The Federal Law on the Special Economic Zone in the Kaliningrad Region

The Federal Law on the Special Economic Zone in the Kaliningrad Region

Adopted by the State Duma on December 23, 2005
Approved by the RF Federation Council on December 27, 2005

Chapter 1. General provisions

Article  1. The scope of the present Federal law

The present Federal law shall regulate the relations established as a result of the creation of the Special Economic Zone (SEZ) in the Kaliningrad region. The Law governs the functioning of the SEZ, changes in the regime or cancellation of the special legal regime of this zone in view of the geopolitical position of the Kaliningrad region with the purpose of acceleration of its social and economic development.

Article 2. Basic notions used in the present Federal Law "On the Special Economic Zone in the Kaliningrad Region"

The following basic notions are used in the present Federal law:

1) the Special Economic Zone in the Kaliningrad region (hereinafter referred to as the Special Economic Zone) is the territory of the Kaliningrad region, where a special legal regime for economic, production, investment, and other activities is in force;

2) management of the Special Economic Zone is the activities of the authorized body and those of the Administration of the Special Economic Zone, respectively aimed at supporting the special legal regime of the Special Economic Zone and ensuring its functioning;

3) the authorized body is the Federal executive body, authorized to perform the functions relating to the management of Special Economic Zones and ensuring the functioning of the special legal regime of the Special Economic Zone in accordance with the provisions of the present Federal law;

4) the Administration of the Special Economic Zone (the Administration) is a structural unit of the supreme executive public authority in the Kaliningrad region, ensuring the functioning of the Special Economic Zone in accordance with the provisions of the present Federal law;

5) Resident of the Special Economic Zone (Resident) is a legal person, meeting the present Federal law requirements and included in the General Register of residents of the Special Economic Zone (the Register);

6) investment declaration is a document, containing the information about the conditions for the implementation of an investment project in the Special Economic Zone by the Resident in accordance with the provisions of the present Federal law.

Article 3. Management of the Special Economic Zone

1. In order to ensure the functioning of the special legal regime of the Special Economic Zone, in the process of settling relevant issues, the authorized body shall coordinate its actions with Federal public authorities, the Administration and Federal executive bodies.

2. In view of ensuring the functioning of the Special Economic Zone, the Administration shall perform the following functions:

1)  keeping the Register in the order and in the form established by the authorized body;

2)  considering  applications submitted by legal persons about their inclusion in the Register, and making decisions on  the inclusion of legal persons in the Register or exclusion of Residents from the Register, according to the present Federal law;

3) providing information about inclusion of legal persons in the Register and about exclusion of Residents from the Register to tax and customs authorities;

4) supervision of observance of investment declaration conditions by the Residents;

5) agreement of the changes made by the Resident in the investment declaration, and entering of the changes into the Register;

6) elaborating proposals on  the inclusion of goods in the list of goods categories not allowed to be placed under the free customs zone regime;

7) protection of legitimate interests of  the Residents in their relations with the territorial bodies of the federal executive authorities, bodies of the Government of the Kaliningrad region, institution s of local government in settling investment project implementation issues;

8) presentation of annual reports on results of functioning of the Special Economic Zone in the current fiscal year according to the procedure and in the form, established by the authorized body;

9) delivery of an extract from the Register on the Resident’s request;

10) approval of the investment declaration forms.

3. The appointment/dismissal of the Head of the Administration shall be carried out by the top public authority (head of the supreme executive body) in the Kaliningrad region in agreement with the authorized body.

Chapter 2. Residents

Article 4. Inclusion of legal persons in the Register

1. A legal person is eligible to be included in the Register if the legal person meets the following requirements:

1) the legal person is set up in conformity with the legislation of the Russian Federation;

2) the legal person is registered by the public authorities in the Kaliningrad region;

3) the goods are manufactured by the legal person exclusively on the territory of the Kaliningrad region;

4) investments are made by the legal person on the territory of the Kaliningrad region;

5) the investment project submitted by the legal person, meets the requirements, stipulated by the present Federal law.

2. The legal persons using other special tax regimes, stipulated by the legislation of the Russian Federation on taxes and charges, cannot be Residents.

3. The financial organizations, including credit and insurance organisations as well as professional participants of the securities market, cannot be Residents.

4. The legal person shall submit to the Administration a written application for inclusion of the legal person in the Register (in Items 5-9 of the present Article the person is referred to as Applicant) and simultaneously submit the following documents:

1) copies of legal person’s foundation papers, certified by a notary

2) a certified copy of the document, attesting that the legal person has been entered in the general State register of legal persons.

3) the certificate of registration by the tax authority;

4) the investment declaration.

5. The administration shall consider the application for inclusion of the Applicant in the Register within 10 days from the date, when the application is submitted to the Administration, shall make a decision on inclusion of the Applicant in the register or about refusal to include the Applicant in the Register and indicate the reasons of refusal and, on the day of making the decision, shall send a written notice to the Applicant.

6. The Administration shall make the decision about refusal to include the Applicant in the Register, only in case of non-observance of the conditions for inclusion in the Register, established by the present Federal law.

