Tatarstan: Your business partner. Investor's guide. Investor's roadmap (стр. 1 )

TATARSTAN: YOUR BUSINESS PARTNER

INVESTOR'S GUIDE
INVESTOR'S ROADMAP

Kazan 2010

Under the editorship of Ravil Zaripov, Minister of Industry and Trade of the Republic of Tatarstan

Editorial board:

Gulnara Akhmadeyeva, Oleg Vlasov, Ildar Mingaleyev, , Igor Nosov

This publication was prepared with participation of:

Rustem Akhmetgarayev, Engil Ismagilov, Sergei Mezentsev, Timur Mindubaev, Yulia Mironova, Albina Samigullina

© Ministry of Industry and Trade of the Republic of Tatarstan, compilation, 2011

4, Ostrovskiy St., Kazan 420111

Phone: +7 (8,

Fax: +7 (8

© __________________________, design and layout, 2010

__, ____________ St., Kazan 420107

Phone: +7 (843) __________

Fax: +7 (843) ___________

Ladies and gentlemen, visitors of the Republic of Tatarstan!

This Investor's Guide entitled "Tatarstan: Your Business Partner" is intended for all those who seek to establish stable business contacts with our republic.

This edition was prepared by the Ministry of Industry and Trade of the Republic of Tatarstan. The remarks and suggestions expressed by users of the previous guides are taken into account.

Modern Tatarstan was one of the first Russian regions to start changing over to European standards, not only in the field of industrial production, but also in education, medicine and other sectors. Transition to European standards will largely support the optimisation of the management system and encouragement of business initiative, which in turn will create favourable conditions for further development of the market economy in the republic.

Quite visible are the results of the independent foreign economic policy pursued by the republic in the past ten years. Tatarstan has increased its foreign trade turnover over fivefold, forged stable economic ties with over 120 countries and their regions throughout the world. The products manufactured by republic's enterprises and some Tatarstan-registered trademarks are well known both in Russia and abroad. Year by year manufacturers from Tatarstan are awarded the prizes as the best Russian exporters. All this enables the republic to enjoy a high international rating and ensures its harmonious integration into the world community.

Much attention is paid in the republic to further enhancement of its investment image. Consistently improving is the legal framework of the investment process in conformity with the international standards related to protection of investors' rights, and the necessary infrastructure is being developed. Tatarstan today is the location where many foreign companies are operating and renowned multinational companies are represented. We are always open for cooperation and hope that this edition will be a useful guide to the business world of Tatarstan and a reliable partner in the implementation of your business projects.

Rustam Minnikhanov, President of the Republic of Tatarstan

1. Doing business in the Republic of Tatarstan

1.1. First steps towards starting your business in the Republic of Tatarstan

Choosing a format of doing business is a most important step prior to the implementation of investor’s investment projects in the territory of the Russian Federation and in the Republic of Tatarstan, in particular. This choice is critical for further course of activities resulting in the differentiation of the rules of financial, tax, customs and administrative regulations. That is why one should pay special attention to this aspect in order to successfully achieve the objectives being sought.

There are several formats through which a foreign company can conduct business activities in the Russian Federation:

- By creating a Russian legal entity with 100 per cent foreign investment or a joint venture company;

- By opening a representative office or a branch;

1.1.1. Opening a branch or a representative office of a foreign legal entity

Branch of a foreign legal entity is its economically autonomous subdivision, which is not deemed to be an independent legal entity. It is established for the purpose of conducting the activities which are carried out outside the Russian Federation by the foreign legal entity (parent organisation) and is liquidated on the basis of a decision of this foreign legal entity.

A branch operates on the basis of statutes approved by the parent organisation and performs all or part of its functions, including the functions of a representation, on behalf of the foreign legal entity which established it on condition that the purposes of the establishment of and the activities carried out by the parent organisation are of a commercial nature and the parent organisation bears direct material liability for obligations assumed by it in connection with the conduct of those activities in the territory of the Russian Federation.

