investment profile: russia
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Why to invest in Russia? Economic, Investment and Business Outlook. Published: August 2013 Publisher: Oryx Business IntelligenceTRANSCRIPT
Oryx Business Intelligence
Oryx Business Intelligence
Business Environment - Russia
Published: August 2013
Oryx Business Intelligence 2
Why Russia
• GDP growth of 3.4% in 2012• FDI recorded at USD 51.4 billion in 2012, or a total of
USD 356.8 billon in years 2005-2012• In accordance to the World Bank ranking Russia is
ranked:• ‘High income level country’• 8th largest economy in the world• 5th largest economy by purchasing power
parity in the world• The Customs Union with Belarus, Kazakhstan and
Russia• Advanced information technology and retail sectors• Extensive expertise in aviation, machinery,
automotive, space and agriculture industries• Favorable environment and resource for the
manufacturing and trade/ retail activity• Cheap supply of raw materials, abundant water
resources• A presidential decree issued in May 2013 states that
Russia must be in the top 20 in the Doing Businessranking by the year 2020
The Information Technology and Retail
sectors are the fastest growing segments
of the Russian economy
Core AdvantagesThe Moscow City
Oryx Business Intelligence 3
Investment Environment – Russian Federation
According to the Ernst & Young's EuropeanInvestment Monitor 2012, Foreign DirectInvestment (FDI) inflow in Russia isPositioned for growth
19 percent of international investors perceiveRussia as one of the most attractive globalregions in 2012, an increase of 8 percent in2012 is the largest investor attractiveness toinvest increase globally
Investors already present in Russia continueto demonstrate their confidence in theRussian market. Nearly 80 percent of theseinvestors plan to increase or maintain theiroperations in the country
Foreign investment in the capital slumped 34percent in 2012
Russian Investment Environment Global Investment Trend 2006-12
Source: Oryx Research, Ernst & Young EU Investment Monitor 2012
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Economy Dynamics – Russian Federation
Retail Sector: Russia is the second largestRetail market and the fastest growing market forluxury goods in Europe. Russia has around 16.5million square meters of retail space. TheRussian Retail sector is one of the mostdeveloping sectors in the economy with Russiansspending around 60 per cent of pre-tax incomeon retail goods - the highest spent level inEurope.
Manufacturing Sector: Russia has a developingManufacturing sector which is the second largestsector in Russian economy. Manufacturing inRussia include aircraft, automotive, defense,electronics, railroad and space industries.
GDP breakdown by Sector, 2012, % Russian Economy
Source: Oryx Research, Ministry of Economic Development
0 5 10 15
Fishing
Hotels and Restaurants
Education
Utilities
Healthcare and social services
Agriculture, Hunting and Forestry
Finance
PA and military security
Construction
Transport and Communication
Natural Resource Extraction
Real Estate
Manufacturing
Retail, Wholesale and Repair Services
Infrastructure Sector: Russia is planning to invest around US$ 380 billion in infrastructure sectorprojects by 2020. The investment is projected to be formed from state budged and public-privatepartnerships. Russia has a developing transport network which includes more than 120.000 km of railwayroads, 1 million km of roads and highways, 230.000 km of pipelines and 100.000 km of inland motorways.Russian transport network needs modernization, especially roads and highways.
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0 10000 20000 30000 40000 50000
United Arab Emirates
United States
Saudi Arabia
Turkmenistan
Qatar
Iran
Russia
CU M in billion
5
Economy Dynamics – Russian Federation
Real Estate Sector: Russian real estatesector is one of the fastest growing sectors inRussian economy. More than 37 millionsquare meters of real estate was built in thefirst six months of 2013, representing a 7.6 percent growth pattern. The most profitable andgrowing real estate is retail real estate, officebuildings and residential properties. The mostpreferred regions for office real estate areMoscow and St. Petersburg. The mostpreferred cities for retail real estate andresidential properties are cities with apopulation more than 1 million people.
Top World Gas ReservesRussian Economy
Source: Oryx Research
Natural Resource Extraction: Russian natural resources are among the largest in the world whichincludes oil, natural gas, coal, iron ore, apatite, diamonds and other. Russia natural gas reserve is thebiggest in the world, and remains one of the largest producers and exporters of oil and gold.
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Investment Environment – Russian Federation
According to the HSBC Trade Forecast, Russian trade is expected to perform better than theworld average during the next 15 years. Russian trade is mainly driven by exports of oil andcoal, and import of motor vehicles and technology equipment and gadgets.
World Trade, Annual Growth Rates, Russia Vs. World, 2012-2026 (f)
Source: Oryx Research, HSBC Trade Forecast
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Why Russia
Russia’s RetailInvestment Environment
• The Russian jurisdiction recognizes generallyaccepted principles of the legal regulation ofinvestments
• Both local and foreign investors are subject toequal business conditions in relation to theRussian Law of Investment and other Laws
• An investor is entitled to manage, use and disposehis/ her possessions on his/ her own discretion. Aninvestor is entitled to transfer the profit owned byhim/ her into foreign country without any restriction,except a tax payment as prescribed by theRussian legislation
• Russia has 79 double-tax treaties providing a taxbenefit for foreign investors in Russia
Several Double Taxation Avoidance Agreements with Russia
The government sets an objectiveimproving Russia's investmentclimate as a matter of urgencyA presidential decree issued in
May 2013 states that Russia must
be in the top 20 in the Doing
Business ranking by 2020
Australia EU Kuwait South-Korea
Brazil India Norway USA
Canada Israel Qatar Venezuela
China Japan Saudi Arabia Vietnam
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Special Economic Zones and Incentives
Tax IncentivesSpecial Economic Zones
Major Benefits to Consider • Russia’s SEZs count 61 foreign companies in 2012, sixUS companies came on board the same year. GeneralMotors invested US 180 million, 3M – US 30 million,and – US 75.4 million.
• The tax incentives alone would have influenced thedecision makers to operate in SEZ: 3M will pay 2 percent for the first five years of profit-making operations,instead of the standard rate of 20 per cent.
• Other privileges are provided to Alabuga: Given aminimum investment of US 3.8 million to operate in thezone, it will be exempted from the VAT and importduties on equipment, on which, Denmark's Rockwool,for instance, already saved US 12.6 million.
Foreign Players in Russia’s SEZ
� Innovation zones: Dubna, Zelenograd, St. Petersburg and Tomsk SEZ
� Industrial zones: Alabuga, Lipetsk and Togliatti SEZ
� Tourist zones: Baikal Haven, Baikal Gates, Altai Valley and the Turquoise Katun SEZ
� Logistic zones: Ulyanovsk Vostochny and Sovetskaya Havan SEZ
- Comfortable administrative procedures- Federal and regional government support- Tax benefits- Free customs zones- No connection fees- Logistics terminals- Customs terminals
SEZ Russia
Profit tax, % 2-15.5 20
Social security taxes, % 14-30 30
Property tax, % nil 2.2
Land purchase price, %4-50 (cadastral
price)
100 (market price)
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Fastest Growing Export Sectors – Russian Federation
Russia’s Fastest Growing Export Sectors 2012 - 2016f
Source: Oryx Research, HSBC Trade Forecast
Oryx Business Intelligence 10
Fastest Growing Import Sectors – Russian Deferation
Russia’s Fastest Growing Import Sectors 2012 - 2016f
Source: Oryx Research, HSBC Trade Forecast
Oryx Business Intelligence 11
Logistics Network
Logistics JunctionLogistics Network
• Railway links between Russia and Lithuania,Finland, Ukraine, Belarus, Georgia,Azerbaijan, Kazakhstan, Mongolia, China,North-Korea and Poland
• High-speed railway, currently beingexpanded
• Widespread sea network. Direct link to theBlack Sea, the Sea of Azov, the Baltic Sea,the Barents Sea, the White Sea, the Sea ofJapan and the Caspian Sea
• Developed logistics network: rail, sea
and sky
• Rail junction between Europe and Asia
• The shortest way from Europe to Asia
Train Network
• The world’s second largest railway network• Trans-Siberian Railway - the largest railway
line in the world• Trans-Eurasia logistics – Russian and
German joint venture is operating freighttrains between Germany and China viaRussia
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Registering Business and Tax Environment
Tax EnvironmentTypes of Business Entities
Limited liability company
• Minimal capital – 10,000 RUB (USD 310)• Min number of founders – 1• The shareholders are liable to the amount of
their individual capital contribution
Joint-stock companies
• Minimal capital – 10,000 RUB (USD 310)• Min number of founders – 1
Branch
- is a subdivision of a foreign legal entity that canconduct commercial activity.Accreditation fees: USD 4,100. Accreditation bodies charge a processing fee of between USD 500 and USD 2,000 (from one to five years of accreditation).
Representative office
- is a subdivision of a foreign legal entity thatrepresents company. Commercial activity is not allowed.Accreditation fees:
1 year – USD 1,0002 years – USD 2,0003 years – USD 2,500
The standard corporate income tax – 20%• Reduced to 15.5% in some regions
Standard value added tax (VAT) – 18%The general personal income tax
– 13% for residents– 30% for non-residents
Basic social security rate for employers– 30% (salary is under USD 17,579)– plus 10% of amount exceeding USD
17,579
15% is applied for dividends paid to non-resident company20% on interest20% on royalties
Withholding Tax Rate
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Tax Rates – European Countries
Statutory Tax Rates And Standard VAT Rates, EU Countries And Russia, 2012, %
Dividends paid 15%
Interest paid 20%
Withholding Tax Rates To Non-Resident Entity
No CountryCorporate Income
TaxVAT
Personal Income
Tax
1 France 36.1 19.6 46.8
2 Malta 35.0 18.0 35.0
3 Belgium 34.0 21.0 53.7
4 Portugal 31.5 23.0 49.0
5 Italy 31.4 21.0 47.3
6 Greece 30.0 23.0 49.0
7 Spain 30.0 18.0 52.0
8 Germany 29.8 19.0 47.5
9 Luxembourg 28.8 15.0 42.1
10 Norway 28.0 25.0 40.0
11 Sweden 26.3 25.0 56.6
12 Denmark 25.0 25.0 55.4
13 Netherlands 25.0 19.0 52.0
14 Austria 25.0 20.0 50.0
15 Finland 24.5 23.0 49.0
16 United Kingdom 24.0 20.0 50.0
17 Estonia 21.0 20.0 21.0
18 Hungary 20.6 27.0 20.3
19 Slovenia 20.0 20.0 41.0
20 Iceland 20.0 25.5 31.8
21 Russia 20.0 18.0 13.0
22 Czech Republic 19.0 20.0 15.0
23 Poland 19.0 23.0 32.0
24 Slovakia 19.0 20.0 19.0
25 Romania 16.0 24.0 16.0
26 Latvia 15.0 22.0 25.0
27 Lithuania 15.0 21.0 15.0
28 Ireland 12.5 23.0 41.0
29 Bulgaria 10.0 20.0 10.0
30 Cyprus 10.0 17.0 38.5
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Email [email protected] / [email protected]
Tel +792 (68) 512186
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