7. The decision about for inclusion of the Applicant in the Register shall be followed by delivery of a certificate about inclusion in the Register to the Applicant.

8. The Applicant shall be entitled to perform his/her activities, using the special legal regime of the Special Economic Zone from the day when the decision about his/her inclusion in the Register is made.

9. The decision on refusal to enter the Applicant in the Register can be appealed against by the Applicant in the arbitration court.

10. The investment projects are to meet the following requirements:

1) the investment project is to be implemented in the territory of the Kaliningrad region;

2) the investment project cannot be directed at the following purposes:

а) extraction of oil or natural gas, or provision of services in those domains;

b) production of ethyl alcohol, alcohol products, tobacco products, and other excisable goods (except passenger cars and motorcycles) in conformity with the list, approved by the Government of the Russian Federation;

c) wholesale and retail trading;

d) repairs of household devices and personal usage objects;

e) financial activity;

3) Making capital investments. Capital investments, taken into account in determining the minimum investment project cost, are investments in fixed capital (fixed assets), including the costs of  designing and research work, new construction, modernisation, modernization of fixed assets, rehabilitation of buildings, purchase of machines, equipment, tools, stock (except for expenditures on purchase of cars, sport, tourist, and pleasure boats, as well as the costs of construction and reconstruction of living premises, which shall not be considered as capital investments or capital costs in determining the investment project costs);

4) the volume of capital investments, according to the presented investment project proposal, should total at least one hundred and fifty million rubles;

5) the volume of capital amounting to at least one hundred and fifty million rubles should be invested within a period not exceeding three years from the date when the decision is made on inclusion of the legal person in the Register;

6) in determining of the volume of capital investment, described in this Article, the amount of gratuitous or paid transfer of machines, equipment, and/or transport vehicles (both direct, and through third persons) shall not be taken into account (including cases of provision of installment plans for a period over three years), if the State registration of the deals had been carried out in the Kaliningrad region according to the procedure, established by the legislation of the Russian Federation, before the day of enactment of the present Federal law.

11. The investment declaration should contain the following data:

1) the purpose of the investment project (the kinds of goods, services, manufacture or provision of which is planned according to the investment project);

2) the total amount of financing of the investment project;

3) the schedule of realisation of the annual volume of investments during the first three years of  the investment project implementation;

12. Making changes to the investment declaration, concerning the conditions of implementation of the investment project, shall be carried out by the Administration, based on the Resident’s written statement with justification of the need to make the changes, according to the procedure, envisaged by Items 4-8 of the present Article. The decision about modification in the investment declaration shall be made out in duplicate, one of which shall be given to the Resident.

13. The bases for refusal to modify the investment declaration shall be:

1) discrepancy of the requested amendments to requirements of the present Federal law;

2) alteration of the purpose of the investment project;

3) decrease in the total amount of financing of the investment project in the first three years of its implementation up to a level below one hundred and fifty million rubles;

4) alteration of the schedule of annual volume of investments, excluding the possibility of implementing of the investment project with observance of requirements of the present Federal law

Article 5. Exclusion of the Resident from the Register

The Resident shall be subject to exclusion from the Register:

1) based on the application, sent in writing for exclusion from the register from the day following the day when the application is received by the Administration;

2) based on the enacted decision of the arbitration court to exclude the Resident from the Register;

3) in case of liquidation of the legal person, from the day following the day of entering of the corresponding record in the General State register of legal persons;

4) in case of termination of the Resident’s (legal person’s) activity as a result of reorganisation, from the day following the day when the reorganisation is finished.

Article 6. Guarantees to the Resident

1. In the case where federal laws or/and other regulative acts of the Russian Federation lead to an increase of the total tax load on the Resident implementing an investment project, (except for  excise tax, value added tax, and transfers to the Pension Fund of the Russian Federation), or establish a regime of interdictions or restrictions concerning implementation of capital investments in comparison with the total tax load and regime corresponding to Federal laws or/and other regulative acts of the Russian Federation on the day of beginning of funding of the investment project by the Resident, the newly adopted Federal laws or/and other regulative acts of the Russian Federation shall not be applied to the Resident implementing the investment project for the period indicated in Article 21 of the present Federal law, provided that the Resident meets all the requirements of the present Federal law.

2. The provision of Item 1 of the present Article shall not be extended to the Federal laws and other regulative acts of the Russian Federation, adopted for protection of the bases of the constitutional structure of the Russian Federation, citizens’ health, their rights and legitimate interests, for environment protection, for ensuring national defence and state security, and for regulation of relations in the field of setting, calculation, collection, and payment of customs, value added tax, excise tax, and customs charges relating to shipment of goods across the customs border of the Russian Federation.

