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Legislation of priority development

State Secretary - Deputy Minister of the Ministry of the Interior Pavel Volkov told EastRussia how the laws for the Far East are being adopted and working

In December of this year, the federal law on territories for advanced development will mark the third anniversary, the first in a series of specialized normative acts that created a special legal regime for investors in the Far East. Now such laws are already 25. About what has been done and what is planned - in an interview with EastRussia Pavel Volkov tells, the State Secretary - the Deputy Minister of the Russian Federation for the Development of the Far East.

Legislation of priority development
Photo: Ministry of Economic Development of the Russian Federation
Special project TORA and Free Port
- Pavel Mikhailovich, the key feature of the investment climate that is being formed in the Far East today is that it is based on a whole range of special laws that somehow determine specific regulation for the region. How much can you consider this work to be completed, or does the creative process continue?

- Quite right, one of the basic basic principles of the advanced development of the Far East is the creation and improvement of advanced development legislation in various branches of law, which should provide competitive and better living and business conditions in the macroregion. The ministry pays a lot of attention to this task, but we are not the only ones involved in the creation of advanced development legislation in the Far East. This work involves specially created development institutions, the public council of the ministry, experts and, of course, investors from the Far East. Separately, I would like to note the great support of the deputies and senators who not only actively work on government bills in the State Duma or the Federation Council, but also become the authors of legislative initiatives themselves.
To date, we have established a database of 25 legislative acts and more than 70 acts of the government, the whole complex is purposefully working for the development of the Far East and ensuring the advanced development of the macroregion - this is what we call advance development legislation. And these are not only the laws on the territories of advanced development, the Free Port of Vladivostok, the Far Eastern hectare. This and other regulations aimed at supporting individual industries, to lift certain restrictions.   
The process certainly continues. New laws are being adopted, and already adopted laws are being adjusted on the basis of law enforcement experience. 
- Summing up the results of the 2017 year in terms of lawmaking, what has been done?

- 2017 has become quite successful in terms of legislation. Priority development legislation was supplemented by seven federal laws in completely different branches of legislation and regulating different spheres of life in the Far East.
Thus, in March, a law came into force providing entry to the territory of the Free Port of Vladivostok in Vladivostok with electronic visas. This mechanism has already shown its relevance in the Primorsky Territory, then we plan to expand the geography of the application of an electronic visa. 
In April, a law came into force that removed unnecessary taxes from the TOP management company and the Free Port of Vladivostok - this will allow the Far East Development Corporation to use more funds directly for infrastructure construction.
In June, a small but very important law came into force, which corrected and supplemented the previously adopted law on reducing energy tariffs in the Far East. In fact, it has now become possible to align energy tariffs for industrial consumers in the Far East to the average Russian level. Let me remind you that the tariff in some areas of the Far Eastern Federal District reached 14 rubles per 1 kWh. Now enterprises have the opportunity to pay 4 rubles - as the national average.
In July, a law came into force that expanded the boundaries of the Free Port of Vladivostok to the Uglegorsk urban district of the Sakhalin Region. The area has great potential for modernization of port facilities and projects in the field of coal mining, processing and transshipment. Also in July, a law came into force, which will allow from 2018 to 2023 to apply reduced income tax rates for enterprises in the tourism industry of the Far East.
Also in July, significant useful amendments were adopted to the law on the "Far Eastern hectare" and a separate law aimed at clarifying the powers of regional and local authorities in the field of urban development. These amendments were initiated and supported by the regions themselves, whose territories became part of the Free Port of Vladivostok ...
- How productive is the autumn session of the parliament for the Far East?

- Productive. Just a few days ago - on November 22 - the Federation Council approved two very important laws: the first was developed and adopted to extend tax periods before the start of the application of preferential rates for corporate income tax on large investment projects. The second law is the extension of the preferential rate for the extraction of minerals for projects in the Far East related to the extraction of certain types of ores - tin.
Another bill is now passed by the State Duma in the first reading and is connected with the possibility to implement projects in the TOP in the consolidated group of taxpayers.

- As you noted, in March, a law came into effect, ensuring entry into the territory of the Freeport via an electronic visa. In August, the first visas were issued, the people went. How do you assess the operation of this law?

