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Guide to Investment

Sverdlovsk Region Industrial and manufacturing special economic zone

PwC Russia (www.pwc.ru)

provides industry-focused assurance, tax and advisory services. Over 2 000 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Yuzhno-Sakhalinsk and Vladikavkaz share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. The global network of PwC firms brings together more than 161 000 people in 154 countries. PwC first appeared in Russia in 1913 and re-established its presence here in 1989. Since then, PwC has grown to become the largest professional services provider in Russia. According to the annual rating prepared by the independent rating agency Expert RA, published in Expert magazine, PwC is the largest auditor, tax and legal advisor in Russia (see Expert, 2000-2010). This overview has been prepared in conjunction with and based on the materials provided by the Ministry of Investment and Development of the Sverdlovsk region and the Ministry of International and Foreign Economic Relations.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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Contents

2 4 7

Welcome message from the Governor of the Sverdlovsk Region Foreword by the Managing Partner of PwC in Russia General information about the Sverdlovsk Region
Economic and geographical location Administrative and territorial divisions

10

Key advantages of the Sverdlovsk Region:


Investment potential Economic potential Key Eurasian transportation hub Large industrial centre Foreign trade activities Research and innovation capacity Human resources

21 23

Special economic zones in Russia


Background

Location and infrastructure Transportation advantages Tax and customs preferences Procedure for obtaining special economic zone residential status Conclusion

Industrial and manufacturing Special economic zone in the Sverdlovsk Region

32

Contact details

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Welcome message from the Governor of the Sverdlovsk Region


Dear all, The Sverdlovsk Region has truly earned its reputation as Russias core territory it is one of the nations strongest, fastest growing and most attractive for investment. This is where rich natural resources, powerful industrial complex and solid scientific, cultural and human potential all come together. The Mid-Urals is the place where, over three centuries ago, Russias metal industry came to life and thrived and has since become well-known the world over. Extensive industrial experience, a powerful resource base and skilled professionals put the Sverdlovsk Region among the leaders in terms of manufacturing output. Having successfully recovered from the economic crisis, the region is now moving towards the creation of high tech and knowledge-intensive production and is transitioning from an old industrial region to an area of innovative development. And this is why the creation of the Titanium Valley industrial and manufacturing special economic zone is a milestone event for this region, giving every investor an opportunity to fully appreciate and utilise the vast potential of the Mid-Urals and unique conditions for the development of innovative high tech industries. We are ready to provide guarantees to all investors, both domestic and international. To do so, we have already taken a number of administrative measures at the regional and federal levels. For example, the Russian Direct Investments Fund will be ready by summer 2011. In the near future, a special institution of investment representatives will be set up in each of Russias constituent regions, and the Sverdlovsk Region has already established the Ministry of Investment and Development. We are growing fast and strive to meet all business requirements to ensure the sustainability of our economic development and build our confidence in the future. Welcome to the Sverdlovsk Region!

Alexander Misharin Governor Sverdlovsk Region

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Foreword

Dear all, Relative political stability and a rapidly expanding economy have created significant investment opportunities in Russia. The Urals is one of Russias most favourable regions for investment. It is a large industrial region, situated at the crossroads of important routes connecting Europe and Asia. The Sverdlovsk Region is rich in natural resources and has a strong, diversified production and industrial sector, great intellectual potential and a skilled labour force. The Urals is also known for its strong history of academics and advanced field research. Stable economic growth is making the Sverdlovsk Region more attractive for many Russian and foreign investors, allowing them to operate successfully in metals production and manufacturing. The Urals steady economic growth over the past few years has attracted a lot of Russian and foreign investors. According to Russias policy aimed at increasing foreign investment, a number of special economic zones (SEZ) have been established across the country over the last several years. On 16 December 2010, the Russian government established an SEZ in the Sverdlovsk Region. This industrial SEZ was created to bolster the economy of Russia and the Sverdlovsk Region by providing favourable tax, administrative, economic and business conditions for companies interested in investment projects in industrial production. This overview of the project, investment policy and opportunities offered is intended to serve as an aid to investors looking forward to expanding operations in Russia. It would also help potential investors to assess the most competitive advantages offered by the Sverdlovsk Region. This document has been prepared in collaboration with the Sverdlovsk Region Ministry of Investment and Development and the the Ministry of International and Foreign Economic Relations and is based on materials provided by the Ministries. I hope that this publication will inspire investors to pursue new achievements and initiatives. I wish the Sverdlovsk Region Administration continued success in making the region prosperous.