3. The methods of calculation of the size of the cumulative tax load on the date of beginning of implementation of the investment project and the order of establishment (fixation) of the fact of increase in this size shall be determined by the Government of the Russian Federation

4. The land plot required for implementation of the investment project shall be rented to the Resident or given to the Resident to have and to hold as property according to the legislation of the Russian Federation regulating land relations. The size of the rent, determined on the day when the rent contract is signed, for the period of implementation of the investment project cannot be changed during the whole period of validity of the rent contract

Article 7. Supervision of investment projects implementation

1. After fulfilling the conditions of the investment declaration, but not later than two months after the date of expiration of the first three years from the date when the legal person was included in the Register, the Administration together with tax authority at the place of registration of the Resident shall carry out a check-up of conformity of the Resident’s activity with the requirements of the present Federal law (hereinafter referred to as check-up) according to the procedure established by the Government of the Russian Federation.

2. The tax bodies at the place of registration of the Resident by the tax body shall have the right to carry out check-ups concerning the Residents in the order, stipulated by the Tax Code of the Russian Federation.

3. if, in the course of the check-up, it is established that the amount of the capital investment is below the level, envisaged by Article 4 of the present Federal law, the Administration is entitled to  demand - through a judicial procedure - exclusion of the Resident from the Register.

4. If, as a result of a check-up, it is established that the amount of the capital investments is not below the due level, envisaged by Article 4 of the present Federal law, the Administration must  deliver to the Resident a Certificate about fulfilment of the investment project terms by the REsident, within ten days from the day when the check-up is finished, but not later than three years and three months from the date when the legal person was entered in the Register. The format of the certificate about fulfilment of the investment project terms by the Resident shall be established by the Administration.

5. The refusal in granting of the Certificate on fulfilment of the investment declaration terms to the resident or a delay of delivery of such a certificate, beyond the period, stipulated by the present Article, can be appealed against by the Resident in the arbitration court.

6. In addition to the check-ups, indicated in Items 1 and 2 of the present Article, annually, from the day of inclusion of the Resident in the Register until the day when decision is made about delivery of the Certificate about fulfilment of the investment declaration terms, the Administration together with the Authorized body is obliged to carry out check-ups of the Residents’ activities with a view to examine the conformity of the activities to the investment project implementation terms, stated in the investment declaration. In case of discrepancy of the Resident’s activities with the requirements, stipulated by the present Federal law, as well as in case of violation of the investment declaration terms by the Resident with regard to the investment volume and timing, the Administration is obliged to demand exclusion of the Resident from the Register through the arbitration court procedure.

7. In case of exclusion of the Resident from the Register before the Resident receives the Certificate about fulfilment of the investment declaration terms, the resident shall be obliged to pay the taxes, which the Resident did not have to pay under the special taxation regime, according to the legislation of the Russian Federation about taxes and charges.

Chapter  3. Customs regime of the free customs zone, applied in the Kaliningrad region

Article 8. Scope of application of the present article

1. The present article sets the scope of application of the customs regime of the free customs zone in the Kaliningrad region, established according to the legislation of the Russian Federation concerning the goods, shipped into the territory of the Kaliningrad region and shipped out from territory of the Kaliningrad region.

2. With regard to legal persons who are carrying out their activities according to the Federal law No. 13-FZ of 22 January 1996 "About the Special Economic Zone in the Kaliningrad region", a ten-year long transition period shall be valid in view of the special features, established by Article 8 of the present Federal law.

Article 9. Contents of the customs regime of the free customs zone, applied in the Kaliningrad region

1. The customs regime of the free customs zone, applied in the Kaliningrad region, is a customs regime, under which foreign goods are imported in the territory of the Kaliningrad region and used within the territory without payment of customs and taxes and without application of interdictions and restrictions of economic nature, established according to the legislation of the Russian Federation about State regulation of foreign trade activity, in view of the particular features, established by the present Federal law.

2. The free-customs-zone regime, applied in the Kaliningrad region, covers foreign goods, imported in the territory of the Kaliningrad region and used within this territory by legal persons, whose state registration is carried out in the Kaliningrad region according to the procedure, established by the legislation of the Russian Federation.

3. Only a legal person, whose state registration has been carried out in the Kaliningrad region according to the procedure, established by the legislation of the Russian Federation, may act as  Declarant of goods to be placed under the free customs zone regime, applied in the Kaliningrad region,

4. The goods, placed under the free customs zone regime, applied in the Kaliningrad region, as well as the products of their processing, may be used exclusively in the territory of the Kaliningrad region.

5. With regard to the goods, placed under the free customs zone regime, applied in the Kaliningrad region, as well as the products of their processing, transfer of the rights of ownership, use, and/or disposal, including retail sale of the specified goods, shall be allowed.

Article 10. Conditions for placement of goods under the free customs zone regime, applied in the Kaliningrad region

1. Foreign goods may be placed under the free customs zone regime, applied in the Kaliningrad region, except for the following kinds of goods:

1) excisable goods;

2) goods, importation of which to the customs zone of the Russian Federation is prohibited according to the legislation of the Russian Federation;

3) goods, not allowed to be placed under the the free customs zone regime, applied in the Kaliningrad region, according to the List approved by the Government of the Russian Federation, including the items proposed by the Government of the Kaliningrad region.

2. The government of the Russian Federation, taking into consideration proposals of the Government of the Kaliningrad region, may establish the periods, during which individual categories of goods, included in the List, specified according to Item 1 of the present Article, cannot be placed under the free customs zone regime, applied in Kaliningrad region.

3. Foreign goods, previously placed under other customs regimes, can be placed under the free customs zone regime, applied in Kaliningrad region, provided they meet the requirements of Items 1 and 2 of the present Article.

4. No customs payments shall be required for goods placed under the free customs zone regime, applied in the Kaliningrad region.

5. When foreign goods are shipped into the Kaliningrad region for processing and placed under the free customs zone regime, applied in the Kaliningrad region, the customs authorities shall carry out identification of the foreign goods on the Declarant’s request.

6. The persons, importing goods according to the free customs zone regime, applied in the Kaliningrad region, shall be obliged to keep account of the goods and present their accounts about such goods to the customs authorities.

7. The format and the procedure of the accounting, as well as the form, order and terms of presentation of the accounts shall be established by the Federal executive authority, authorized to carry out the functions of legal regulation in the sphere of customs administration.

Article 11. Identification of goods in the products of their processing

1. The identification of goods, placed under the free customs zone regime, applied in the Kaliningrad region, in the products of their processing shall be performed in the following ways:

1) by imprinting of seals, stamps, digital or other marks on the imported goods by the Applicant, by the processor, or by a customs officer;

2) by detailed description of the imported goods, taking photographic pictures, making scaled drawings;

3) comparing of the test results or samples of the imported goods with the products of their processing;

4) using serial numbers or other marks, made by the manufacturer of the imported goods.

2. The acceptability of the declared method of identification of the goods, placed under the free customs zone regime, applied in the Kaliningrad region, with regard to products of their processing shall be established by the customs authority in view of the goods nature and the operations carried out for their processing.

3. On the Declarant’s request and with the consent of the customs authority, the identification for the customs purposes can be performed by examination of the submitted detailed description of particular features of the raw material, components, and accessories, used in the production process, of the description of the processing technology, or by carrying out customs control over fulfilment of the goods processing operations

Article 12. List of operations for processing of goods

The operations for processing of goods, placed under the free customs zone regime, applied in the Kaliningrad region, include:

1) complete transformation or surface processing of goods;

2) manufacturing of new products, including mounting, assembly, or disassembly of goods;

3) repair of commodities, including their renovation, replacement of components, restoration of their consumer properties;

4) processing of goods, which facilitate manufacture of commodities or simplifies it, even if the goods are fully or partially consumed in the course of processing

Article 13. Termination of the free customs zone regime, applied in the Kaliningrad region

1. The procedure of the free customs zone regime, applied in the Kaliningrad region, can lead to  release of the imported goods and/or products of their processing for free circulation by placement  of the goods and/or products of their processing under the free customs zone regime for their release for internal consumption or placing them under another customs regime according to the Customs Code of the Russian Federation.

2. At release of imported commodities for free circulation, the amounts of the customs duties and taxes shall be paid, as they would be payable, if the imported goods had been declared for release for free circulation on the day, when the goods were placed under the free customs zone regime, applied in the Kaliningrad region. In order to calculate the customs duties and taxes, the customs authority shall use the customs value and/or quantity of foreign goods on the day of reception of the customs declaration with the declared customs regime and the foreign exchange rate against the currency of the Russian Federation, established by the Central bank of the Russian Federation. The interdictions and the restrictions stipulated by the legislation of the Russian Federation on public regulation of foreign trade activity shall be applied to the goods.

3. At release of products of processing for free circulation under condition of identification of the imported goods in the products of processing, the amounts of the duties and taxes shall be paid, as they would be payable, if the goods imported and used in processing (materials, raw materials, accessories) had been declared for release for free circulation on the day of placement of the goods under the free customs zone regime, applied in the Kaliningrad region. In order to calculate the customs duties and taxes, the customs authority shall use the customs value and/or quantity of foreign goods on the day of reception of the customs declaration with the declared customs regime and the foreign exchange rate against the currency of the Russian Federation, established by the Central bank of the Russian Federation. The interdictions and the restrictions stipulated by the legislation of the Russian Federation on public regulation of foreign trade activity are applied to the goods.

4. In absence of identification, carried out according to Article 11 of the present Federal law, the provisions of Item 3 of the present Article shall be applied, if the Declarant submits the documents and the data confirming the customs value and/or the quantity of the foreign goods, placed under the free customs zone regime applied in the Kaliningrad region and used in their processing.

5. In case of non-observance of the conditions, established by Items 3 and 4 of the present Article, in releasing of products of processing for free circulation, duties and taxes shall be estimated, based on the rates used with regard to the products of processing. The customs value and quantity of products of processing shall be determined on the day of the declaration for their release for free circulation.

6. The customs regime of the free customs zone, used in the Kaliningrad region, can be terminated on exportation of the products of processing of the goods, according to the customs regime relating to export of products of processing of the goods, which had undergone processing operations.

Article 14. Particular cases of application of the customs duty rates with regard to products of processing:

1. With regard to products of processing, the customs duty rates shall be applied according to the country of origin of goods imported for processing.

2. If foreign goods originated in more than one country are used for processing, the customs duty rates shall be applied in view of the following particularities:

1) if the processing has led to a change at the level of any of the first four digits of the commodity classification code under the Commodity nomenclature of foreign-trade activities, the customs duty rates shall be applied to the products of processing as to goods imported from countries, to which the Russian Federation provides the most-favoured-nation status in trade/political relations;

2) in other cases, the customs duty rates shall be applied according to the country of origin of the foreign goods, the customs value of which is the largest. If the customs values of the goods used for processing are equal, the customs duty rates shall be applied as to goods imported from countries, to which the Russian Federation provides the most-favoured-nation status in trade/political relations.

Article 15. Particulars of the Customs Treatment in the Kaliningrad region’s free customs  Zone with regard to the following individual categories of goods including means of transportation

1. Motor transport vehicles for transportation of freights, haulage tractors, trailers, tractors, buses, sea and air vessels, railway rolling-stock enjoying the status of foreign goods for customs purposes, imported to the territory of the Kaliningrad region and placed under the free customs zone regime applied in the Kaliningrad region, shall be treated for customs clearance purposes as transport vehicles carrying out international transportation between the territory of the Kaliningrad region and foreign territories and transportation of goods and passengers between the territory of the Kaliningrad region and other parts of the customs territory of the Russian Federation, provided the following conditions are observed:

1) the transport vehicles are registered on the territory of the Kaliningrad region;

2) the transport vehicles belong to legal persons specified in Item 2 of Article 9 of the present Federal law.

2. The government of the Russian Federation is entitled to establish restrictions on the use and disposal of the goods specified in Item 1 of the present Article, among other ways, by way of setting deadlines for the use of such goods in other parts of the customs territory of the Russian Federation and specification of the routes of movement of such goods.

3. The federal executive bodies, authorized to operate in the field of customs, as agreed with the Administration, shall establish a simplified procedure of customs clearance of the goods specified in item 1 of the present Article, as they cross the customs border of the Russian Federation.

Article 16. Customs clearance and customs control

1. The customs clearance and customs control of goods imported into the Special Economic Zone or shipped out of the territory of the Special Economic Zone shall be effected by the customs bodies in compliance with the customs legislation of the Russian Federation.

2. In order to simplify customs procedures in the free customs zone in the Kaliningrad region, the federal executive body, authorized in the field of customs operations, is entitled to establish and, on request of interested persons, apply special technologies of customs clearance, including presentation to the customs bodies of documents and data, not stipulated by the Customs Code of the Russian Federation;

3. Goods and vehicles, imported into the Special Economic Zone or shipped out of the Special Economic Zone, shall be inspected within twenty-four hours from the moment of submitting the necessary documents and data, and of presentation of the goods and means of transportation to the customs bodies

4. Goods shipped from the territory of the Kaliningrad region to other territories of the Russian Federation and into the territory of the Kaliningrad region from other territories of the Russian Federation, shall be exempt from customs payments for sanitary quarantine, phytosanitary, veterinary and other kinds of public control

Chapter 4.  Taxation and exchange control in the Special Economic Zone

Article 17. Taxation procedure

1. Residents of The Special Economic Zone, shall enjoy a special procedure for the payment of company income and property taxes, in accordance with Articles 2881 and 3851 of the Tax legislation of the Russian Federation.

2. Other federal, regional and local taxes and charges, and payments to extrabudgetary public  funds shall be paid in compliance with the legislation of the Russian Federation on taxes and charges, and that of the Kaliningrad region, including other regulatory legal enactments of local government bodies on taxes and charges.

Article 18. Special treatment of  the on EXCHANGE REGULATION AND EXCHANGE CONTROL legislation of the Russian Federation

The  procedure for the compulsory sale of foreign exchange by the residents at the domestic exchange market of the Russian Federation shall not be extended to foreign exchange earnings from exports of goods (works, services) and from the results of intellectual activity gained on the territory of the Special Economic Zone

Chapter 5.  THE PROCEDURE FOR  ENTRY, EXIT AND STAYING ON THE TERRITORY OF THE KALININGRAD  REGION.

Article 19. The procedure for  the entry in, exit from and stay on the territory of the Kaliningrad Region

1. The procedure for entry in, exit from and staying on the territory of the Kaliningrad Region of foreign citizens and (or)stateless persons shall be governed by the legislation of the Russian Federation and international agreements of the Russian Federation, and in accordance with the present Federal Statute

2. In order to facilitate the entry to the Kaliningrad region of foreign citizens - representatives of SEZ residents, investors, and individuals invited to discuss opportunities for cooperation in the Special  Economic Zone, the Government of the Russian Federation shall establish a simplified entry procedure, providing the opportunity of visa issuance to the above-mentioned categories of foreign citizens directly at the check-point on the border of the Russian Federation, on their  entry to the Kaliningrad region. The said procedure shall be carried out at Russian Federation’s border check-points by the representatives of the federal executive authority stationed at border crossings, and in charge of foreign affairs, based on the invitations made out at the Administration’s request according to the established procedure.

3. The bodies of state authority of the Kaliningrad Region shall be vested, for the purposes of economic security, with the right to independently introduce restrictions on certain categories of foreign citizens and stateless persons as to the term and place of staying in the Kaliningrad Region. These restrictions, however, must not infringe the human rights and freedoms guaranteed by the legislation of the Russian Federation and by the international agreements of the Russian Federation

Chapter 6. Settlement of disputes

Article 20. Procedure of settlement of disputes

Disputes, arising in connection with the creation of the Special Economic Zone, its functioning, modification, and liquidation, shall be settled by the arbitration court in accordance with the legislation of the Russian Federation.

Chapter  7.  Limitation period and liquidation of the Special Economic Zone

Article 21. Limitation period of the Special Economic Zone

The Special Economic Zone is established for the period of twenty-five years.

Article 22. Liquidation of the Special Economic Zone

1.Liquidation of the Special Economic Zone shall be carried out pursuant to a federal statute to be adopted on expiry of the term set by Article 21 of the present Federal law

The Federal law on liquidation of the Special Economic Zone regime shall not  come into force earlier than one year after the date of its official publication.

2. The federal law on the Liquidation of the Special Economic Zone before the appointed time shall be adopted in the event of:

1) introduction of martial law on the entire territory of the Russian Federation

2) introduction of the state of emergency on the entire territory of the Russian Federation for a period of over three months

Chapter 8.  Transitory provisions

Article 23. Particulars of free customs zone treatment during transition period

1. To legal persons registred in the Kaliningrad region who, on the  date of coming into force of the present Federal law, are carrying out their activities based on the Federal law No. 13-FZ as of 22 January 1996 "On the Special Economic Zone in the Kaliningrad region", the free customs zone regime shall apply according to the procedure stipulated by Article 3 of the present Federal law, with respect to the particulars of the present Article.

2. Goods imported in compliance with the free customs zone regime intended for free circulation after processing shall be exempt from customs duties and other charges, provided the above said goods meet the criteria for processing, set by Article 24 of the present Federal law.

3. Goods imported in compliance with the free customs zone regime intended for  export after processing shall be exempt from customs duties and other charges, provided the above said goods meet the criteria for processing, set by Article 24 of the present Federal law.

4. The provisions of the present Article shall not apply to legal persons included in the Register.

5. The provisions of the present Chapter shall apply to the legal persons, specified in Item 1 of the present Article, for the period of ten years from the date of enactment of  the present Federal law. On expiry of the said period, the application of the free customs zone regime with the details, stipulated by the present Chapter , shall not be allowed.

6. The provisions of Article 15 of the present Federal law  with regard to motor transport vehicles for transportation of freights,  trailers, semi-trailers, tractors,  buses, imported into the territory of the Kaliningrad region and placed under the free customs zone regime before the present Federal law came into force, for three years from the date of its enactment shall extended to the cases, where the transport vehicles belong to physical persons registered as individual entrepreneurs in the Kaliningrad region.

Article 24. Sufficient Processing Criteria

1. Goods shall be considered sufficiently processed, if one of the following conditions is met:

1) owing to processing or manufacturing of the goods, the classification code of the end-product under the Commodity nomenclature of foreign trade activities has changed at the level of any of the first four digits;

2) owing to processing or manufacturing of the goods, the value of the goods has changed and the share of the value added has reached thirty per cent.

2. Irrespective of the provisions stipulated by Item 1 of the present Article, the sufficient processing criteria shall not be met by:

1) operations aimed at protection of  goods against damage during storage or transportation;

2) operations aimed at preparation of goods for sale and transportation (splitting a consignment, formation of batches, sorting, repacking)

3) simple assembly operations and other operations, which do not substantially change the condition of the goods with regard to the List, set by the Government of the Russian Federation;

4) mixing of goods, originated in different countries, if the characteristics of the final product do nor substantially differ from the characteristics of the goods mixed.

3. The observance of the requirements, established by the present Article, is to be testified by an appropriate certificate.

4. The procedures for the application of the sufficient processing criteria and delivery of appropriate certificates shall be established by the Government of the Russian Federation.

Chapter 9. Final provisions

Article 25. On modification of the second part of the Tax Code of the Russian Federation

To amend the second part of the Tax Code of the Russian Federation (Collection of legislation of the Russian Federation, 2000, No. 32, Article 3340; 2001, No.  33, Art. 3413; 2002, No.  1, Art. 4; No.  22, Art. 2026; No. 30, Art. 3027, 3033; 2003, No.  1, Art. 2, 6; No.  28, Art. 2886; No.  46, Art. 4435; No. 52, Art. 5030; 2004, No. 27, Art. 2711; No.  31, Art. 3220, 3231; No.  34, Art. 3520, 3522, 3525; No.  35, Art. 3607; No.  41, Art. 3994; 2005, No. 1, Art. 30; No.  24, Art. 2312; No. 30, Art. 3128) as follows:

1) by adding Article 2881 with the following contents:

"Article 2881. Particulars of calculation and payment of company income tax levied on organisations residing in the Special Economic Zone in the Kaliningrad region

1. Residents of the Special Economic Zone in the Kaliningrad region (hereinafter, also - residents) shall pay company income tax according to the present Chapter, except for the cases established by the present  article.