Representative office is an economically autonomous subdivision of a legal entity which is located elsewhere than at the location of that entity and which represents and protects the interests of the legal entity.

A branch/representative office has the right to carry out its activities in the territory of the Russian Federation from the day of its accreditation and ceases to carry out its activities from the day on which its accreditation is withdrawn.

The authority which is carrying out the accreditation of branches of foreign legal entities is the State Registration Chamber under the Ministry of Justice of the Russian Federation. The accreditation of a representative office is granted for the term of 1, 2, or 3 years, the accreditation of a branch is granted for the term of 1, 2, 3, or 5 years; if necessary, the accreditation may be extended.

The time period for granting the accreditation is 21 working days.

The amount of the State duty is:

Term of accreditation of a representative office	Amount of the State duty in Roubles	Term of accreditation of a branch	Amount of the State duty in Roubles
1 year	30,000	1 year	75,000
2 years	60,000	2 years	90,000
3 years	75,000	3 years	105,000
		5 years	120,000

List of documents required for opening (accreditation) of a branch/representative office*:

1. A written application stating the request for permit to open a branch/representative office of a foreign legal entity in the Russian Federation, in a simple format (on the letterhead of the foreign legal entity, signed by its head and sealed with the seal of the foreign legal entity, indicating the name, date of foundation, location, types of activity of the foreign legal entity, objectives of opening and expected duration of a representative office in Russia, and information on business relations with Russian partners and prospects for its future development);

2. An extract from the Trade Register of the country of origin of the foreign legal entity or other document confirming the fact of registration of the foreign legal entity in accordance with the laws of the country of its location;

3. The Articles of Association (Charter) of the foreign legal entity (in case the legislation of the country of registration of the foreign legal entity does not provide for the Articles of Association (Charter), a document issued by an authorised body in the country of origin should be submitted to this effect);

4. The decision of the foreign legal entity concerning the opening of a branch/representative office in the Russian Federation;

5. The original and a notarised copy of the statutes on the branch/representative office of the foreign legal entity in the Russian Federation;

6. A reference letter from a bank, which provides services to the foreign legal entity, confirming its solvency (this document should be valid for 6 months from the date of issue);

7. Reference letters from Russian business partners (at least two letters in a free format on the letterheads of the companies signed by their heads and sealed with the companies’ seals);

8. A notarised copy of the General Power of Attorney which empowers the head of the branch/representative office of the foreign legal entity with the required authorities in the Russian Federation;

9. A document confirming the address of the representative office of the foreign legal entity in the Russian Federation (a guarantee letter or a lease agreement with a notarised ownership certificate enclosed);

10. A document confirming the consent of the administrations of the constituent entities of the Russian Federation (administrations of provinces, regions, republics, national districts) regarding the opening of the representative office;

11. A card with information on the branch/representative office signed by a representative of the foreign legal entity and sealed with the seal of the foreign legal entity, in 2 copies.

* All foreign documents are only accepted in case they are legalised by a consulate or certified by Apostille unless the exemption from these procedures is granted under international agreements of the Russian Federation and are enclosed with a translation into Russian which is certified by a notary or consular services. These documents are valid for one year from the date of their issue.

1.1.2. Procedure for the creation of Russian legal entities

For the creation of a legal entity one should undertake the following steps:

1.  To determine its organisational-legal form, location, and type of activity.

Joint-Stock Company (“AO”) is a commercial organisation whose registered capital is divided into a certain number of shares which certify the liability rights of the participants in the company (shareholders) with respect to the company. Shareholders are not liable for the company’s obligations and bear the risk of losses which are associated with its activity within the limits of the value of the shares which they hold.

The minimum amount of the registered capital of a joint-stock company is:

- Open-end joint-stock companies (“OAO”): no less than RUR 100,000.

- Closed-end joint-stock companies (“ZAO”): no less than RUR 10,000.

