government commission is sent to the investor for consideration

The Interagency government commission reviews

the documents and issues theconclusion on the application

Ministry of Industry and Tradeprepares a preliminary conclusion,

interacts with the investor if necessary

The investor submits an application for the special investment contract along with

necessary documents

up to 70 working days

up to 10 working days

Within 10 w.d. the applicant selects one of

three options:

Special investment contract: Processing timeframe

ACCORDING TO GOVERNMENT DECREE OF THE 16.07.2015 № 708 minimum time required to process the special investment contract is 90 working days (4,5 months), maximum (in case of negotiations) – 100 w.d. (5 months)

Within 60 w.d. the IC holds a meeting to decide on the

application and as a result issues the conclusion to the Ministry

defining if the application is qualified for the special

investment contract or not

70 w.d.

Within 10 w.d. the Ministry notifiesthe applicant, the Ministry of Finance and other relevant

authorities if the application is qualified by the IC for the special investment contract and sends

them a draft copy of the contract

If the IC did not qualify the application, then the Ministry passes

this information to the applicant

60 w.d

If the applicant does not reply to

the Ministry’s notification

80 w.d.

Within 10 w.d all public side parties of the special investment contract sign it (i.e. the Ministry, regional and municipal

authorities)

90 w.d. or 100 w.d. (in case negotiations took place)

If the applicant does not reply to the Ministry’s notification within 20 w.d. the conclusion of the IC is considered

expired

No obligations from either side

Within 10 w.d. the Ministry holds negotiations with the applicant

together with relevant regional and municipal authorities.

90 w.d.

Signed Special investment

contract

In 30 w.d. the Ministry sends

to the Interagency commission (the

IC) (est. by Decree of 31.10.2015

№ 2213) a preliminary conclusion on

the application (prepared according

to Order of Ministry of 25.09.2015 №

2951) along with the application and

support documents

30 working days (w.d)

1) Sign the draft copy of the special investment contract and send it back to the Ministry, OR

2) Decide not to sign, OR

3) Send the list of disagreements to the Ministry

2) Decide not to sign

1) Sign the finalized version of the special investment contract, OR

Application and support documents sent by

Investor (Applicant) to the Ministry of industry and trade (Ministry) (the

application form was approved by Order of

Ministry of 07.08.2015 № 2288)

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As a result the applicant selects either of two options: