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St. Petersburg's Investment and Financial Strategy, Page 2

3.6 Council for Encoraging Forgeign Investment

A council for promoting foreign investment (the Council) was set up under the patronage of the Governor of St. Petersburg on 10 February 1998. It is a permanent advisory body intended to create a favourable investment environment and facilitate the activities of both Russian and foreign investors in St. Petersburg.

The Council's objectives include:

  • summarising local and overseas experience with regard to attracting investment;
  • developing recommendations for the Administration of St. Petersburg with regard to working with investors;
  • providing information to the Administration of St. Petersburg with regard to companies and organisations engaged in investment activities in St. Petersburg; and
  • preparing proposals and drafting investment legislation.

The Council consists of a Chairman (the Governor of St. Petersburg), his two deputies, an Executive Secretary and eighteen Council members. Members of the Council represent St. Petersburg's governmental authorities as well as companies, organisations and institutions engaged in investment activities in St. Petersburg.

The major aspects of the Council's activities are as follows:

  • preparing laws supporting foreign investment;
  • drafting legislation regarding the city's expenditure in the form of guarantees;
  • designing an industrial export support programme;
  • signing St. Petersburg's economic development zone programme;
  • setting up and participating in the activities of the Committee on the IT support of business security;
  • setting up and participating in the activities of a working group for enhancing the image of St. Petersburg among foreign investors;
  • designing proposals on delegating authority over investment solutions to local bodies; and
  • creating a St. Petersburg Investment Centre.

3.7 St. Petersburg Budget for 2000

St. Petersburg's revenue and expenditure budget for 2000 is approved by the Law "On the 2000 Budget of St.Petersburg". The Law provides for an increase in expenditure to be used by St. Petersburg for investment support in comparison with the amount allocated in 1999.

The budget determines the aggregate sum of commitments which St. Petersburg may have with regard to guarantees issued for 2000. The budget provides for expenditure to be directed towards maintaining and developing municipal infrastructure, meeting the city's demand for goods for social welfare and implementing environmental protection measures.

3.8 Investment Laws

Laws adopted in 1998 that encouraged investment activities in the city and granted additional privileges to investors are still in effect in St. Petersburg in 2000:

  • Law of St. Petersburg 185-36 of 30 July 1998 On Governmental Support of Investment Activity in St.Petersburg";
  • Law of St.Petersburg 184-37 of 30 July 1998 On Additions to the Law of St.Petersburg "On Tax Privileges" and
  • Law of St.Petersburg 191-35 of 30 July 1998 "On Investments in St. Petersburg Real Estate Property".

3.8.1 The Law "On Governmental Support of Investment Activity in St. Petersburg"

The Law stipulates the ways in which governmental support is rendered to investors. Investments may be supported as follows:

  • by providing investors with guarantees from the city of St. Petersburg in order to assist them in attracting funds for investment purposes;
  • by providing investors with tax privileges on taxes due to the budget of St. Petersburg;
  • by providing investors with privileges with respect to leasing St. Petersburg real estate property; and
  • by providing investors with local budgetary support.

    According to the Law, budgetary funds may be used to support investors for the following purposes:

    • to make settlements with investors' creditors against guarantees issued on the investors' behalf;
    • to provide loans to investors;
    • to set up charter capital of business entities founded with the participation of St. Petersburg and other investors; and
    • to finance governmental orders placed by St. Petersburg for goods, work and services produced by the investor.
    3.8.2 The Law "On Additions to the Law of St. Ppetersburg "On Tax Ppriviliges""

    This Law stipulates a number of ta privileges for companies investing ir fixed assets with regard to those taxe) due to the municipal budget. Types ol privileges and periods of their validity are established based on the Law depending on the scope and period of investment. The Law provides privileges with regard to the following taxes:

    a) Profit tax

    Companies investing in fixed assets are entitled to deduct the aggregate sum of investments from their taxable profit when calculating tax due to the budget of St. Petersburg.

    b) Property tax

    Companies who invested more than 50 million US dollars in fixed assets within the period from 1 January 1992 to 31 December 1999 are fully exempt from property tax in 2000. Companies who have invested from 25 to 50 million US dollars since 1 January 1992 are entitled to use a tax rate reduced by 50% in 2000.

    As of 1 October 1999, companies who have invested over 1 million roubles in fixed assets are exempt from tax with regard to these investments for a period from 8 to 28 quarters (depending on the amount invested).

    c) Land tax

    Companies who own land and invest in real estate construction or reconstruction are exempt from land tax for the period stipulated by the Law.

    d) Privileges for producers of excisable goods

    Producers of excisable goods who have invested more than 5 million US dollars in fixed assets related to production are entitled to the following privileges over a period of five years:

    • a 50% profit tax reduction; and
    • exemption from land and advertising taxes in St. Petersburg.

    e) Privileges granted under international agreements signed by St. Petersburg

    Legal entities, in which both St. Petersburg and foreign investors will participate, may be set up in St. Petersburg based on international agreements concluded between St. Petersburg and the governments of the respective countries. Such legal entities are entitled to the following tax privileges, provided they have contributed at least 1 million US dollars to the charter capital and invested at least 10 million US dollars in material production in St. Petersburg.

    Exemption from the following taxes with regard to amounts due to the budget of St. Petersburg may be obtained for seven years or another period established by an international agreement:

    • profit tax;
    • property tax of legal entities;
    • land tax;
    • vehicle acquisition tax;
    • vehicle owners' tax; and
    • advertising tax.

    3.8.3 The Law "On Iinvestments in St. Petersburg Real Estate Property"

    The Law stipulates the terms and procedures for real estate investments and the rights and obligations of investors and St. Petersburg governmental authorities. The contents of this Law are detailed in item 93.

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