Limited Liability Company (“OOO”) is a business company established by one or more persons whose registered capital is divided into participating interests; the participants in a company shall not be liable for its obligations and shall bear the risk of losses arising from the company’s activities within the limit of the value of the participating interests held by them.

The minimum charter capital of an OOO is no less than RUR 10,000.

2.  To undergo the procedure of the state registration in the tax authority at the location of the permanent executive body.

The applicant should submit the following documents:

·  an application for the State registration, signed by the applicant (authenticity of the signature should be certified notarially);

·  the decision on the establishment of the legal entity in the form of minutes, agreement or other document;

·  the foundation documents of the legal entity (originals or notarially certified copies);

·  an extract from the register of foreign legal entities of the relevant country of origin;

·  a document confirming the payment of the State duty (RUR 4,000).

The State registration is processed within a period of no more than five working days from the day on which the documents are submitted to the registering body. The documents must be issued within 1 working day from the date of entering the corresponding record to the State register.

3. To open accounts in any financial institution.

4. To register, within a year, an issue of securities for the OAO (with the Regional Branch of Financial Markets Federal Service in the Volga-Kama Region).

5. In case of the available long-term development plans and prepared business plan of the investment project, a legal entity may apply for being granted a State support.

6. Procedure for creating legal entities with participation of foreign capital.

The procedure for the State registration of legal entities with foreign founders (whether individuals or legal entities) is carried out along the same lines as that of resident legal entities, in accordance with the Federal Law No. 129-FZ of 08.08.2001 “On State Registration of Legal Entities and Individual Entrepreneurs”, but with some peculiarities.

In order to prepare the documents by Russian specialists, the following information and documents are needed:

For each individual foreign investor:

·  Certified translation of the foreign investor's passport into the Russian language.

For each corporate foreign investor:

·  Full name and position of the head of the corporate foreign investor who is authorised to represent the interests of the corporate foreign investor in the Company or a Power of Attorney* issued to the representative;

·  *The foundation documents or an extract from the register of foreign legal entities of the relevant country of origin or other evidence, having equal legal force, of the legal status of the corporate foreign investor;

This document should state the following:

·  The country of incorporation of the foreign investor;

·  The date of registration of the foreign investor;

·  The registration number of the foreign investor;

·  The name of the registering authority of the foreign investor;

·  The country of registration (incorporation) of the foreign investor;

·  The address of the foreign investor.

* - These documents of a foreign investor should be (one of the following options):

1.  Legalised by an Embassy of the Russian Federation or a consulate of the Russian Federation in the country of origin of the foreign investor;

2.  Apostilled, in case the foreign investor comes from the country which is a signatory to the Hague Convention of 1961;

3.  Neither legalised nor apostilled, in case the investor comes from a country which is a signatory to agreements of legal assistance with the Russian Federation which grant exemption from legalisation.

4.  Foreign language documents should be enclosed with a notarially certified translation.

1.2. Major priorities for investment in the Republic of Tatarstan

The Programmes for Social and Economic Development of the Republic of Tatarstan identifies the following priority areas for investment:

Support of the "strong" manufacturers making leading commodities, namely:

·  Oil refining products in all process stages (tyres, polyethylene, rubbers, etc.);

·  Crude oil;

·  Aircraft equipment;

·  Motor vehicles;

·  Woodworking products;

·  Produce of the republic’s agricultural sector.

The meeting of the State Council held on Marchadopted the Law of the Republic of Tatarstan “On the Approval of the Programme for Social and Economic Development of the Republic of Tatarstan for ”, which also confirmed the said priority areas for investment.

1.3. Implementation of an investment project in the territory of the Republic of Tatarstan

An investor who intends to implement an investment project in the territory of the Republic of Tatarstan should apply to the relevant sectoral ministry of the Republic of Tatarstan with a proposal for implementing a project and its technical and economic parameters, for the purpose of being granted a practical and consulting assistance in the implementation of the investment project.

