Attracting foreign investments to the economy is one of the basic areas of foreign trade activities of the republic. In Bashkortostan there was created and is being constantly updated normative and legal base regulating topics of investment activity and granting guarranties and privileges to foreign investors. Free economic zones have been set up in Bashkortostan,where preferential taxation order to create favourable conditions for capital inflow into various branches of industry is provided. Presently,free economic zones in towns Aghidel and Kumertau are functioning.
Political, economic and social stability to a great extent determines firm positions of the republic in Russia regions investment attractiveness rating, defined by the «ExpertRA» agency.
In terms of investment potential Bashkortostan is on the 11th place, and holds the 8th position in the rating of investment risk, and is in the top ten in Russia in terms of:
- legislative activity in investment policy (4th place);
- the volume of capital investments (8);
- the level of industrial development (9);
- innovational activity of the enterprises (10).
Within 10 years,since the foreign trade activities were liberalized the volume of foreign investments attracted to the republic’s economy made over 320 million USD, including direct investments — 47 million USD or 14,7%, credits — 250 million USD or 78%.
Mostly, investments were attracted to the enterprises in chemical and petrochemical industries, metallurgy and engineering, light industry and agriculture. Germany, Belgium, Holland, Spain and China are the countries most actively investing to the republic.
There are frame credit agreements between West and Bashkir banks that are of high importance for attracting foreign financial resources to the republic.
In 1992 the Governments of the Republic of Bashkortostan and Free State of Saxony, Germany, signed the Joint Statement and Financial Protocol, which became a starting point for the present revolving credit line in the amount of 100 million DM under the guarranties of the governments.
Under the demand line of credit there were realized:
- project of JSC «Salawatnefteorgsyntez» on production ethylbenzene, styrol, necessary documentation and production equipment has been bought;
- delivery of production equipment for digital and radio-relay communication for JSC «Bashinformsvyaz»;
- purchase of 100 harvesting combines by «Case Harvesting Systems GmbH» for technical equipping of the republic’s agriculture.
Within 1998–2000 the republic bought 135 harvesting combines by «New Holland» company, Belgium, in the amount of 46 million DM. This project has been realized in accordance with credit agreements between JSC «BashCreditBank» and CredietBank, Belgium, for the amount of 28 million DM.
In 1998 the Moscow Narodny Bank and Midland Bank, Great Britain, granted the Bashkortostan Government with credit for the amount of 45 million USD for financing the priority investment projects.
With financial support of «Bancario San Paolo do Torino», Italy, which gave credit for the amount 70 million USD, the Technimont company put into operation the polypropylene production unit with the capacity 100 thousand tons per year at JSC «Ufaorgsyntez» in 1997. Under the program,new projects on production polypropylene bags are realized, new processing areas are under study.
The Bashkortostan Government considers it priority to invest to developing natural resources, setting up new highly technological productions, completing construction objects, ecological projects and infrastructure updating. The most effective form of establishing new productions is setting up joint ventures and enterprises with full foreign property in the territory of the republic.
As of January 1, 2001, 490 joint ventures, branches and representation offices of foreign legal subjects were registered in the republic, including joint ventures — 299, companies with full foreign investment — 120, branches — 36, representation offices — 37.
Mostly, firms and companies of the following countries take part in establishing new companies with foreign investments in Bashkortostan: Turkey — 56, Uzbekistan — 44, the USA — 36, Vietnam — 29, the Ukraine — 25, Germany — 24, China — 24, Kazakhstan — 21.
One of the examples of the foreign companies profitable business in the republic is Amstar joint venture. A plant on beer production with output of 3 million deciliters per year has been put into operation in it under investments of the Dutch firm «Amsterdam Brewery Investment B.V.»
To increase efficiency of facing and decorative stones use a joint Bashkirian-German venture «Bashkirskiy granit» is working. The enterprise is equipped with modern production equipment of Eisenwerk Hensel company, Germany. The equipment allows producing a wide range of items out of natural stone with high level of manufacturing automation.
Spanish company «Kelme Internacional» supplied equipment to joint stock company «Baskelme» to complete construction of sports footwear and completing items factory according to the signed credit agreement with European Bank for Reconsruction and Development in the amount of 22 million USD. The factory’s capacities allow producing 1,2 million pairs of footwear, 200 thousand units of textile items annually.
