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  • Why to invest in Russia

    «A broad and varied framework of support has been set up in Russia in response to the needs of investors. Support can be provided at national level and/or local level for all types of projects, from manufacturing, services and R&D to innovation and training.

    The RDIF network is a key contact for foreign investors to help them identify clearly the eligibility of their investment projects for state aid». Kirill Dmitriev, RDIF, CEO


    Currently, Russian market can be characterized as emerging, but there are some advantages we have to mention.

    Firstly, the Russian GDP growth of 1.6 % was announced in 2017, including 2.5% expansion of agricultural sector. The government supports the initiatives to build the developed economy prospectively.

    For instance:

     

    -Regional incentives granted by local authorities with respect to taxes paid to their budgets. The size of an entry investment is usually in the range of around RUB 50 million to RUB 150 million.

    -Special tax regimes in special economic zones (SEZs).: industrial zones, port zones: RUB 120 million in case of reconstruction. The investment of RUB 40 million should be made within the first three years, RUB 400 million within three years from the date of obtaining resident status in a port zone in cases of port facilities construction.

    -Regional investment projects and special investment contracts. Investors who have concluded such contracts may enjoy a reduced CIT rate and a number of non-tax incentives, rental payment for land, etc.

    -Advanced Development Zones (ADZs): to develop the Russian Far East. Zero rate on the federal portion of CIT for a five-year period. Reduced social contributions (7.6% instead of the standard 30%) during a ten-year period. Reduced regional portion of CIT (not more than 5% at most during the first five years of profitable sales and at least 10% during the subsequent five years).

    -The free port of Vladivostok

    -Incentives related to certain activities (e.g. R&D and information technology [IT] related activities).

    -Reduced CIT rate for IT companies in several regions.

    -Certain R&D services are exempt from VAT.

    -Fixed assets used in science and technology may be depreciated with an accelerated coefficient of up to 3.

    -Incentives related to specific projects (e.g. Skolkovo, 2018 FIFA World Cup). exemption from CIT and property tax, as well as from VAT liability, and reduced rates for mandatory social fund contributions.

    -Russian tax law provides for special tax regimes to support small and medium-sized enterprises (SMEs). These include unified and simplified tax regimes, as well as a unified agricultural tax.

      

    Secondly, 2018 could see a growing mismatch between the supply vs. demand of funds. this mismatch will require stronger efforts to improve Russia’s investment climate. Russia registered impressive progress reaching 35th position among the 190 economies measured in this year’s World Bank Doing Business report. Not such a low position, right?

     

    Thirdly, it seems that week ruble influenced negatively. However, During last years, because of the main effort of ruble lowing the government has made fighting inflation a top priority over the past years, with the central bank maintaining a strict fiscal and monetary policy.

    As a result inflation in December 2017 was at a record low of 2.5 percent and unemployment was at 5.1 percent.

    The Central Bank policy rate is still nearly 8 percent — an emerging market level. But that too is expected to fall and could go as low as 4-5 percent in 2018.

    A lower Central Bank interest rate should stimulate borrowing and spending. Middle-class Russians are starting to move upmarket in the food they buy, and the car market, which collapsed during the recession.

     

    Fourthly, Russian company profits are growing, the stocks are dirt cheap, and dividend yields are high. It could be the best time to invest in Russia, as macro factors are turning positive while the stock market is still the cheapest in the world.

    The cheapest PE in the world – 7.1. Undoubtedly, Russian economy had suffered from oil prices’ dependence for last years, but now it’s started to recovery.

     

    Fifthly, One belt one road Chinese project will link 65 countries in Asia and Europe. And there is still time to invest and take advantage of the economic development and Asian related growth.

     

    Industry production ratings:

     

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    To conclude Russia has never been the easiest country to understand, but it's worth it. We provide all the services from the first step to the last on the way to Russia.
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