Federal Law No. 244-FZ on the Skolkovo Innovation Center

Practical Law UK Articles 2-504-0801 (Approx. 5 pages)

Federal Law No. 244-FZ on the Skolkovo Innovation Center

by Igor Ostapets and Irina Dmitrieva, White & Case LLP

Project management and implementation

The following persons implement the Project:

The management company and its subsidiaries.
Companies with the status of a Project Participant performing research activities (Project Participants)
Other companies and individual entrepreneurs engaged by the management company, its subsidiaries or Project Participants to perform activities other than research (for example; construction activities, educational and medical services).

Management Company

A special non-commercial organisation, the Fund for the Development of the Centre of Research and Commercialisation of New Technologies (the Management Company), has been established to manage the Project. Its co-founders, in particular, include the Russian Academy of Sciences, Vneshekonombank, Rusnano, and the Russian Venture Company.

The Management Company exercises a wide range of powers, including those of regional and local authorities. To assure the functioning of Skolkovo, the Management Company:

Develops and approves Project rules.
Grants interested companies the status of Project Participants and maintains a register of Project Participants.
Assists Project Participants in their research activities (for example; arranges for the provision of accounting and legal services, services on state registration of intellectual activities' results).

The Management Company owns land plots located in Skolkovo. They may not be disposed of or encumbered and may only be let to persons implementing the Project without the right to further sublet them.

Project Participants

Only Project Participants may perform research activities under the Project. The Management Company grants the status of a Project Participant only to Russian companies that:

Are established to carry out exclusively research activities in accordance with the Law.
Undertake to carry out these activities in accordance with the Law and in conformity with Project rules.

Furthermore, effective 1 January 2014, a company may only obtain the status of a Project Participant if its sole executive body or management company/manager is permanently located in Skolkovo.

The Management Company may establish additional criteria for companies seeking to obtain the status of a Project Participant.

The status of a Project Participant is valid for ten years and terminates automatically upon the expiration of this term or in case of the company's liquidation or reorganisation. The Management Company terminates a compan's status of a Project Participant if the company breaches Project rules or provisions of the Law or withdraws from participation in the Project.

Activities performed in the course of the Project

Research activities

Project Participants may engage in research only in certain areas limited to:

Energy efficiency and energy savings, including the development of innovative energy technologies.
Nuclear technology.
Space technology, particularly in the sphere of telecommunications and navigational systems (including the establishment of a relevant ground-based infrastructure).
Medical technology related to the development of equipment and medicines.
Strategic computer technology and software.

Furthermore, the Law regulates certain other activities to be performed in the course of the Project.

Construction activities

Design documentation of capital construction facilities to be built, rebuilt or repaired in Skolkovo as well as results of engineering surveys are not subject to state expert review. The Management Company performs expert review of these documents. It also issues construction permits and permits to put buildings into operation.

Advertising

The Management Company approves the installation of advertisements in Skolkovo and decides on the demolition of unauthorised ones.

Educational and medical activities

Educational and medical activities are performed by private organizations on the basis of permits issued by the Management Company and in accordance with the rules developed and approved by it.

Benefits

Persons implementing the Project enjoy the following benefits.

Employment of foreign citizens

The following benefits are available with respect to the employment of foreign citizens by companies implementing the Project:

No need to obtain permits to employ foreigners.
Invitations for foreigners to enter Russia for work as well as work permits are issued through the Management Company or its subsidiaries irrespective of the quotas.
Work permits for foreigners are issued for up to three years and may be subsequently extended for a term of up to three years.
Adult family members of highly qualified specialists working for the Project can also obtain work permits irrespective of the quota.

Accounting benefits

Project Participants are exempt from the obligation to maintain accounts until their annual revenue exceeds RUB 1 billion; they should, however, account for their income and expenses in a respective book of record. If the above threshold is exceeded, Project Participants are obliged to maintain full-scale accounts as of the following year.

Tax benefits

Project Participants are granted the following tax incentives (depending on their financial performance with regard to annual revenue and cumulative profits):

Financial performance

Tax benefits

Term of incentive

Annual revenue up to RUB 1 billion. (In order to confirm the right to tax benefits, a Project Participant is obliged, among other things, to submit to the tax authorities extracts from the book of record of income and expenses for confirmation of the annual revenue amount.)

Exemption from profit tax payer obligation. (Exemption from taxpayer obligation actually implies the absence of the obligation (i) to pay tax and (ii) to file tax returns.  The law provides for the right to waive the right to exemption from profit tax and VAT payer obligations.)

Exemption from VAT payer obligation. (Exemption from taxpayer obligation actually implies the absence of the obligation (i) to pay tax and (ii) to file tax returns.  The law provides for the right to waive the right to exemption from profit tax and VAT payer obligations.)

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Exemption from property tax.
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Reduction of rate of social contributions: 14% (instead of 34%). (No incentives are established with respect to mandatory accident insurance contributions.)

10 years.

Annual revenue exceeding RUB 1 billion

and

Cumulative profit up to RUB 300 million. (Cumulative profits are calculated as the sum of profits at the end of the each subsequent tax period starting from the period in which the amount of annual turnover exceeds RUB 1 billion.  The form for calculation of cumulative profits and tax base of a Project Participant should be approved by the Ministry of Finance.)

Profit tax rate 0%5. (Use of 0% tax rate implies the need to file, together with a tax return, a notification of the cumulative profits amount according to the form approved by the Federal Tax Service as agreed upon with the Ministry of Finance.)

Exemption from VAT payer obligation. (Exemption from taxpayer obligation actually implies the absence of the obligation (i) to pay tax and (ii) to file tax returns.  The law provides for the right to waive the right to exemption from profit tax and VAT payer obligations.)

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Exemption from property tax.
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Reduction of rate of social contributions: 14% (instead of 34%). (No incentives are established with respect to mandatory accident insurance contributions.)

In each tax period during the 10 years, at the end of which cumulative profit does not exceed RUB 300 million.

Customs benefits

The Management Company may render customs broker services to persons implementing the Project.

If a person implementing the Project imports goods using the Management Company as customs broker, its expenses for payment of customs duties and import VAT are reimbursed out of the federal budget as subsidies (in the form of advance payments). Reimbursement is possible with respect to goods (save for excisable goods) imported in order to:

Build or equip real estate in Skolkovo, or arrange for its technical support facilities,
Implement research activities in Skolkovo.

Liability

Persons implementing the Project in breach of the Law are subject to criminal, civil, and administrative liability in accordance with Russian law. No special provisions for liability of persons implementing the Project have been introduced to the Administrative Offences Code and the Criminal Code yet.

Federal Law No. 244-FZ on the Skolkovo Innovation Center | Practical Law