Spanish joint-stock company Perea Maritima, («Pemar,C.A.»)observed the terms and conditions of the commercial competition — made free financing of JSC «SalawatGidroMash» for the amount of over 1,5 million USD and redeemed 27,4% of the enterprise’s shares. It is important to note, that the project realization presupposes that JSC «SalawatGidroMash» will have long-term guaranteed sales of its production by manufacturing and supplying hydraulic production in the amount of up to 3 million USD annually on request of the Pemar C.A. company.
Developing foreign economic cooperation the Bashkortostan Government takes its cue to establishing long-term contacts with international organizations, large banks and financial companies. Bashkortostan is one of few Russian regions accomplishing cooperation with the United Nations Organization for Industrial Development (UNIDO).
The Government of the Republic the Bashkortostan and UNIDO signed an Agreement on Cooperation in April 23, 1999 to promote a stable progress of the industry and settle ecological problems. An Integrated program on building up industrial potential and raising competitiveness of Bashkortostan in the world market has been developed. It is aimed at studying economic potential of the republic, selecting perspective investment projects, and so on.
Mainly, UNIDO takes its priorities in our republic as help in search of foreign investors for major investment projects, such as construction of Bashkir polyester complex «Polyef» in the town of Blagoveshchensk, construction of catalysts production units at Ishimbay chemical plant of catalysts, polycarbonates production in joint-stock company «UfaKhimProm».
There is a Foreign Investments Agency of Bashkortostan in the republic and its main purpose is to assist the republican enterprises and foreign companies to realize investment projects. Over 150 investment projects of the republic are included into UNIDO information database.
The republic’s government pays much attention to building up a positive image of Bashkortostan in the international scope. To develop mutually advantageous cooperation with foreign partners and promote the Bashkortostan’s production to the world markets there were held various events,such as:
- international conference «Investments in the Republic of Bashkortostan» and presentation of the investment projects;
- presentation of the Republic of Bashkortostan for the members of the American Chamber of commerce;
- meetings with businessmen of Hungary, Germany, China, India, Turkey, Finland, Poland, the Czech Republic, Slovakia,etc.
In April 2001 an international rating agency «Standart & Poor’s» assigned long-term credit rating «B-minus» (Stable) and another international agency «Moody’s Investors Service» issued «B3» rating to the Republic of Bashkortostan, reflecting the republic’s possibilities to pay off its long-term liabilities.
We attach much importance to developing and improving economic relations with all foreign countries and are looking forward for your proposals on mutually advantageous cooperation, and ready to open up new business relations.
List of the documents required for registration of the enterprise with foreign capital
1. Application to the State Registration Office with the Ministry for Foreign Relations and Trade of the Republic of Bashkortostan (SRO MFRT RB) for registration with the description of the activity of the enterprise — 2 copies.
2. Documents of the Russian participants of the created enterprise with the foreign capital:
a) Certificate (decree) on registration of the enterprise (notarially attested copy) — 2 copies.
b) Memorandum and Articles of Association (notarially attested copies) — 2 copies each.
c) Resolution of the supreme body on participation in the joint-venture (notarially attested copy) — 2 copies. The participants — the individuals present a copy of the passport — 2 copies.
3. Documents of the foreign participants:
a) Statement from the trade registrar of the country where the company is registered or other document verifying registration as the legal entity (master copy or notarially attested copy with a legalization approval) — 2 copies.
* The member — legal person presents a copy of the passport — 2 copies.
b) Document on solvency of the foreign partners, legal and (or) individuals given by the bank (master copy or notarially attested copy with a legalization approval) — 2 copies.
* Term from the moment of issue of the indicated document before submission to SRO MFRT RB is no more than 6 months.
c) The business permit for the foreign participants — individuals, if such registration is provided by the legislation of the country of residing, or other document verifying status of the entrepreneur — foreign investor (master copy or notarially attested copy) — 2 copies.
* All documents should be translated into Russian, and the signature of the translator should be certified by the notary.