David Gray Managing Partner PwC in Russia

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General information about the Sverdlovsk Region

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1 2 3 4 5 6 7 8 9

Severouralsk KrasnoTurjinsk Serov Kachkanar KrasnoUralsk Verkhnjaja Salda Nizhnjaja Salda Nizny Tagil Turinsk

10 Alapaevsk 11 Irbit 12 Verkhny Tagil 13 Novouralsk 14 Verkhnyaya Pyshma 15 Asbest 16 Tugulym 17 Pervouralsk 18 Beresovsky 19 Sukhoy Log 20 Achit 22 Ekaterinburg 23 Belojarsky 24 Bogdanovich 25 Krasnoufimsk 26 Arti 27 Polevskoy 28 Sysert 29 Kamensk-Uralsky 21 Revda

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Economic and geographical location


The Sverdlovsk Region is one of the fastest growing regions in Russia and is located on the border between Europe and Asia. This is where a powerful industrial complex, rich natural resources, large transportation flows, solid scientific and human potential combine. The economy of the Sverdlovsk Region is an industrial one, and its structure encompasses all key sectors of the industrial complex. This region is among Russias top ten, which account for 60% of the countrys industrial products. The level of concentration of manufacturing industries in the region is four times higher than the national average. What makes this region unique is its advantageous geographical location on the border between the European and Asian parts of Russia, i.e. at the focal point of the country's transport corridors. The regional centre is Ekaterinburg, located in 1 700 km from Moscow on the eastern slope of the Urals. The Sverdlovsk Region is rich in natural resources for the ferrous and non-ferrous metal sectors, as well as the chemical industry. For many years, one of the key priorities of the regions economic policy has been to create a favourable environment for attracting investment and developing international business activities.

Administrative and territorial division


The executive authorities of the Sverdlovsk Region are represented by its Governor and Government. The region has 47 towns, 26 workers and urban-type settlements and 1 843 villages. It is divided into five administrative districts: Gornozavodskoy, Severnyi, Zapadnyi, Vostochnyi and Yuzhnyi, with its administrative centre in Ekaterinburg, which is the capital of the Urals Federal District and Russias fourth largest city by population. Ekaterinburg ranked third in the 2010 Forbes rating of the best Russian cities for business. The city has confidently positioned itself as this Eurasian regions centre and has the necessary international business infrastructure in place. As a result, the Sverdlovsk Regions authority and recognition are growing exponentially.

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Key advantages of the Sverdlovsk Region

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1.

High investment potential, low investment risks and stable financial position

2. Leadership among Russias constituent regions in terms of economic development 3. The largest transportation and logistics hub in the Urals Region 4. Multi-industry manufacturing complex 5. Developed foreign trade activities infrastructure 6. High level of academic knowledge, university and industry R&D potential 7. Skilled labour and a substantial innovation potential

Indicators of social and economic development show the regions vast potential for the development of the Urals economy and its resistance to fluctuations in global markets due to the diversified structure of its manufacturing industries and the radical modernisation processes currently underway.

Finance

Regional budget in 2011

3 085 bln. euro

Capital invrstment in 2010 5 425 bln. euro

Investment potential
Sverdlovsk is one of Russias top constituent regions for investment. Over many years, the region has enjoyed steady and sustainable growth at rates much higher than the national average. The region has a great talent pool and scientific potential, a developed business infrastructure that meets global standards, effective investment support legislation and a successfully implemented long-term regional social and economic development strategy. It is the fifth most populous region in Russia, according to the Territorial Agency of the Federal State Statistics Service for Sverdlovsk Region, and ranks fourth among Russias constituent regions in terms of the volume of regionally manufactured products dispatched and wholesale and retail turnover.

