1. Introduction
    1. Political and administrative structure
    2. Legal environment
  2. Common forms of business structures for foreign investors
    1. Main types of structure
    2. Registration, liquidation and reorganisation of business structures
    3. Shareholders’ and participants’ agreements
    4. Strategic industries
  3. Anti-monopoly issues
    1. General legal and regulatory framework
    2. Scope of application of the Competition Law
    3. Anti-competitive practices and restriction of competition
    4. Liability
  4. Tax system
    1. General approach
    2. Corporate taxation
    3. Incentives
    4. Special tax regimes
    5. Taxation of individuals
    6. Double taxation treaties
  5. Customs regulations
    1. General approach
    2. Trade between EEU and non-EEU countries
    3. Mutual trade between the EEU members
  6. Currency control
    1. Foreign currency transactions
    2. Consequences of breach/Penalties
  7. Lending in Russia
    1. Lending documents and governing law
    2. Jurisdiction
    3. International finance transactions and repatriation requirements
    4. Security interests
    5. Recognition of security trusts
    6. Syndicated loans
    7. Enforcement
    8. Suretyships and guarantees
    9. Bankruptcy considerations
    10. Other lending related issues
  8. Employment and migration
    1. Formalising the employment relationship
    2. Managing employment relationships
    3. Terminating an employment agreement
    4. Specifics of employing foreign nationals
  9. Personal data protection
    1. General approach
    2. Scope of the Data Protection Law
    3. Liability
    4. Right to be forgotten
  10. Intellectual property
    1. General approach
    2. Contractual aspects of intellectual property rights
    3. Rights over the results of intellectual activity
    4. Company names, trade names, trademarks and appellations of origin
    5. Intellectual property rights infringements
    6. IP Court
  11. Advertising issues
    1. General approach
    2. Scope of application of the Advertising Law
    3. Violations of the Advertising Law
    4. Liability
  12. Anti-corruption and compliance
    1. General approach
    2. Legal framework
    3. Compliance requirements for companies
    4. Concept of corruption in Russian law
    5. Possible targets of bribery
    6. Liability and penalties for corruption
    7. Example of sector-specific anti-corruption measures
  13. Real estate and construction
    1. Rights to real estate
    2. Real estate transactions
    3. Resolution of real estate disputes
    4. Planning and construction issues
  14. Corporate bankruptcy
    1. Insolvency criteria
    2. Stages of bankruptcy proceedings
  15. Import substitution and production localisation in Russia
    1. Measures affecting goods importation and current import substitution legislation
    2. Localisation incentives
    3. Sector-specific impact of import restrictions and localisation requirements
  16. Banking sector
    1. Legislative and regulatory framework
    2. Licensing and operations
    3. Deposit insurance
    4. The anti-money laundering law
    5. Bank secrecy
    6. FATCA and CRS
  17. Environment, energy efficiency and renewables
    1. Environment
    2. Energy efficiency
    3. Renewables
  18. Infrastructure and public private partnerships
    1. General approach
    2. Key PPP legislation
    3. Russian PPP environment
    4. Financing
    5. Legal issues
    6. Prospects for infrastructure projects
  19. Oil & gas
    1. Legislative framework
    2. Ownership and licensing
    3. Restrictions on foreign investors
    4. Licences
    5. PSAs

Import substitution and production localisation in Russia

Background

Around ten years ago, the Russian Government and legislators started to adopt measures aimed at increasing domestic production of goods and reducing the country’s dependency on foreign goods. The events, which took place in Ukraine in 2014, further reinforced these measures as it became more obvious that it is very dangerous for the country’s economy to be overly dependent on imported goods that (i) could be cut off at any time by sanctions; and (ii) are subject to currency exchange rates volatility.

Initially, the government’s policy was simply aimed at import substitution by removing foreign goods from the Russian market and imposing restrictions on imported goods so that domestic goods would take their place. However, it quickly became clear that it was necessary to simultaneously attract foreign direct investments and provide incentives for foreign companies to localise their production in Russia.

Currently, a weak Russian rouble, relatively cheap and qualified local labour force, a free access to the CIS markets¹, including the country’s deeper integration with Armenia, Belarus, Kazakhstan and Kyrgyzstan, which are members of the Eurasian Economic Union (the “EEU”), together with the incentives implemented by the Russian Government, have made the country an attractive place for production of goods.


[1] Russia is a party to the Commonwealth of Independent States Free Trade Area (CISFTA) between Russia, Ukraine, Belarus, Uzbekistan, Moldova, Armenia, Kyrgyzstan, Kazakhstan and Tajikistan. However, Russia has suspended this regime towards Ukraine since 2016. In addition, Russia has bilateral free trade treaties with other CIS countries like Azerbaijan. Back ↑

Localisation incentives

Along with the above restrictive measures, the Russian Government and legislators have created several incentives for foreign companies to localise their goods in Russia by opening production plants in the country, instead of simply importing their goods from their factories in other countries.

The main types of incentives are:

  • goods produced in Russia are not subject to the restrictions imposed on imported goods;
  • tax benefits (please see the Tax system chapter); and
  • subsidies.

The “Made in Russia” solution

Given the significant share of the public sector, especially when combined with the procurements of goods carried out by state-controlled companies, the restrictions imposed on imported goods effectively and significantly limit the access of importers of foreign goods, except those involved in consumer goods, to the Russian market.

Accordingly, foreign companies whose goods are subject to restrictions can maintain their shares or get full access to the Russian market if they open production plants in the country. Such plants can use imported components. However, they must carry out production activities that will allow their end products to be classified as “domestic” goods.

The EEU’s customs laws and regulations generally determine whether products may be regarded as Russian goods. A product is assigned a certificate of Russian origin if it is fully manufactured or is “sufficiently processed” in the country.

There are two main criteria for defining sufficient processing:

  • formal criterion: as a result of processing, one product is transformed into another in such a way that, according to the classification of goods for customs purposes1, leads to a change in the first four digits of the product’s classification code (e.g. a plank, which has code No. 4407, is manufactured into a wooden box with code No. 4415);
  • value criterion: this is when industrial or technical processing leads to a certain percentage of added value increase in the finished product, compared to its components. There are specific rules as to how to calculate such added values for different types of goods (e.g. not all assembly works may count towards added value for the purposes of considering end products as “domestic” goods).

The Russian origin of goods is confirmed2 in the following ways:

  • by an ST-1 Certificate, which is issued in accordance with the Agreement on the Rules for Determining the Country of Origin of Goods in the Commonwealth of Independent States, which was adopted in Yalta on 20 November 2009;
  • by an expert opinion of the Russian Chamber of Commerce; or
  • under a special investment contract that was signed with the manufacturer.

General direct investment incentives

Quite a few direct investment incentives are available in Russia, for example:

  • entering into special investment contracts (SPICs), which are now being rebooted into SPIC 2.0 due to the low efficiency of the initial version (please see the Environment, energy efficiency and renewables chapter);
  • obtaining the status of a regional investment project;
  • locating production in an industrial park;
  • locating production in a production cluster;
  • becoming a resident of a special economic zone (please see the Tax system chapter);
  • claiming benefits provided by a bilateral investment treaty; and/or
  • obtaining subsidies from the state budget.

These instruments may sometimes overlap and synergise with each other.


[1] Decision No. 54 of the Council of the Eurasian Economic Commission “On Approval of the Common Commodity Nomenclature for Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff of the Eurasian Economic Union” dated 16 July 2012. Back ↑

[2] According to Russian Government Decree No. 719 dated 17 July 2015. Back ↑

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