Tatarstan: Your business partner. Investor's guide. Investor's roadmap (стр. 2 )

As of 1 July 2010, a total of 945 commercial organisations with foreign investment have been registered in the Unified State Register of Enterprises and Organisations of Tatarstan (against 918 as of 1 July 2009). Of these, %) are fully owned by foreign investors, other enterprises were created with participation of capital from the republic’s and foreign organisations.

The geographical structure of commercial organisations with foreign investments shows that the enterprises with participation of investors from Turkey, Cyprus, Uzbekistan, the USA, Germany, and Virgin Islands are the best contributors to the total number of the registered enterprises.

The total number of countries participating in the creation of commercial organisations in the territory of the republic is 69 non-CIS and CIS countries.

The city of Kazan still holds the lead in the number of registered enterprises (some 73.9% of joint ventures), followed by Naberezhnye Chelny (9.9%), Yelabuga (3.1%), Almetyevsk (2.9%), and Nizhnekamsk (3%).

Foreign companies working in the region

·  Wienerberger A. G. (Austria): construction of a brick-making plant in the Republic of Tatarstan estimated at about 140 million brick per year. Located in 40 kilometres away from Kazan, in the Vysokogorsky District;

·  DeLonghi (Italy): production of electric heaters and Kenwood meat grinders. ZASS Alabuga, a Turkish-Italian joint venture in Yelabuga.

·  Schneider Electric (France): organisation of the licensed production of substations and high-voltage equipment by TATEK in Zainsk;

·  FIAT (Italy):

1.  Production of FIAT vans in the territory of SEZIPT Alabuga. Production output is 75,000 vans a year;

2.  Production of FIAT cars in Naberezhnye Chelny by a joint venture company of Sollers-Naberezhnye Chelny and Fiat;

·  Isuzu Motors (Japan): production of Isuzu trucks in the territory of SEZIPT Alabuga, a joint venture between OAO Sollers and Japan-based Isuzu Motors and Sojitz Corp. Production output is estimated at 25,000 trucks cars a year;

·  Zahnrad Fabrik (Germany): a joint venture between OAO KamAZ and OOO ZF-Kama for the production of automatic transmissions for KamAZ trucks in Naberezhnye Chelny;

·  Daimler (Germany): OOO Mercedes Benz Trucks Vostok, a joint venture between OAO KamAZ and Daimler for the production and distribution of Mercedes Benz trucks in Russia, the output of the plant is estimated at up to 10,000 trucks a year;

·  Cummins (USA): establishment of the Euro-3 and Euro-4 Cummins diesel engine production for OAO KAMAZ in Naberezhnye Chelny;

·  Rockwool International (Denmark): establishment of the East Europe’s largest mineral wool production in the territory of SEZIPT Alabuga;

·  IKEA (Sweden): Mega-Kazan hypermarket;

·  Metro Cash & Carry (Germany): trade outlets in Kazan and Naberezhnye Chelny.

·  Quinn Group (Ireland): construction project of a warehouse complex and logistics park, Q-Park Kazan, with office premises of 207,000 square metres of floor space in Laishevo District of the Republic of Tatarstan.

2. Legislation in the sphere of investment

Basic laws and other regulatory legal acts related to the implementation of investment activities in the Republic of Tatarstan are as follows:

FEDERAL LEGISLATION:

• Federal Law No. 160-FZ of July 9, 1999 "On Foreign Investments in the Russian Federation" (as amended on April 29, 2008).

• Federal Law No. 39-FZ of February 25, 1999 "On Investment Activities in the Russian Federation Implemented in the Form of Capital Investments" (as amended on July 24, 2007).

• Federal Law No. 225-FZ of December 30, 1995 "On Product Sharing Agreements" (as amended on December 30, 2008).

• Resolution of the Government of the Russian Federation No. 883 of July 23, 1996 "On Privileges for Payment of Import Custom Duty and Value Added Tax in Respect of Goods Imported by Foreign Investors as a Contribution to Charter (Pooled) Capital of Enterprises with Foreign Investments", where it does not contradict the Tax Code of the Russian Federation.