Foreign investment 2010 1 084 bln. euro

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Economic potential
As a result of a positive trend in the regions development over the last few years, its longterm credit rating has been continuously on the rise; this sustainable financial position has become one of the regions most attractive aspects. In 2010, Standard & Poors rating agency once again affirmed the regions BB credit rating. A low debt burden, the regional authorities pursuing a conservative debt management policy, financial support from the federal budget, significant industrial assets, and high liquidity and people welfare indicators that are above the Russian average have had a positive effect on the region's credit quality. Confirmation of this positive credit rating enhances the Sverdlovsk Regions investment attractiveness, facilitates the expansion of the range of potential investors and creditors, and broadens access to borrowings and other sources of capital. This in turn contributes to the further growth of the regions economy. The Sverdlovsk Regions internal regional product is RUB 835bn (2009: sixth among Russias regions). There are 73 lending institutions operating in the Sverdlovsk Region, including those with foreign investment: Raiffeisen Bank, Barclays Bank, Intesa Bank, Societe Generale Vostok, Citibank, Home Credit and Finance Bank and others. Leading global audit, consulting, insurance and leasing companies also operate in the region. The implementation of large investment projects by foreign companies has demonstrated that the regions economy is open to foreign capital. Over just the last three years, Boeing (US), Siemens (Germany), Buzzi (Italy), OMIA (Switzerland), Saint Gobain (France) and others have been launching and successfully implementing their investment projects in the region. The law On state support for investors in the Sverdlovsk Region, aimed at creating favourable conditions for investment overall and support for foreign investments, is in effect. The key investor support arrangements are state guarantees, tax exemptions and a number of other measures taken as part of governmental support.

Rating of Sverdlovsk Region

Industrial Production

Retail turnover

Wholesale turnover

Capital Investments

Foreign Investments

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Key Eurasian transportation hub


The Sverdlovsk Region is advantageously located where Europe and Asia meet, determining the regions importance as a key transit centre in Russia. The regions transport infrastructure is being developed in accordance with a number of federal and regional programmes. The Sverdlovsk Region Administration has adopted a framework for the development of the regions transportation and logistics system for 2009-2015 (with an outlook up to 2030) in line with federal law. This framework is currently being implemented. According to this document, the Sverdlovsk Region is developing as a large international logistics centre with an interregional managing centre. It serves international and regional communications and transit traffic, such as the main latitudinal corridor (an extension of the International Transport Corridor No. 2 BerlinMoscow-Nizhniy Novgorod through Ekaterinburg to Beijing), made up of the existing Transsib railways and the Ekaterinburg-Tiumen and Ekaterinburg-Kazan highways. In developing a transportation hub linking Europe and Asia, the region intends to build an efficient transportation and logistics system, the components of which include: Koltsovo international airport hub, which is the largest airport hub in Russia after Moscow and St Petersburg and facilitates the economic and social development of the Sverdlovsk Region and its integration into the global economy, as well as an expansion of business, culture and tourism;

Sverdlovsk Railway is the main connecting and handling centre for freight and passenger traffic between Europe and Asia and has a unique geographical position and significant resources. Today, the market served by Sverdlovsk Railway covers 10.5% of the country's territory, 7.4% of its population and ensures the operation of 7% of Russias basic production assets; A developed network of roads, including the West-East International Transportation Corridor and a system of highways; A network of international- and interregionallevel terminal and logistics complexes for transferring, storing and handling Eurasian commodity flows.

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Large industrial centre


The regions level of manufacturing industry concentration is considerably higher than the national average, allowing the Sverdlovsk Region to take pride in its role as Russia's industrial centre. The Sverdlovsk Regions industries cover almost all existing types of economic activities. Traditionally, the regions industrial specialisation includes the ferrous and nonferrous metals industry, metal processing, machine building and power generation, including nuclear power.

The machine building complex specialises in the production of machines and equipment, electrical equipment, electronic and optical equipment, and transport vehicles. It includes 240 large and medium enterprises and is one of the core industries in the Mid-Urals economy. It has traditionally been the most innovative and technically advanced sector of the manufacturing industry, employing more than 180 000 people. The regions machine-building enterprises are also large consumers of manufacturing products.