* Documents and acts originating from the following states: the Republic of Albania, the Republic of Armenia, the Republic of Belarus, the Republic of Bulgaria, the Hungarian Republic, the Socialist Republic of Vietnam, Peoples Republic of China, Democratic People Republic of Korea, the Republic of Kazakhstan, the Republic Kyrgyzstan, the Latvian Republic, the Lithuanian Republic, the Republic of Moldova, Mongolia, the Republic of Poland, Romania, the Republic of Turkmenistan, the Republic of Tajikistan, the Republic of Uzbekistan, the Republic of Ukraine, Czech Republic, the Slovak Republic, the Estonian Republic, the States of former Yugoslavia do not require their legalization.
4. Instruments of Association:
a) The minutes of the founder’s meeting on incorporation of the enterprise signed by the founders, and in case of incorporation of the enterprise by one founder — the resolution of the founder on incorporation of the enterprise. The master copy and notarially attested copy should be provided.
b) Articles of Association Charter — 2 copies.
c) Memorandum of Association of the legal entity — 2 copies.
5. Statement from the bank about opening the account and that not less than 50% of the authorized capital was put to the account.
6. Letter of guarantee on granting to the incorporated enterprise of a premise (legal address), with the appendix of the documents verifying the property right to a premise — 1 copy.
7. Document on payment of an admission fee at the rate of two minimum wages.
8. Power of attorney to register with SRO MFRT RB, if the registration is entrusted to the proxy — 1 copy.
* If as the founder of the enterprise with the foreign investments from the Republic of Bashkortostan acts state and (or)municipal enterprise, the incorporation of the legal entity should be previously agreed with appropriate committees of the Republic of Bashkortostan on the property management.
* If the total cost of assets of the founders of the incorporated enterprise exceeds 100 thousand of the minimum sizes of wages, the founders are obliged in 15–day’s term from the date of state registration to notify the Body of anti-monopoly policy of the Republic of Bashkortostan about registration of the legal entity. The founders can address to the Ministry with the given problem prior to the registration of the enterprise.
The documents are taken for examination only if all documents are provided. Term of registration is not over 30 days from the date of submission of all documents according to the list with possibility to eliminate the defects, revealed by examination.
Pursuant to the Decree of the Government of the Russian Federation #655 from 06.06.94, the enterprises with the foreign investments registered in the Republic of Bashkortostan,are subject to entering into the Unified State Register of the enterprises with the foreign investments of the Russian Federation. The management of the indicated register is assigned to the State Registration Office of the Ministry for Justice of Russia (SRO of MJ RF).
Guarantees to the foreign investors and commercial organizations with the foreign investments in the russian federation
The Federal Law of Russian Federation From 9.07.99 #160-FZ «About the foreign investments in the Russian Federation»
A Russian commercial organization receives the status of commercial organization with the foreign investments from the date of the foreign investor joined it. The commercial organization loses the status of commercial organization with the foreign investments from the date of foreign investors leaves the company.
The legal mode of the foreign investors activities and utilization of the profit, obtained from the investments, can not be less favourable, than legal mode of activities and use of the profit, obtained from the investments given to the Russian investors.
The foreign investor after payment of taxes and collectings, stipulated by the legislation of the Russian Federation, is entitled to free usage of the incomes and profit on the territory of the Russian Federation and can freely transfer abroad incomes, profits and other moneys gained according to the law in foreign currency in connection with the investments, earlier carried out.
The property of the foreign investor or commercial organization with the foreign investments is not subject to orced withdrawal, including nationalization, requisition, except for the cases and on the basis, which are stipulated by the federal law or international agreement of the Russian Federation.
The full and unconditional protection of rights and interests is granted to the foreign investor on territory of the Russian Federation.
The following guaranties are granted to the foreign investor:
- Legal protection;
- Transfer of rights and responsibilities to other person;
- Payment of indemnification at the case of nationalization and requisition of property;
- From the unfavourable change of the legislation of the Russian Federation;
- Provision of proper dispute resolution;
- Purchase of securities;
- Participation in privatization;
- Rights to the land cuts, natural resources, building, facilities and other real estate.
The regions of the Russian Federation have the right to adopt laws and other normative legal acts regulating foreign investments, on problems relating to their authority, and also to joint authority of the Russian Federation and the regions of the Russian Federation.
The regions of the Russian Federation and bodies of local government within the limits of their competence can grant to the foreign investor privileges and warranties, to finance and to render other forms of support of the investment project realized by the foreign investor, at the expense of the budgets of the regions of the Russian Federation and local budgets, and also out of budget means.