REPUBLIC'S LEGISLATION:

• Law of the Republic of Tatarstan No. 2180-XII of July 19, 1994 "On Foreign Investment in the Republic of Tatarstan" (as amended on June 27, 2001, September 23, 2003, and January 22, 2008).

• Law of the Republic of Tatarstan No. 1872 of November 25, 1998 "On Investment Activities in the Republic of Tatarstan" (as amended on July 30, 2009).

• Resolution of the Cabinet of Ministers of the Republic of Tatarstan No. 123 of March 11, 2001 "On Additional Measures of State Support for Enterprises (Organisations) of the Republic of Tatarstan Implementing Investment Projects" (as amended on June 15 and November 26, 2001, and December 28, 2002).

• Resolution of the Cabinet of Ministers of the Republic of Tatarstan No. 284 of May 7, 1999 "On Approval of the Regulations on Procedures for Granting State Support for Enterprises and Organisations Implementing Investment Projects in the Republic of Tatarstan" (as amended on September 26, 2008).

The legislation of the Republic of Tatarstan is aimed at creating additional guarantees to foreign investors within the terms of reference of the Republic of Tatarstan.

2.1. Fundamentals of the tax system of the Russian Federation

The tax system existing in the Russian Federation is governed by the legislation of the Russian Federation on taxes and levies and comprises the Tax Code of the Russian Federation and federal laws on taxes and levies adopted in accordance with the Code.

In accordance with the Tax Code of the Russian Federation, the following taxes are established:

1. Federal taxes and levies:

·  Profit tax;

·  Value added tax;

·  Excise taxes;

·  Personal income tax;

·  Insurance contributions to State non-budgetary funds;

·  Mineral extraction tax;

·  Payments for use of natural resources

·  Water tax.

2. Regional taxes:

·  Corporate property tax;

·  Transport tax;

·  Gaming tax.

3. Local taxes:

·  Land tax;

·  Individual property tax.

Executive authorities of the Russian Federation and constituent entities of the Russian Federation, in the cases provided for by the legislation on taxes and levies, may issue regulatory legal acts concerning the matters associated with taxation and levying, but are not entitled to modify or amend the legislation on taxes and levies.

2.2. System of taxation in the Republic of Tatarstan

In the territory of the Republic of Tatarstan, the same taxes and levies are charged as provided for by the federal legislation.

List of basic taxes in effect in the territory of the Republic of Tatarstan

Tax	Rate	Distribution by budgets
Federal	Regional	Local
1. Profit tax	20.0 %	2.5 %	17.5 %	-
2. Value added tax	18.0 %	18.0 %	-	-
3. Property tax	2.2 %	-	1.1 %	1.1 %
4. Land tax	1.5 %	-	-	1.5 %
5. Transport tax	Depending on the kind and horsepower of a vehicle	-	Depending on the kind and horsepower of a vehicle	-

In addition to the taxes listed above, legal entities are subject to certain liabilities for payments of pension, social and environmental taxes. Customs duties are governed separately by Customs Code.

2.3. Procedure for granting land plots for the implementation of investment projects in the territory of the Republic of Tatarstan

The Land Code of the Russian Federation

Granting of land plots for the implementation of investment projects is carried out upon the preliminary approval of the locations for future construction projects.

1. A project initiator submits a formal application to the relevant sectoral ministry of the Republic of Tatarstan requesting its assistance in seeking a plot of land for the establishment of its production facilities in the territory of the Republic of Tatarstan.

Providing that the project initiator is a foreign company and/or foreign investors are planned to be involved in the project, the application is forwarded to the Ministry of Industry and Trade of the Republic of Tatarstan whose terms of reference include the administration powers in the sphere of international, interregional and external economic relations and attraction of foreign investments.

2. The application should indicate the substantiation for the estimated size of a land plot, the requested right to the land plot, specifications for provision with electric energy, natural gas, service water, and railway transportation and should be enclosed with a project feasibility study.