Structure of volume of the shipped goods and services in 2009 (in % total amount)

14,8% Production and distribution of energy, gas and water

44,8% Metallurgy

18,5% Machine-building 17,1% Other activities

4,8% Mining

80,4% Manufacturing activities

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The metals complex specialises in the production of metal and finished metal products, and includes the production of finished steel and steel pipes, pellets and ferroalloys. The nonferrous metals industry manufactures primary aluminium, titanium rolled products, refined copper and copper concentrate. Mining: The Sverdlovsk Region is among Russias most mineral resource-rich areas. The region accounts for 97% of the vanadium, 68% of the bauxites, 23% of the iron ore, 6% of the copper and 2% of the nickel extracted in Russia. It is known for its high level of extraction of alluvial gold and platinum, hard rock gold, raw materials for the construction industry, facing and fabricating materials, etc. Wood processing and woodworking: The wood market, comprising mostly lumber and ply wood, is oriented towards the domestic market and export primarily to the US and Europe. Currently, the Mid-Urals area is also witnessing fast growth in the production of electronic and optical equipment, pharmaceuticals and health products.

Export structure in 2010


17,7%

46,7%

21%

14,6%

n n n n

Machinery equipment production Chemical production Other Metal and metalware

Import structure in 2010


17,8% 11,7% 12,5%

10,6% 47,4%

n n n n n

Metal and metalware Chemical production Mineral products Machinery equipment production Other

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Commodity import
USA China Germany United Kingdom France Czech Republic Italy

Technologies People Information

Attract investment
USA Germany Netherlands Ekaterinburg

We have trade partners from 120 countries

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Foreign trade activities


According to the Russian Ministry of Foreign Affairs, the Sverdlovsk Region ranks third in the country in terms of the number of official consular and trade missions of foreign countries (over 20). The region has more than 130 trade partners. Geographically, the regions key foreign trade partners continue to be industrially developed countries, which account for over 50% of its total commodity turnover. These countries are the key consumers of metals and metal products, machine-building products and chemicals, which constitute the core of the region's exports. The regions foreign trade is expressly export driven. Export accounts for 70.7% of the total commodity turnover while import totals 29.3%. The Sverdlovsk Region differentiates its export both geographically and by product type, thereby lowering its general exposure to market fluctuations. The Sverdlovsk Region is a large importer of high-tech products. Each year, it imports machine-building products worth around EUR 2 billion. Sverdlovsk Region partner countries Finland, Hungary, Bulgaria, Slovakia

Commodity export
Germany Italy Vietnam Austria China

Technologies People Information

Investment
Spain Netherlands Switzerland

Sverdlovsk Region partner regions Baden-Wurttemberg (Germany), Rheinland-Pfalz (Germany), Liguria (Italy), Piemonte (Italy), Carinthia (Austria), Baria-Vungtau (Vietnam), Sinczyan-Uigur Autonomous District (China) Sverdlovsk Region partner city Harbin (China) Ekaterinburg partner cities Genoa and San Remo (Italy)

More than 20 representatives of foreign diplomatic missions

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Research and innovation capacity of the Sverdlovsk Region


The Sverdlovsk Region is one of just a few Russian regions that have retained their high R&D potential and is a leader among them. The region has vast innovation resources that can be used for the production of new high-tech products that will be competitive in both the domestic and global markets. The regions industrial science complex is made up of 92 industrial R&D institutes that employ more than 17 000 people. The academic science complex comprises 22 institutes of the Urals Division of the Russian Academy of Sciences. There are also 32 universities and over 160 large and medium innovative manufacturing enterprises. More than 30 000 people are involved in R&D work in the region. In 2010, the Yeltsin Urals Federal University was founded on the basis of two old Ekaterinburg universities. This university is the core of research and innovation in the Urals Region. In the Sverdlovsk Region, there are 32 universities in total (21 of them are state or municipally owned and 15 of them are non-governmental). The Sverdlovsk Region has 4 200 educational institutions of all types, which teach more than 1 million people. The system of secondary and higher vocational education is also well developed.