- E-visa showed its relevance. From August to the end of November, we have issued more than 5 thousands of e-visas, while 3,2 thousands of people have already taken advantage of them and arrived in Vladivostok. What is interesting - applications were received from all without exception 18 countries whose citizens have received this opportunity.
- In this list - half of the Arab countries. Everywhere people go? 

"Suffice it to say that our first citizen was a Saudi citizen." And only the second - a citizen of China.
- Which countries are the most active citizens of the electronic visa?

- The leaders are clear - this is China and Japan. From China to Vladivostok by e-visa to date, moved more than 1,8 thousand people, from Japan - over 1,2 thousand people. 
- And for what purpose do people go for 8 days to the Free Port?

- When applying, the foreigner must indicate the requested type of visa. The absolute majority declares the tourist purpose of the trip. 
- Do I understand correctly that people traveling on an electronic visa can fly to Vladivostok only by an international flight, that is, from the same Arab countries they need to get not through Moscow, but by connections through Beijing, Seoul, Tokyo?

- You can, of course, enter through the maritime checkpoint in Vladivostok, but by air you can only enter through the airport "Knevichi" in Vladivostok. So far, only this airport has the appropriate equipment and software. That is, the border on an electronic visa can only be crossed here. Transit through Moscow with such a visa can not be flown. Accordingly, foreign citizens must choose routes through Asian hubs that have air links with Vladivostok.
- The President at the Eastern Economic Forum called for the expansion of the use of electronic visas in the Far Eastern subjects. How will it look like?

- Within the framework of the existing legislation, new checkpoints will be opened in the Far East at the beginning of the year, through which it will be possible to enter electronically. These are railway and automobile checkpoints on the border of Primorsky Krai and China (Pogranichny, Khasan, Makhalino, Poltavka, Turiy Rog), two ports in Primorye (Posiet and Zarubino) and two ports in other regions - Korsakov in Sakhalin and Petropavlovsk in Kamchatka. 
At the same time, the current legislation does not allow us to use the electronic visa regime at the airports of Petropavlovsk-Kamchatsky, Yuzhno-Sakhalinsk, Khabarovsk and other cities. This is due to the fact that, although some municipalities of these constituent entities of the Federation entered the Free Port of Vladivostok, the airports themselves (and checkpoints in them) do not belong to the territory of the Free Port. Therefore, as part of the execution of the President's instructions, in the near future we are submitting to the Government a draft law that contains amendments to the federal law "On the procedure for leaving the Russian Federation and entering the Russian Federation." With the help of these amendments, we intend to open the opportunity for foreigners to visit the Far Eastern regions on the basis of an electronic visa. We expect this to be a big step forward for increasing the popularity of e-visas and, accordingly, for an increase in the number of trips to the Far East. 
- That is, in Kamchatka, from the next year an electronic seaport will work on an electronic visa, not an airport?

- Absolutely. The seaport of Petropavlovsk-Kamchatsky - already from 1 January 2018. The airport - after the adoption of appropriate amendments to the legislation, and the subsequent measures to equip the checkpoint with the necessary equipment and software.
- But what about the Jewish Autonomous Region? There is no international airport in Birobidzhan. 

- The EAO does not operate the Vladivostok Free Port regime and there is no international airport (Khabarovsk airport is used). Unfortunately, under these conditions, it is not possible to apply an electronic visa to enter the EAO in the near future. The law does not allow a foreign citizen to leave the subject of the federation into whose territory he has entered. Therefore, it will not be possible to receive an electronic visa to the Khabarovsk Territory and enter the EAO. So the question is the subject of further regulation.

- You touched on the topic of adjusting taxes for large investment projects. The same was done in the interests of large projects, such as Amursky GPP, VNKhK? What is the essence of the adjustment? How easy were these amendments?