Tax privileges to the foreign investors and commercial organizations with foreign investments
The Value-Added Tax
The operations of rendering the financial services on granting loans in money form are not subject to the taxation.
The importation to the customs territory of the Russian Federation of the following is not subject to the taxation:
- Goods (except for the excise liable goods),imported as free aid for of the Russian Federation;
- Medical goods of domestic and foreign production according to the list stated by the Government of the Russian Federation;
- Materials for manufacturing of medical immune biological preparations for diagnostics, preventive maintenance and (or) treatment of zymotic diseases;
- Technological equipment, inventory materials and their spare parts, imported as the contribution in authorized capital of organizations, according to the list, identified by the State Customs Committee of the Russian Federation;
- Goods intended for official use of foreign diplomatic and equal to them representations,and also for personal use of diplomatic and administrative — technical staff of these representations,, including members of their families living together with them.
The imported technological equipment (inventory materials and their spare parts) is released from the payment of the tax, which analogs are not made in the Russian Federation, according to the list approved by the Government of the Russian Federation (the Decree of the Government of the Russian Federation from October 18, 2000 #806).
This privilege expires after January 1, 2002.
The profit tax
The following profit is not subject to the taxation:
- Gained from production of children’s food;
- Directed by the enterprises of branches of material production sphere for financing capital investments of industrial purpose, and also for repayment of the bank credits obtained and used for these purposes, including interests on the credits;
- Directed by the enterprises of all branches of the national economy on financing housing and construction,and also for repayment of the bank credit obtained and used for these purposes,including interests on the credits;
- Directed by the enterprises for realization research and experimental and pilot-design work, but no more than 10% from the sum of the taxable profit.
The taxes, collectings, excises and other mandatory payments
Pursuant to the Law of the Russian Federation from 30.12.95 #225-FZ «On agreements on sharing of production» the enterprise is released from the taxation, collectings, excises and other mandatory payments (except for the profit tax and payments for use of natural recourses). The collection of the indicated taxes, collectings and other mandatory payments is substituted by sharing of production on the terms of an agreement.
Privileges in the customs import duties in the Russian Federation
The goods imported to customs territory of the Russian Federation as the contribution of the foreign founder to the authorized capital are released of the customs duties, provided that the goods are:
- not excise liable;
- related to the fixed assets;
- imported in terms established by the instruments of incorporation in order to form authorized capital.
The rates of the import customs duties reduced twice, can be applied to the goods of foreign origin within no more than 5 years provided that the foreign companies, delivering them, are the founders of the enterprises, which produce the similar goods on the territory of the Russian Federation with use of domestic raw material and labour of the Russian workers and carry out the direct investments in the branches of material production of the Russian Federation in the sum equivalent not less than 100 miln.USD. Thus the contribution of the foreign participant to the authorized fund of such enterprise should make the sum equivalent not less than 10 miln. USD.
The equipment, including machines, mechanisms and also materials which are included in a set of delivery of the appropriate equipment,and componentry (except for those which are not liable to excise), imported to the customs territory of the Russian Federation, as part of the credits given by foreign states and international financial organizations pursuant to the international agreements of the Russian Federation is released from the payment of the duty.
The goods imported to the customs territory of the Russian Federation and (or) exported from this territory as free aid and (or) as charitable purposes with the states, governments, international organizations, including rendering of technical assistance are released of payment of the duty.
Privileges to the foreign investors and commercial organizations with foreign investments in the Republic of Bashkortostan
Law of the Republic of Bashkortostan No.190-z dated April 7, 2001
Companies with foreign investments, in which the paid-up portion of foreign investments in the charter capital amounts not less than 25%, whereas revenues from such companies’ own business operations exceed 70% of the total revenues from sales of goods (works, services).
1. During the first 2 years of the state registration, shall be exempt from paying the portion of Profit Tax channelled to the Budget of the Republic of Bashkortostan;
- during the 3rd and 4th years of the state registration, shall pay the portion of Profit Tax channeled to the Budget of the Republic of Bashkortostan in the respective amounts of 25 percent and 50 percent of the base rate.