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Human resources
The Sverdlovsk Region has a population of 4.5 million, of which 83% live in towns and 17% reside in rural areas. People who are 30 to 49 years old comprise the largest portion of the workforce in the region (56.3%). Almost one fourth of the total workforce (24.9%) is made up of young people from 15 to 29 years of age, and the average age of the regions workforce is 39. The Sverdlovsk Regions workforce is highly educated, which is an important condition for increasing production efficiency as a whole and creates opportunities for attracting high-tech investment projects to the region. The region places great importance on training specialists for important investment projects; it sets up training centres, re-trains teachers and develops educational programmes to meet the demand for any skill or profession.

Economically active population 2343 thousand people

Doctors of Science

1000

PhD

5000

State Universities

19

Scientific and research organizations

138

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Special economic zones in Russia

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Background
Russian Government Resolution No. 1032 of 16 December 2010 created an industrial and manufacturing special economic zone in the Verkhnesaldinsky City District Municipality of the Sverdlovsk Region in pursuance of Federal Law No. 116-FZ of 22 July 2005 On special economic zones in the Russian Federation. Russia has 24 special economic zones (SEZs) of four types: industrial (4), innovative (4), tourist (13) and port and logistics (3). In the Urals and Siberia, there is just one industrial and manufacturing SEZ, located in the Sverdlovsk Region. As of 1 January 2011, 257 investors were registered in SEZs. Twentythree more companies have obtained approval of their projects from the Expert Boards and will soon enter into contracts on operating in the SEZ. Thirtyone residents operate in the industrial zones, 195 entities in the innovative zones and 31 companies in the tourist zones. Federal Law No. 116 of 22 July 2005 On special economic zones in the Russian Federation establishes a special regime of operating within an SEZ that provides a special system of benefits and preferences for its residents. The key advantage of an SEZ is the predictability of expenses (administrative, tax, resource, etc.) for investors doing business there. Among an SEZs other advantages are: a special tax regime; a special customs regime; special rates for lease and purchase of land and connection to infrastructure networks. Simplified administrative barriers are an advantage available to those who set up production within an SEZ. Investors also like to see that there are fewer examinations. Examinations are carried out solely to the extent required to assess project solutions from a health and safety perspective with regard to buildings, structures and individual designs and their compliance with the approved urban planning documentation. The timeframe of the examination and approval of project documentation for investment projects suggested for implementation in an SEZ has been significantly reduced to 45 days.

SEZ residents are protected from unfavourable changes in Russian law, i.e., if Russias federal or regional laws or any other regulatory acts worsen the position of SEZ residents, then they should not be applicable until the area loses its SEZ status. It is important that the time period of this guarantee coincides with the period of the SEZs existence. This guarantee also covers changes in tax and customs requirements, which is very important for any business in Russia, where such changes occur rather frequently. Only those investors who have obtained their status as an SEZ resident are entitled to these exemptions and preferences. SEZ residents must make a capital investment in roubles in an amount equivalent to no less than EUR 3 000 000 (except for intangible assets) using the Central Bank of Russia exchange rate as of the day on which the application for concluding a contract on manufacturing and industrial operations in the SEZ was filed with the SEZ managing bodies. SEZ residents must also make a capital investment in roubles in an amount equivalent to no less than EUR 1 000 000 (except for intangible assets) within a year of concluding the above contract. After their registration in the SEZ, residents can lease a plot of land with a complete engineering and transportation infrastructure that significantly reduces expenses on the construction of their production facility. The plot of land can be bought out later. In addition, SEZ residents are given an opportunity to use an accelerated depreciation method with a coefficient of two and an accelerated R&D expense recognition approach. Extraction or development of mineral resources, processing of non-ferrous or ferrous metals and production of excisable products (except for light cars and motorbikes), weapons or military equipment are not allowed within the SEZ. It is also prohibited to have housing facilities within the SEZ. Industrial and manufacturing zone residents do not have the right to engage in any activity other than that provided in the investment project. SEZ residents also do not have the right to have representative offices or branches outside the SEZ.

