On February 12, 2020, the company YE (Ernst & Young Global Limited) and PomorInnovaLes, a Wood Industry Regional Innovation Cluster, held a seminar on the Arkhangelsk PPM in Novodvinsk where they discussed issues concerning the state support of investment projects: special investment contract (SPIC 2.0), agreement for encouragement and protection of investments (AEPI), creation of free trade areas, preferential taxation of arctic zone enterprises, etc.

In addition, the representatives of EY told about the most significant changes and trends in the development of tax legislation, transfer price formation and tax monitoring as a new way of fiscal management.

The company EY was represented by Andrey Sulin, Head of Department for Tax and Legal Services Provision for Industrial Companies (incl. FIC), Aleksey Nesterenko, Head of of Department for Tax Dispute Support in the CIS, Ilya Skripnikov, Partner of EY (Legal Practice) and Ruslan Radzhabov, Director of Transfer Price Formation Group.

The EY speakers presented the main provisions and mechanisms of the new law aimed at reforming the national legal framework of previously existing special investment contracts (SPIC 1.0). The national legal framework of the new version of special investment contracts (SPIC 2.0.) is currently being developed and is being considered by the federal executive bodies; the final version will be approved by the Government of the Russian Federation in April-May of this year.

In connection with this, the results and recommendations of the seminar addressed to the bodies of the Arkhangelsk region and the federal center are still able to influence the final version of the developed set of regulatory legal acts.

In particular, the key elements of SPIC 2.0 were the access to the competition for tax benefits and subsidies only for those investors who intend to develop and implement advance technologies in order to develop industrial products that are competitive on the world market. So, SPIC 2.0 can be concluded with only one investor, but taking into account the synergistic effect obtained as a result of the project, related industries cooperated with investor will also be able to increase the efficiency of their production.

Before the investor submits an application to the authorized federal bodies for participation in the competitive selection, the investment project must be previously agreed with the regional and municipal authorities, etc.

According to representatives of the PomorInnovaLes cluster, such a reset of the SPIC concept requires a more detailed study. In particular, Oleg Gubin, CFO of APPM, has emphasized the need for upstream integration of the national legal framework (NLF) under SPIC 2.0, which is absent in the Arkhangelsk region. “Taking into account the existing experience of SPIC introducing in various regions of the Russian Federation, it would be possible to create a model project of NLF in the Ministry of Industry and Trade of Russia and launch it in the regions where this process is at the initial stage, it would be more appropriate,” - said Oleg Gubin.

The most important questions to EY were asked by representatives of the companies participating in the PomorInnovaLes cluster. The issues of the criteria for investment projects for SME, benefits under SPIC 2.0, status of advance technologies and justification of their relevance, etc were among them.

In particular, Natalya Pinyagina, Director for Interaction with State Authorities at APPM, asked to clarify if the investors, whose projects are under implementation, but the construction of some facilities of the investment project has already been completed, would be able to participate in the competition for the implementation of SPIC 2.0.

Answering these questions, Andrey Sulin, Head of Department for Tax and Legal Services Provision for Industrial Companies (incl. FIC), noted that SPIC 2.0 priority is given to large companies, however, taking into account the overall economic effect, the small and medium enterprises included in the cluster can participate in their projects . In this case, SMEs will be able to experience the results of state support measures for common cluster projects, improving their production and economic indicators.

As for investment projects which are at the implementation stage, they can qualify for participation in the competition of advance technologies under certain conditions, however it is most important to prepare a competent justification for their relevance and get on the list of advance technologies, which will soon be approved by the Decree of the Government of the Russian Federation.

In addition, he noted that enterprises located in Novodvinsk and other areas located in the arctic zone have resident status, which means they can apply for the benefits established for this category of enterprises by the legislation and the relevant national legal framework.

The participants of the PomorInnovaLes cluster were interested in other issues such as taxation and pricing, environmental issues in the work of enterprises, which were also discussed and raised a lot of questions, discussions and suggestions.

As a result of the seminar, it was decided to determine the direction of cooperation between Ernst & Young and the enterprises participating in the PomorInnovaLes cluster and form an appropriate roadmap.

Reference

The constitutive meeting of the PomorInnovaLes cluster participants was held on September 25, 2014.

The Order of Igor Orlov, the Arkhangelsk Region Governor, was issued on the creation of the Wood Industry Regional Innovation Cluster on November 25, 2014.

The Association “Wood Industry Regional Innovation Cluster of the Arkhangelsk Region “PomorInnovaLes” was registered on March 25, 2016.

The “PomorInnovaLes” cluster includes 43 participants, including logging and woodworking enterprises of the region, educational and scientific institutions, and transport and energy infrastructure companies in the region.

The main body of the cluster is Arkhangelsk PPM JSC, GC Titan, Sawmill 25 CJSC, and Arkhangelsk Plywood Factory JSC.