2. Residents shall use a special procedure for paying company income tax, as is stipulated by the present article, with regard to the profit, obtained through the implementation of investment project in conformity with the Federal law On the Special Economic Zone in the Kaliningrad region, provided the residents keep separate accounting of incomes (expenditures), received (made) in the process of implementation of the investment project, and incomes (expenditures), received (made) through other economic activities.

3. In case if no separate accounting is done of incomes (expenditures), received (made) in the course of implementation of an investment project in conformity with the Federal law On the Special Economic Zone in the Kaliningrad region, and incomes (expenditures), received (made) through other economic activities, the profits, received through implementation of the investment project, shall be taxed according to the present article, beginning with the quarter, when such separate accounting is ceased.

4. For the purposes of this article, profits (in monetary terms), received through implementation of an investment project and determined on the basis of the data of separate accounting of incomes (expenditures), received (made) in the process of implementation of the said investment project, and incomes (expenditures), received (made) through other economic activity, shall be recognised as the taxable base for calculation of the income tax on the implementation of the investment project, to which the provisions of the present article are applied in conformity with the Federal law about the Special Economic Zone in the Kaliningrad region.

5. For the purposes of this article, incomes from the sale of goods (work, services), produced (provided) as a result of implementation of an investment project, except for production of goods (provision of work, services), to which investment projects may not apply, shall be recognised as incomes, received through the implementation of the investment project in conformity with the Federal law On the Special Economic Zone in the Kaliningrad region.

6. For six calendar years from the date when the legal person is entered in the general register of residents of the Special Economic Zone in the Kaliningrad region, the tax on incomes from the sale of goods (work, services) received by the resident through implementing of an investment project in conformity with the Federal law about the Special Economic Zone in the Kaliningrad region and established according to the present article and by the Federal law about the Special Economic Zone in the Kaliningrad region, shall be levied at 0 rate of the company income tax

7. During the period from the seventh to the twelfth calendar year inclusive, from the day when the legal persons were entered in the general register of residents of the Special Economic Zone in the Kaliningrad region, the rate of company income tax with regard to the taxable base of the income tax from implementation of the investment project according to the Federal law On the Special Economic Zone in the Kaliningrad region shall make up the value, established by Item 1 of Article 284 of the present Code and reduced by fifty per cent. Therefore:

1) the amount of company income tax with regard to the profit from implementation of the investment project according to the Federal law On the Special Economic Zone in the Kaliningrad region, calculated according to the tax rate reduced by 50 per cent of that established by paragraph 2 of Item 1 of Article 284 of the present Code, shall be transferred to the Federal budget;

2) the amount of company income tax with regard to the profit from implementation of the investment project according to the Federal law about the Special Economic Zone in the Kaliningrad region, calculated on the basis of  the tax rate reduced by fifty percent of the rate established by paragraph 3 of Item 1 of Article 284 of the present Code, shall be transferred to the budget of the Kaliningrad region;

8. If, in compliance with the fourth paragraph of Item 1 of Article 284 of the present Code, the law of the Kaliningrad region establishes a reduced rate of company income tax for individual categories  of taxpayers, Residents among the latter, with regard to taxes payable to the budget of the Kaliningrad region, in cases envisaged by the present article, Residents shall apply the tax rate reduced by fifty per cent.

9. The difference between the amount of company income tax with regard to the taxable base for the tax on profits from implementation of the  investment project in conformity with the Federal law On the Special Economic Zone in the Kaliningrad region, which would be calculated by the resident, if the special regime of payment of the organisations’ profit tax, stipulated by the present article, were not used, and the amount of the tax on organisations’ profits, calculated by the resident according to the present article with regard to the profit, obtained through implementation of an investment project in conformity with the Federal law about the Special Economic Zone in the Kaliningrad region, shall not be included in the taxable base for the company income tax to be paid by the residents.";

10. Article 3851 shall be added, and read as follows:

"Article 3851.  Particularities of calculation and payment of the company  property tax by residents of the Special Economic Zone in the Kaliningrad region

1. Residents of the Special Economic Zone in the Kaliningrad region shall pay company  property tax according to the present article with regard to all property, liable to this tax, except for the property, created or acquired though an investment project in conformity with the Federal law On the Special Economic Zone in the Kaliningrad region.

2. Residents shall separately calculate the amount of the company  property tax with regard to the property, created or acquired through implementation of an investment project in conformity with the Federal law about the Special Economic Zone in the Kaliningrad region.

3. During the first six calendar years beginning from the day when the legal persons were entered in the General register of residents of the Special Economic Zone in the Kaliningrad region, Residents shall enjoy a 0 per cent  tax rate on company  property, with regard to the property created (acquired) through implementation of an investment project, in conformity with the Federal law about the Special Economic Zone in the Kaliningrad region,

4. During the period from the seventh to the twelfth calendar year, inclusive, from the day when the legal persons were entered in the General register of residents of the Special Economic Zone in the Kaliningrad region, the rate of the company property  tax, with regard to the property created or acquired through implementation of the investment project according to the Federal law about the Special Economic Zone in the Kaliningrad region, shall make up the value established by the law of the Kaliningrad region and reduced by fifty per cent.