- The law establishes additional tax periods. Now the standard conditions for investment projects are that the 10-year preferential tax rate comes into force at the latest - 3 tax periods after the investor becomes a resident of the TOP. However, a large enterprise in 3 years may not have time to build up and go to profit, respectively, part of the benefits in relation to them "burn out". Based on this, the new law states: if an investor invests over 500 million rubles, then the rate enters into the 6th tax period. If more than 1 billion rubles - then for the 7th tax period. And if the project costs over 100 billion rubles, then for the 10th tax period. So it is beneficial not only for the investors you mentioned, but also for many others who are implementing large projects.
Let me remind you that this was the instruction of the President; it was given as a result of last year’s Eastern Economic Forum. The question is quite long, but, as I said, we are close to the result - the law has already been approved by the Federation Council. We hope that this year it will come into force. 
- Is it a separate bill? Not an amendment to the law on TOP?

- All that concerns the tax law is the Tax Code, and the law amends it accordingly. By the way, we drafted the bill together with the Ministry of Finance, but it was represented in the State Duma by the Ministry of Finance - like all other acts related to budget and tax legislation. 
- What other legislative initiatives were, in fact, "targeted" adjustment of the regulatory framework in the interests of investors in the Far East?

- The Freeport of Vladivostok expanded to the Uglegorsk District of the Sakhalin Region. This allowed us to cover a bush of investment projects with preferential treatment. Currently, we are preparing an extension of the regime to the Sovgavansky district of the Khabarovsk Territory, further amendments are being considered - Komsomolsk-on-Amur.
In the spring there will be a bill that will amend the legislation on the TOR. This is a large enough normative act, it is aimed at taking into account the entire experience of law enforcement practice, leveling all the revealed difficulties in the application of the current law. In addition, there will be a number of novels, for example, we are laying the standard for the creation of aquatic TOPs. 
- What is a water TOP? Is it a clean water area?

- Yes. We intend to create a legal opportunity to determine a section of a surface water body and form a PDA there. This will provide an opportunity to engage in aquaculture. There are corresponding corrective amendments to the law on aquaculture, which will allow the "Corporation for the Development of the Far East" to carry out most of the work associated with the formation of a fish farm instead of a resident. 
- One of the initiatives that is currently being worked out is the so-called “grandfather's clause”. What will it give investors?

"The grandfather's reservation" means the invariance of legal conditions in a certain period of time.This bill is now in the government, we expect that it will go to the State Duma this year already.It contains changes in tax legislation that will guarantee the invariability of tax norms in regarding the residents of TORs and the Free Port of Vladivostok for 10 years. 

- Tell me, how do you monitor law enforcement practice? How do the new laws work, which measures are effective, and which ones, on the contrary, cause criticism?

- Monitoring law enforcement practices is a very important aspect. We keep it constantly, some time ago we even set up a special unit - the Center for Monitoring and Law Enforcement Practice of the Legislation of the Territories for Leading Social and Economic Development and the Free Port of Vladivostok was singled out. 
Another commission was created, four working groups, each in its own direction. One - for customs issues TOP and SPV, the second - on land, the third - on tax and the fourth - on general issues. The format of the working groups allows active involvement in the discussion of the business (current and potential residents of TOP and SPV), so we receive feedback directly from those to whom the laws are intended. 
- And what is this feedback?

- As a result of the work of the commission and its working groups, we, for example, identified the need for residents to have separate units outside the TOP and SPV, as well as interest in reducing administrative requirements when residents apply the customs regime of the free customs zone and in simplifying the procedure for granting land for their implementation activities. These are very important aspects, we will, of course, take them into account when making adjustments to the laws.
- Is there any practice of legal advice to foreign investors? Now there are a lot of contracts with foreigners, are they asking questions?

- Foreign investors, as a rule, have their own representative offices or hire specialists, consultants to project their investment project to the legal regime of ASEZ or FPV. Applications are received, of course, they are mainly interested in clarifications of legislation, clarifications. Of course, we consider it our duty to openly and professionally disclose certain issues and features of legal regulation. To do this, we created the Agency for the Far East for attracting investments and supporting exports and the Corporation for the Development of the Far East - these institutions were created in order to provide high-quality services for investors (add a little about the functionality).
- And according to what standards do investors first of all request consultations?