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Industrial and manufacturing special economic zone in the Sverdlovsk Region

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Location and infrastructure


The SEZ is located beteen Verkhnaya Salda and Nizhny Tagil, two of the Sverdlovsk Regions largest cities. It is also in close proximity to CJSC Ural Boeing Manufacturing, a US-Russia venture, and VSMPO-AVISMA Corporation OJSC, the world's main producer of titanium and titanium products and a supplier of titanium components for Airbus, Boeing, General Electric, Goodrich, Embraer, Rolls Royce, Safran, etc. The scope of the SEZs industrial priorities covers aircraft engineering, production of components for the aerospace and auto industries, metalworking, tool engineering, the machine tool industry, mechanical engineering, the robotics industry, microelectronics, and chemical production, including pharmaceuticals, composite materials, medical products, etc.

Cities of the SEZ


Verkhnaya Salda was founded in 1778. It covers 7 000 hectares and has a population of 51 000. The city is 176 kilometres away from Ekaterinburg, and its principal industries are mechanical engineering, metals and related mining industries. Verkhnaya Salda is home to several universities and technical vocational schools, including the Verkhnaya Salda Branch of the Ural Federal University. The total number of students attending educational institutions there is 4 700, with about 1 180 graduates every year. To meet the needs of the SEZs residents, the government is establishing the Territorial Training Centre for technical specialists on the basis of the Yeltsin Ural Federal University.

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Nizhny Tagil was founded in 1722. Its territory covers 4 106 square meters and has a population of 37 500 people. Nizhny Tagil is located 146 km away from the city of Ekaterinburg. Its major industries are the mining, mechanical engineering, metals, energy and food industries.

The educational infrastructure of these two cities neighbouring Titanium Valley has the necessary basis for training in-demand professionals. Verkhnaya Salda has a professional vocational school for skilled workers, a college for highly qualified personnel and a branch of the Ural Federal University for engineers with university degrees. In addition, there is the Nizhny Tagil Technological Institute (a branch of the Ural Federal University), E.A. and M.E. Cherepanov Nizhny Tagil Mining and Metallurgical College, Demidov Nizhny Tagil State Professional College, Polytechnic Gymnasium, etc. The city is also home to the Nizhny Tagil Institute of Metal Testing. The institute is capable of providing for a laboratory base for applied research to be conducted by potential SEZ residents.

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Transportation advantages
Titanium Valley provides SEZ residents with easy access to rail and motorway transportation to destinations throughout Russia and around the world. The R-353 motorway near Nizhny Tagil connects the SEZ to the city and the entire Russian transportation network. A separate

railway line links the SEZ with the Nizhny Tagil-Alapaevsk highway and Smychka railway station, which provides access to all of Russia's main railroads. Salka Airport, which is ready for use by the SEZs future residents, is just 20 kilometres from the SEZ. Ekaterinburg-based Koltsovo International Airport offers flights to destinations around the world.

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Customs benefits and preferences


Under Article 6, Part 4 of the Federal Law On Special Economic Zones, the Sverdlovsk Region Administration and the Administration of the Verkhnaya Salda City District of the Sverdlovsk Region ensure the due adoption within their powers of legal acts and regulations establishing the following tax benefits for SEZ residents by 30 July 2011:

An important advantage of the SEZ is that products manufactured there using goods produced abroad and goods from the Customs Union (Russia, Kazakhstan and Belarus) can be exported by SEZ residents to Russia and the Customs Union without VAT and duties until 1 January 2017 (if a company is registered in the SEZ before 1 January 2012), or outside the Customs Union without VAT and customs duty, provided the goods were sufficiently processed in the SEZ. Residents are entitled to independently choose criteria for the sufficient processing of goods, which can include the following: Changing the classification code of goods under the Unified Product Range of the Customs Unions foreign trade activity at the level of any of the first four digits Meeting the required conditions, executing production and technological operations sufficient for qualifying goods produced using foreign-made goods placed under the free customs zone customs procedure as the Customs Unions products Changing the value of goods when the percentage of the value of materials used or the added value reaches the fixed percentage in the finished product's price (normally, the ad valorem percentage) An SEZ resident company can apply a multiplying ratio of two to the main statutory limit of depreciation charges for property, plant and equipment. It is entitled to treat R&D expenses as deductible, including those that did not produce a positive result, in the total amount of actual costs incurred in their reporting (tax) period. The Sverdlovsk Region Administration is considering granting subsidies to investors (SEZ residents) to reimburse profit tax costs related to payments to the Russian constituents budget at 13.5%, with over RUB 1.5 billion in total capital investments into the project for a pay-off period of less than 10 years.