2. The companies with foreign investments, conducting the activities included in the priority industries list of the economy of the Republic of Bashkortostan:
- during the first 3 years of the state registration, shall be exempt from paying the portion of Profit Tax channeled to the Budget of the Republic of Bashkortostan;
- during the 4th and 5th years of the state registration, shall pay the portion of Profit Tax channeled to the Budget of the Republic of Bashkortostan in the respective amounts of 25 percent and 50 percent of the base rate;
- upon expiry of 5 years of the state registration, shall pay Profit Tax in full.
From the date of the state registration, shall be exempt from paying Property Tax, channeled to the Budget of the Republic of Bashkortostan, for the term of 3 years. Upon expiry of 3 years of the state registration, shall pay Property Tax in full.
Decree of the President of the Republic of Bashkortostan No.UP-358 dated June 4, 1996 «On Creation of the «Aghidel» Favourable Economic Zone»
Benefits to Investors:
the portion of taxable profit to be channeled to the Republican Budget of the companies which are located on the territory of the Republic of Bashkortostan and which invest in businesses located in the «Aghidel» Favourable Economic Zone, as well as the profits of companies which receive the above investments, shall be reduced by the amount of actual investment subject to dedicating the received funds to financing capital investment.
Benefits to Businesses:
exemption from the portion of Profit Tax channeled to the Republican Budget.
Taxes,Charges and Other Mandatory Payments
Resident businesses of the «Aghidel» Favourable Economic Zone shall be exempt from paying:
- property Tax, Tax on Motor Road Users, Vehicle Purchase Tax, Vehicle Owner Tax, and some other taxes;
- resident business may be granted a tax amnesty.
Decree of the President of the Republic of Bashkortostan No.UP-665 dated October 9, 1996 «On Creation of the «Kumertau» Favourable Economic Zone»
Value-added tax (VAT)
Resident business, subject to the 10-percent increment of revenues from sales within 1 year of the registration, shall be granted an interest-free tax loan for VAT in the amount of payments to the Republican and local Budgets with the repayment term of two years.
Benefits to Investors:
profits of credit institutions, generated from providing investment loans to resident business of the Favourable Economic Zone at rates not exceeding 1/3 of the rate fixed by the National Bank of Bashkortostan, in the portion, channeled to the Republican Budget, shall not be taxed during the term of the loan, provided the proceeds of the latter are dedicated to capital investment;
the portion of taxable profit channeled to the Republican Budget, of Companies which are located on the territory of the Republic of Bashkortostan and which invest in business located in the «Kumertau» Favourable Economic Zone, as well as the profits of companies which receive the above investments, shall be reduced by the amount of actual investment subject to dedicating the received funds to financing capital investment. The above amounts shall not reduce the actual amount of tax calculated with no adjustment for benefits by more than 50 percent.
Benefits for Businesses:
10 to 100% exemption from Profit Tax, in the portion channeled to the Republican Budget.
Taxes, Charges and Other Mandatory Payments
For small businesses, which conduct the priority activities for the Favourable Economic Zone, tax rates are reduced by 50% in the portion, channeled to the Republican Budget;
10 to 100% exemption from Tax on Motor Road Users in the portion channeled to the Republican Budget;
full exemption from paying Property Tax, Vehicle Purchase Tax, Vehicle Owner Tax, contributions to the Republican Amortization Fund and some others;
all companies, irrespective of ownership forms, shall be granted a 50% reduction of rent;
resident business may be granted a tax amnesty.
Resolution of the Ufa City Council Presidium dated April 16, 1997 «On Regulations for Stimulating Attraction of Foreign Investments to Companies and Municipal Projects of the City of Ufa»
Benefits with Respect to Rent,Local Taxation
The below-listed order of granting benefits is hereby established on the territory of Ufa to legal persons created with a participation of foreign investments or fully-owned by foreign investors, in the portion of execution of municipal investment projects, over and above the benefits specified by the current legislation:
I. With an investment of over USD 5 mln. for the term of 1 to 5 years shall be exempt:
a) from payment of 70% of land,non-residence premises, employed equipment rent;
b) from paying local taxes.
II. With an investment of between USD 2 mln. and USD 5 mln. for the term of 1 to 3 years shall be exempt:
a) from payment of 50% of land, non-residence premises, employed equipment rent;
b) from paying local taxes.
III. With an investment of between USD 100 ths. and USD 2 mln. for the term of 1 to 3 years shall be exempt:
a) from payment of 30% of land, non-residence premises, employed equipment rent;
b) from paying local taxes.