3. The time period for consideration of this application is 30 days.

4. Upon being provided with the options to locate its future production facilities in the territory of the Republic of Tatarstan by the sectoral ministry, the project initiator submits an application to the relevant municipality administration regarding the land plot selection and preliminary approval of the project location. This application should state the project designated purpose, its suggested location, substantiation for the estimated size of a land plot, and the requested right to the land plot. The application may be enclosed with the construction project feasibility study or necessary estimates.

5. The local government body carries out the work on the land plot formation (prepares a town-planning examination opinion, collects technical specifications, etc.). Results of selecting a land plot are documented in the Certificate of Selecting a Land Plot for Construction of Future Production Facilities to be enclosed with layouts of each land plot approved by the local government body on the cadastral plan or the cadastral map of the corresponding territory in accordance with possible selection options.

6. After the decision is made by the Head of the municipality on the preliminary approval of the project location, the project initiator carries out the land plot survey and the State cadastral registration of the land plot.

7. Based on the project initiator application enclosed with the cadastral passport of the land plot, the Head of the municipality within a two-week period makes a decision on granting the land plot for construction.

2.4. Procedure for transfer of agricultural lands to another category

The Land Code of the Russian Federation

Federal Law No. 172-FZ of December 21, 2004 "On Transfer of Land or Land Plots from One Category to Another"

Resolution of the Cabinet of Ministers of the Republic of Tatarstan No. 523 of October 25, 2006 “On Approval of the Form of Request for Transfer of a Land Plot from the Agricultural Lands to Another Category and Composition of Documents Enclosed Thereto”

For transfer of the lands or land plots from agricultural to another category, the interested person submits an application for the transfer of the lands from one category to another (further, “the request”) to the Ministry of Land and Property Relations of the Republic of Tatarstan.

The application comprises the following package of documents:

1. Copies of the documents certifying the identity of the natural person applicant or an extract from the Unified State Register of Individual Entrepreneurs or an extract from the Unified State Register of Legal Entities.*

2. An extract from the Uniform State Register of Rights to Immovable Property and Transactions Therewith evidencing the rights to the land plot. **

3. An extract from the State Land Cadastre concerning the information on the land plot, the land plot cadastral plan. ***

4. The opinion by the State Environmental Expert Review Agency (in case it is provided for by federal laws).

5. The consent of the land plot legal owner to the land plot transfer.

6. The opinion by the Territorial Board of the Federal Immovable Property Cadastre Agency in the Republic of Tatarstan containing the information on: ***

·  Cadastral value of the requested lands, average cadastral value of similar lands in the district;

·  Availability or absence of the documents of entitlement for the land plot and the information on the rights to the land plot requested;

·  Availability or absence of encumbrance (easements).

7. The power of attorney (in case the application is signed by an applicant‘s representative).

8. A decision of the authorised bodies on the preliminary approval of the project location to be enclosed with the Certificate of Selecting a Land Plot (in case the land plot is provided from the lands which are under State or municipal ownership, with the preliminary approval of the project location).

9. Approvals by:

·  The Ministry for Civil Defence Affairs and Emergency Management of the Republic of Tatarstan;

·  The Ministry of Culture of the Republic of Tatarstan;

·  The Territorial Board of the Federal Agency for Subsurface Use in the Republic of Tatarstan;

·  The Ministry for Ecology and Natural Resources of the Republic of Tatarstan;

·  The Ministry of Agriculture and Foods of the Republic of Tatarstan;

·  The Water Resources Department in the Republic of Tatarstan of the Lower Volga Basin Water Board under the Federal Agency for Water Resources (in case the land plot is located within the water conservation zone).

10. A copy of the license for the right to use subsurface mineral resources and a copy of the mining allotment certificate indicating the mining allotment boundaries plotted on the plans and maps, properly certified (in case of the land plot transfer in connection with mining operations).

11. The land reclamation project approved in accordance with the established procedure in the cases associated with mining operations, or the reclamation project for a part of the agricultural lands to be granted for the construction of transportation, communications and utilities lines.