Type of tax

Current tax rate in Russia

Tax rate in the SEZ

Corporate years profit tax Corporate years property tax

20%

15.5%

years

10

2.2%

0%

years

10

Land tax

1.5%

0%

Transport tax (roubles per unit of horse power)

7-15%

0%

The SEZ offers a free customs zone regime, under which foreign-made equipment and components can be imported for free, i.e., value added tax on imported foreign goods will be 0% and import customs duty will not be charged.

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Procedure for obtaining SEZ resident status


To obtain SEZ resident status, corporate investors will need to:

Conclusion
The Russian economy is becoming more and more accessible to the world. The growing domestic market, rich mineral resources, vast scientific and production potential, political and financial stability have combined to make investment in Russia more attractive by creating the possibility of long-term business development. The Sverdlovsk Region has been witness to a great deal of work on establishing and improving the conditions necessary for doing business and making investments. With its high standard of living, powerful production facilities, and welldeveloped business and logistic infrastructure, the region is a shining example of Russias modern and upgraded economy. Today, as an industrial centre of Russia, the region is a very attractive potential market with unlimited opportunities. Having a presence in the region provides for successful business growth both in and outside of Russia for many years to come. As prescribed by the Strategy for the Sverdlovsk Regions social and economic development through 2020, one of the main tools for achieving sustainable economic development in the region is the establishment of institutions like SEZs at a regional level, namely production and industrial SEZs and high-tech enterprises based on OJSC VSMPO-AVISMA Corporation in Verkhnaya Salda. The establishment of an SEZ in the Sverdlovsk Region is a critical step toward ensuring a comfortable environment for investors in this key Russian region. Today we can also affirm that making investments in SEZs is the best way of contributing to the Russian economy, which is characterised by sustainable post-crisis growth, increasing consumption of one of the worlds densest markets (Russias population is 141 million people and 281 million people live in its neighbouring states) and the worlds thirdlargest gold and currency reserves.

1. 2.

sign a letter of intent with the Sverdlovsk Region Administration; develop a business plan for the project based on the criteria established by the Russian Ministry of Economic Development; generate a request for a company to be assigned SEZ resident status and register a legal entity in the Verkhnaya Salda City District; undergo the investment project approval procedure at the SEZ Expert Council meeting; sign an agreement on conducting production and industrial activity in the SEZ with the SEZs operator, who will provide all necessary support for communication among the residents with regard to SEZ matters.

3.

4.

5.

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Contact details:
Sverdlovsk Region Administration PwC Ekaterinburg

Sverdlovsk Region Ministry of Investment and Development


1 Oktyabrskaya Pl. Ekaterinburg, Russia, 620031

Senat Business Centre 7A, office 301, Gorkogo Ul. Ekaterinburg, Russia, 620075 Phone: +7 (343) 253 1433 Fax: +7 (343) 253 1430

Mikhail Maximov Minister of Investment and Development

Maxim Matsiborko Managing Partner


E-mail: maxim.matsiborko@ru.pwc.com

Sverdlovsk Region Ministry of International and Foreign Economic Relations


1 Oktyabrskaya Pl. Ekaterinburg, Russia, 620031

Alexander Kharlov Sverdlovsk Region Minister of International and Foreign Economic Relations
Phone: +7 (343) 217 8672 Fax: +7 (343) 217 8907 r66@midural.ru

Andrei Sobolev Head of Foreign Trade and Investment, Sverdlovsk Region Ministry of International and Foreign Economic Relations
Phone: +7 (343) 217 8908 Fax: +7 (343) 217 8907 sobolev-ao@midural.ru

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