- The most frequent, perhaps, concerned taxes and how to become a resident. By the way, we removed many questions when we began to publish detailed infographics, which told in simple words how to become a resident, what is the essence of tax benefits and what are the grounds for granting them.
What I have listed is just the first slice of questions. Further, as a rule, the questions become more complex and related to the details of a specific investment project (which TOR or FPV regime to choose, where to find a land plot for the project, where to find employees for production, etc.). Investors look at the project taking into account its financial model, compare several points, one in the Free Port, the other in the TOP. The site in the Free Port, for example, is better, and in the TOP there are additional bonuses - for example, the infrastructure can be financed from the federal budget. For a competent choice, a thorough analysis of the entire economics of the project is needed - this is where a thorough study of the legislation is required, our help and qualified assistance from the development institutions of the Far East.
- Do you monitor judicial practice?

- We conduct monitoring of law enforcement practice of the legislation of advanced development of the Far East, which includes monitoring of judicial practice. But so far, fortunately, I have not heard about any disputes related to the application of our legislation. At the same time, we have cases when the "Corporation for the Development of the Far East" participates in the courts, protecting the interests of investors. 
- The issues that were raised in litigation were related to land, in particular, the provision of land to residents of the Free Port. 

- We have norms that allow the Free Port to provide land to residents without bidding. No need to pass a tender or auction, a tender for the land, if it is as such. But, as a rule, those sites that residents want - they have different kinds of participants in economic relations. Therefore, many decisions stall, hang in a bunch of bureaucratic procedures. To help investors solve these problems, we have drafted a bill that will fully take the procedure related to the provision of a land plot to the Development Corporation of the Far East and save residents from excessive bureaucracy or, worse, communication with unscrupulous officials. 
- That is, when there will be an interest of the investor to a certain site in the Freeport of Vladivostok, this section is first taken by the corporation, and then passes to him? 

- Yes.
- And if there is a situation when two participants want the same site?

- The principle whose application is received earlier will be valid.
- You spoke about clarifying the powers of regional and local authorities in the field of urban planning - a special law was adopted on this matter. And what was wrong, why was it necessary to adjust the distribution of powers?

- The history has arisen since the adoption of the law on the Freeport of Vladivostok, the reason for it is that in the Primorsky Territory literally a month before the final approval of this Law, the powers in the field of urban development were redistributed. Namely - regional regional law they were transferred from the local authorities of the Vladivostok agglomeration to the level of the regional administration. And in Primorsky Krai, a conflict arose due to the fact that the Law on the Freeport envisages the presence of town-planning authorities in the local government, and the regional authority passed in accordance with the general provisions of federal legislation, powers in this sphere were transferred to the regional authorities. Already then the work began, connected with the fact that this collision should be eliminated. Now this work is completed. 

- What are your plans for the 2018 year?

- We are preparing a number of bills, some of which we expect to submit to the State Duma in the spring. I have already spoken about the bill, which will introduce many useful amendments to the law on TOP. There are a number of other initiatives related to the legislation on ASEZ that we intend to propose. Firstly, this is the extension of the period for applying preferential rates of insurance premiums until 2025 for residents of ASEZ and FPV. Secondly, this is the legislative establishment of a special regime for the implementation of control (supervisory) activities in the ASEZ in the Far East. And thirdly, this is the removal of restrictions for residents of the TOP on the presence of branches, separate divisions, jobs outside the border of the TOP.
Another initiative related to PDA, but located in a slightly different plane, is the adjustment of the procurement legislation of state-owned companies. We propose to allow state-owned companies to conclude long-term contracts for the purchase of goods, works, services from residents of the TOP. This will allow companies to receive guaranteed sales volumes, which, in turn, will be an indisputable advantage when making an investment decision, or when contacting a financial institution for debt financing.
- And besides the TOP?

- A very important story is to achieve VAT exemption for air transportation of passengers and baggage from / to the Far Eastern Federal District. This measure is directly aimed at increasing the transport accessibility of the region. 
Another layer of work is further amendment of the legislation on the "Far Eastern hectare". In particular, fulfilling the instructions of the president, we must ensure that the program is extended to participants in the resettlement program for compatriots and their family members, provided they receive Russian citizenship.
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