The sectoral ministry will promptly establish coordination ties with potential partners of the investor, i. e. enterprises in the republic, and will suggest a suitable investment site in the territory of the Republic of Tatarstan with due account for the location of the productive forces in the Republic of Tatarstan.

According to Article 19 of the Law of the Republic of Tatarstan No. 2180-ХII of July 19, 1994 “On Foreign Investment in the Republic of Tatarstan”, foreign investors implementing investment projects in the territory of the Republic of Tatarstan should apply to the Ministry of Industry and Trade of the Republic of Tatarstan for being granted the necessary support and signing an Investment Agreement between the foreign investor and the Cabinet of Ministers or the Ministry of Industry and Trade of the Republic of Tatarstan concerning the conditions of implementing the investment project in the territory of the Republic of Tatarstan.

Model diagram of interaction with a sectoral ministry of the Republic of Tatarstan when implementing an investment project in the territory of the Republic of Tatarstan

INVESTOR

Municipalities of the Republic of Tatarstan

 

Seeking a site for
project implementation

Preparation of an Investment Agreement
between the Government of Tatarstan and
an investor concerning the implementation
of the project proposed by the investor

Cabinet of Ministers of the Republic of Tatarstan

 

Ministry of Industry and Trade of the Republic of Tatarstan

Working out an issue of possible
establishment of joint ventures
with enterprises of Tatarstan

 

Approval of
documentation

The Ministry of Economy of the Republic of Tatarstan

Granting tax privileges,
applying to the Investment
Fund of the Russian Federation
for being granted State support
in the project infrastructural
development

 

1.4. Investment climate in the Republic of Tatarstan

Investment opportunities

The Republic of Tatarstan today is one of the most developed regions of Russia with strong industrial production, favourable investment climate, and high scientific potential. The multifaceted work on implementing the State industrial and investment policies aimed at the creation of conditions for intensively developing real sector of economy and, first of all, favourable investment and business climate resulted in the persistent trends of economic growth in the republic and positive outcomes of the industrial complex in the recent years.

The Republic of Tatarstan is still one of the most investment-favourable regions in the Russian Federation, which is confirmed by international rating agencies such as Standard & Poor’s, Fitch, and Moody’s.

Changes in international credit ratings of the Republic of Tatarstan in

	2003	2004	2005	2006	2007	2008	2009	2010
Moody’s	Ba3	Ba1	Ba1	Ba1	Ba1	Ba1	-	-
Standard &Poor’s	B - stable	B- positive	B positive	BB- stable	BB- positive	BB positive	BB stable*	-
Fitch	-	-	BB	BB	BB+	BBB-	BBB-	BBB-

* Rating withdrawn from 01.06.2009

According to the World Bank’s first “Doing Business in Russia” sub-national report, the capital of the Republic of Tatarstan – Kazan – ranks 1st as to the most favourable conditions of doing business in the Russian Federation, which is due to relatively high efficiency of the procedures for starting a business and registration of property rights, lesser time for obtaining construction permits and going through the procedures associated with trading across borders.

Investment The outcome of the economic reform in the Republic of Tatarstan in recent years shows that attraction of foreign investment is a crucial element of its sustainable social and economic development.

Changes in Foreign Investment Received in the Republic of Tatarstan in

(US$ million)

	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Total	651.1	642.5	176.1	596.1	683.6	483.7	1,679.4	2,593.8	2,240.3	4,149.7
Direct	8.5	2.5	77.1	79.2	54.5	134	417.9	722.9	113.3	146.5
Other	550.7	639.8	94.2	436.6	627.8	146.4	1,233.9	1,870.2	2,127	4,003.2
Portfolio	91.9	0.2	4.8	80.3	1.3	203.3	27.6	0.7	0.0001	0.006

As of 1 January 2011, economy of Tatarstan accumulated US$ 4,870.5 million of foreign investment. Other investment dominated with 82.7%, while direct investment accounted for 12.7% and portfolio investment, for 4.6%.