Guarantees go to the investment space // The State Duma simplifies the conclusion of agreements on the protection and encouragement of capital investments

To attract businesses to launch the investment cycle, the authorities continue to increase the availability of the mechanism of agreements on the protection and promotion of investments (SZPK). Yesterday the State Duma in the second reading approved the obligation of the federal and regional authorities to conclude agreements with investors if their projects comply with the requirements of the regime. The requirements themselves have been significantly relaxed, investors are promised additional guarantees and flexibility in working with the tool – from the choice of methods for concluding an agreement and reimbursing costs to the possibility of editing already concluded agreements. For the sake of investors, the authorities will have to de facto carry out an inventory of all benefits, and state support will be possible at different stages of the project.

The State Duma yesterday in the second reading adopted large-scale amendments to the law on SZPK, designed to increase the attractiveness of the mechanism for investors. Agreements are a key tool for launching an investment cycle to restore the economy; they guarantee to investors the invariability of conditions for the period of implementation of investment projects and reimbursement of a number of costs. Initially, it was assumed that such guarantees would be available only for large projects, however, since the adoption of the law on the SZPK in the summer of 2020, the authorities have continued to soften the conditions and expand the range of potential participants in the SZPK. Recall that by 2024, the authorities expect to conclude at least a thousand such agreements for 14 trillion rubles. So far, in the six months of 2021, 36 agreements have been concluded in 25 regions for 1.3 trillion rubles.

In the draft approved yesterday, the key amendments are the norms obliging the federal and regional authorities to sign the SZPK with investors if the application meets the conditions, otherwise the business may seek to conclude an agreement through the courts. The Economy Ministry and the Russian Union of Industrialists and Entrepreneurs do not talk about how often investors face rejections. Note that the amendment will de facto ensure the priority of the NWPC over other mechanisms for launching investment projects, in particular, concessions or public-private partnerships, which may be preferable for local authorities because of their understanding of how to work with them.

Also, officials will have to take an inventory of all federal and regional benefits, which investors can pretend to preserve when applying for the SZPK – they should be brought together in registers to simplify the preparation of specific projects.

The requirements for the projects themselves are reduced: for example, the minimum investment for projects to modernize urban public transport, create passenger terminals, transport and logistics centers have been reduced from 5 billion to 1.5 billion rubles, in tourism – to 500 million rubles, and during construction houses within the framework of the integrated development of territories – up to 250 million rubles. The duration of the “stabilization clause” for projects in the agro-industrial complex, education and health care has been increased from six to ten years. However, they themselves are required to generate at least 70% of the proceeds from core activities. Also, for the conclusion of the SZPK, a building permit is not required (usually it is issued already at an advanced stage of the project).

In general, the tool will become more flexible – for example, the implementation of projects can be divided into stages (pre-investment, investment, operational). This will make it possible to receive deductions and subsidies for the NWPC in a layered manner, for example, upon completion of individual facilities. The list of reasons for changing the conditions of the NWPC has been expanded – due to the inability to complete the project on time due to force majeure circumstances (an approximate list of them will be determined by the government) or when information on the division of infrastructure costs is included in the NWPC (they can now be divided between different participants of the NWPC into the basis of the concluded agreement).

The volume of state support within the framework of the NWPC will also increase: for example, the document expands the list of costs reimbursed to investors. In addition to infrastructure costs, this is the payment of interest on loans and borrowings for these purposes, as well as for research and development (the technology must be registered and generate at least 80% of the proceeds of the investment project). At the same time, the project contains the government’s promised opportunity to recover costs in the form of a tax deduction as an alternative to subsidies, which is preferable for business, since it puts the mechanism of reimbursement in the hands of the investor. The agreements themselves can be concluded in both electronic and paper form; VEB.RF will support the processes of concluding the SZPK and additional agreements to them.

In expert circles, amendments to the law on SZPK are approved. “From the very beginning, the business was striving for greater conditions of stabilization, lower entry thresholds in various industries and the possibility of tax deduction. The amendments are progressive and necessary, ”says Kirill Nikitin, director of the Center for Tax Policy at Moscow State University. Vladimir Sokolov, head of PPP, infrastructure projects, energy and natural resources practice at PwC in the Russian Federation, notes that the project includes many amendments formulated by business, so the pool of investment projects for the NWPC will indeed increase. Another expert in a conversation with Kommersant notes that the amendments are a good attempt to instrumentally improve the investment climate in the country, but introduce, in fact, an uncontrolled application process for participation in the SZPK. This “raises the question of the advisability of facilitating access.” “Some projects would have been launched without SZPK, but now the costs for them will be compensated from the generated taxes – I would like to know the amount of lost income or budgetary obligations,” says the source of Kommersant.

It follows from the project that government agencies will have data on the obligations; it requires that the amount and terms of cost recovery be indicated in the SZPK. “The norm will make the amount of future obligations more predictable for the budget: it is likely that after the completion of the project it will differ, but not significantly. At the same time, this corresponds to the goals of the Ministry of Finance to understand what the budget has subscribed to, ”says Vladimir Sokolov.

Diana Galieva

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