5. The special order of payment of the tax on organisations’ property shall not be extended to the part of the property value (created or acquired through implementation of the investment project according to the Federal law about the Special Economic Zone in the Kaliningrad region), which is used for production of goods (work, services), at which the investment project may not be aimed. Thus the part of the property value, which is used for production of goods (work, services) on which the investment project cannot be directed, shall not be considered an equal part of the income obtained as a result of production of such goods (work, services) in the total amount of all incomes of the resident.

6. The difference between the amount of the company property tax as regards the taxable base for the company property tax (created or acquired through implementation of an investment project according to the Federal law about the Special Economic Zone in the Kaliningrad region), which would be estimated by the Resident if the he/she has not used the special regime of payment of the company property tax, stipulated by the present Article, and the amount of the company property tax, estimated by the resident according to the present Article in relation to the tax on organisations’ property created or acquired through implementation of the investment project according to the Federal law about the Special Economic Zone in the Kaliningrad region, shall not be included in the taxable base for the tax on profit of the Resident’s organisation.".

Article 26. On the amendments to the Customs Code of the Russian Federation

Item 1 of Article 3579 of the Customs Code of the Russian Federation (Collection of the legislation of the Russian Federation, 2003, No. 22, Articles 2066; 2004, No. 46, Art. 4494) is to be supplemented with sub-point 25 with the following contents:

"25) of goods, imported into the territory of the Kaliningrad region in conformity with the free customs zone regime, and products of their processing, placed under the customs regime for internal consumption.".

Article 27. Enactment of the present Federal law

1. The present Federal law shall come into force on 1 April 2006.

2. From the date of enactment of the present Federal Law, hereby shall be declared null and void:

1) Federal law No. 13-FZ of 13 January 1996 "On the Special Economic Zone in the Kaliningrad region” (Collection of the legislation of the Russian Federation, 1996, N0. 4, Art. 224), except for sub-item 2 of Article 1 of Article 7, effective until 1 July 2006 with regard to importation of passenger cars to the territory of the Special Economic Zone in the Kaliningrad region).

2) Article 26 of Article 2 of the Federal law No. 31-FZ of 21 March 2002 "About adjustment of legal acts to the Federal law "About public registration  of legal persons" (Collection of the legislation of the Russian Federation, 2002, No. 12, Art. 1093);

3) Article 11 of the Federal law No.169-FZ of 8 December 2003 "About amendments to some legal acts of the Russian Federation and about recognition of legal acts of the RSFR invalid” (Collection of the legislation of the Russian Federation, 2003, No. 50, Art. 4855);

4) Article 35 of the Federal law No. 58-FZ of 29 June 2004 "About modification in some legal acts of the Russian Federation and recognition of some acts of the Russian Federation invalid in connection with realisation of measures for improvement of the government” (Collection of the legislation of the Russian Federation, 2004, No. 27, Art. 2711);

5) The third paragraph of Article 73 of the Federal law No. 122-FZ of 22 August 22, 2004 "About amendments to some legal acts of the Russian Federation and about recognition of some legal acts of the Russian Federation invalid in connection with adoption of the Federal laws "About changes and supplements to the Federal law "About the general principles of organisation of legislative (representative) and executive bodies of public authorities of subjects of the Russian Federation" and " About the general principles of organisation of local self-management in the Russian Federation (Collection of the legislation of the Russian Federation, 2004, No. 35, Art. 3607);

6) Article 4 of the Federal law No. 90-FZ of 18 July 2005 "About amendments to some legal acts  of the Russian Federation" (Collection of the legislation of the Russian Federation, 2005, No. 30, Art. 3101);

7) Article 7 of the Federal law No. 117-FZ of 22 July 2005 "About amendment of some legal acts in connection with adoption of the Federal law "About Special Economic Zones in the Russian Federation" (Collection of the legislation of the Russian Federation, 2005, No. 30, Art. 3128).

3. To recognize null and void from 1 July 2006:

1) The federal law No. 13-FZ of 13 January1996 "About the Special Economic Zone in the Kaliningrad region" (Collection of legislation of the Russian Federation, 1996, N 4, Article 224);

2) Article 73 of the Federal law No. 122-FZ of 22 August 2004 "About amendments to the legislative acts of the Russian Federation and recognition as null and void of some legislative acts of the Russian Federation in connection with adoption of federal laws "About the changes and supplements to the Federal law "About the general principles of organisation of legislative (representative) and executive authorities of subjects of the Russian Federation" and "About the general principles of the organisation of local self-management in the Russian Federation" (Collection of the legislation of the Russian Federation, No. 35, 2004, Art. 3607).

4. The statutory legal acts, including the regulatory legal acts of government bodies, adopted for enactment of the Federal law No. 13-FZ of 22 January 1996 "About the Special Economic Zone in the Kaliningrad region" and effective on the date of adoption of the present Federal law, shall remain effective, provided they are not contradictory to the present Federal law.

V. Putin
President of the Russian Federation