On August 9, 2019, a new Territory of Advanced Development (TOR) “Trans-Baikalia” was created in Russia, raising the number of TORs in Russia to 109. Locating a company in a TOR is one of the options that allow companies interested in developing production in Russia to significantly reduce tax costs.
What is a TOR and why is it necessary?
TOR is a special territory located in Russia, including the European part, which allows companies to obtain tax privileges in exchange for investments in a certain region. Typical TOR residents are manufacturing companies in various industries and transport and logistics companies.
The specific list of tax benefits and the conditions for receiving them may vary depending on the region. In general, there are profit tax, insurance, and VAT benefits.
Reduced income tax rates are as follows:
|Income tax||Preferential rates||Standard rates|
|Federal tax rate||0%||3%|
|Regional tax rate||5-10%||17%|
For residents of a TOR, a preferential rate for insurance premiums is set at 7.6%, while the standard rate is 30%.
A number of TORs have a free customs zone, where foreign goods can be sold without paying customs duties and taxes on import.
There is also a fast-track VAT refund procedure, taking just 12 days instead of 3.5-4 months.
Restrictions on benefit use
To receive the tax advantages, a number of conditions must be met by a resident:
- Income from activities in the TOR must be at least 90% of all income of a resident
- There are requirements for the amount of capital investment and the number of jobs created
- Residents of the TOR may not carry out activities outside of the TOR region
Compared to other preferential regimes, such as SPEC, TOR has both advantages and disadvantages.
How can SCHNEIDER GROUP help?
Our experts will be happy to offer you an analysis of the various preferential treatments available to your industry or region of interest.