12. In case of transferring a land plot within right-of-ways and roadsides of general-purpose highways, approvals by:

·  Executive governmental authority, local administration (executive and administrative body of the municipality), natural person or legal entity owning highways by perpetual right in accordance with the legislation of the Russian Federation;

·  Bodies of the State Road Traffic Safety Inspection of the Ministry of Internal Affairs of the Russian Federation in the Republic of Tatarstan;

·  Republic’s Traffic Safety Authority (in case the land plots are located within the roadsides of a general-purpose road of the Republic of Tatarstan).

_______________________________

* An extract from the Unified State Register of Legal Entities or the Unified State Register of Individual Entrepreneurs with the issue date of no more than one month prior to the date of submitting the application to the Ministry of Land and Property Relations of the Republic of Tatarstan.

** An extract from the Unified State Register of Rights to Immovable Property and Transactions Therewith evidencing the rights to the land plot with the issue date of no more than six months prior to the date of submitting the application to the Ministry of Land and Property Relations of the Republic of Tatarstan.

*** The documents specified in clauses 3 and 6 with the issue date of no more than one year prior to the date of submitting the application to the Ministry of Land and Property Relations of the Republic of Tatarstan.

The time period for consideration of this application which was not returned to the applicant for rework, may not exceed 60 working days.

2.5. Procedure for obtaining a permit to use energy carriers, rates and prices

Procedure for the connection to electricity grids

The connection is performed on a remuneration basis in accordance with the contract signed between the grid organisation and a legal entity or a natural person.

The connection is an integrated procedure with the following steps:

·  Applying for the connection;

·  Preparing specifications and a draft contract including specifications by a grid organisation;

·  Signing the connection contract;

·  Fulfilling the actions envisaged in the contract by the contracting parties;

·  Obtaining a permit from the Russian Federal Service for Ecological, Technical and Atomic Supervision for putting the applicant’s facilities into operation;

·  Performing the actual connection of the applicant’s facilities to electricity grids by the grid organisation;

·  Actual supply (reception) of voltage and power (fixing of a switching device in the ON position);

·  Drawing the statement of connection and the statement of delineation of balance inventory and operational responsibilities.

The rates for the electric energy supplied by OAO Tatenergosbyt to consumers of the Republic of Tatarstan are established as follows:

No.	Indicator	Unit of measurement	Voltage ranges
HV	MV-I	MV-II	LV
Tariff group of “Other Customers”
1.	Single-rate tariff	RUR/ MWh	471.72	829.71	1,980.87	2,392.67
1.1	Single-rate tariff for consumers that receive electrical energy and power from buses (distribution devices) of generated voltage	RUR/ MWh	395.06	395.06	395.06	395.06
2.	Double-rate tariff
2.1.	Charge for electrical grid maintenance	RUR/ MWmonth	295,682.09	422,429.34	1,029,885.04	1,634,891.39
2.2.	Charge for electrical grid maintenance for consumers that receive electrical energy and power from buses (distribution devices) of generated voltage	RUR/MWmonth	295,682.09	295,682.09	295,682.09	295,682.09
2.3.	Charge for process losses in electrical grids	RUR/MWh	76.25	113.01	184.85	440.93

Rates of the charge for connection to electricity grids

Resolution of the Board of the Committee of the Republic of Tatarstan for Tariffs No. 6-1/tp of February 1, 2010

In 2011, the charge for the connections rated at less than 10,000 kVA to distribution electricity grids of OAO Setevaya Kompaniya with a voltage level of lower than 35 kV is established as follows:

Voltage	Connected power, kW	Charges for connection, Roubles/kW (without VAT)
0.23-1 kV	Up to 30 incl.	8,814.00
From 30 to 100 incl.	8,148.00
Higher than 100	12,776.00
6-10 kV	Up to 100 incl.	8,384.00
From 100 to 750 incl.	12,402.00
Higher than 750	6,250.00

The charge for the connection rated at over 10,000 kVA and with a voltage level of no lower than 35 kV is determined for each applicant individually.