Moscow investment digest

December 2018

Dear colleagues!

The Moscow Department for Investment and Industrial Policy, in cooperation with the Moscow City Investment Agency, presents a new issue of the Moscow Investment Digest.

NEWS

New status: Benefits in exchange for investments

Two Moscow enterprises, namely ZAO Lambumiz (the largest Russian manufacturer of cardboard packaging for liquid products) and the Babaevsky Confectionery Concern have been granted an industrial complex status. For these companies, the income tax will be reduced by a quarter (down to 12.5%), the property tax will decrease twofold (the current rate is 2.2% of the property book value or 1.5% of the cadastral value), and the land tax will be reduced by 80% to make 20% of the accrued tax amount. The land rent rate will be 0.3% of the site cadastral value instead of 1.5%.

ElitGroup Invest received the status of an investment priority project (IPP) to create an industrial complex. The investor will establish a meat and poultry processing plant. Over four years, ElitGroup Invest IC will invest about RUR 1.2 bn to create a plant in the Novo-Peredelkino Subdistrict in Moscow. Due to the IPP status, the overall tax burden will be reduced by 25%. The company will be awarded a special investment contract, according to which the city guarantees that the regional tax burden will not be raised and, at the same time, all the benefits received will be returned along with relevant penalties, if the investor fails to fulfill its obligations.

ZAO Renault Russia has received the status of a vehicle manufacturer operating in Moscow. This will extend the benefits granted to the company by the Moscow Government from 2013 to 2017 over the period from 2018 to 2020. The preferences that Renault Russia will receive along with the new status will reduce the income tax from 17% to 12.5% and zero the property tax rate. In turn, the company undertakes to maintain a high level of investment in its own development, to improve its revenues and exports, and to increase the number of employees.

An industrial park status was granted in Moscow for the first time

The "Nizhnye Kotly” industrial park is located at Varshavskoye chausse 46 at the Research Institute of Technical Physics and Automation (part of AO Rusatom Healthcare control circuit of the Rosatom State Corporation). It occupies an area of over 8 ha.

Due to the special status, a company can apply for a number of important regional benefits and thus be able to invest more funds in social development.

From 2019 to 2023, Nizhnye Kotly will undergo a large-scale modernization with production and laboratory buildings repair. The volume of private investments in the project will be ca. RUR 2.1 bn.

The new industrial park is expected to be used for research and development in the field of natural sciences and engineering, incl. nuclear medicine, radiation technology, as well as technical control, testing and analysis.

“It is planned to conclude a special investment contract with the industrial park managing company for a period of up to 10 years,” Head of the Moscow City Investment Agency Leonid Kostroma explained.

Moscow's high investment attractiveness was confirmed by a RAEX rating

Moscow has topped the 23rd overall investment attractiveness rating of Russian regions compiled by the RAEX agency (RAEX-Analytics). Moscow ranked first in terms of investment potential and social infrastructure quality, and also came close to becoming one of the leaders in terms of investment risks.

“Moscow has created all the necessary conditions to make it interesting for an investor to enter the largest consumer market in Europe and to invest. Over the past 7 years, the investments in fixed assets in Moscow have grown by almost 80% in comparable prices, the positive trend going on in the current year. According to our estimates, the volume of investments in Moscow will exceed RUR 2 tn by the end of 2018,” Vice-Mayor of Moscow for Economic Policy and Property-Land Relations Vladimir Yefimov said.

Entrepreneurs can explore the property without leaving home

The Moscow Investment Portal has launched a new service that allows you to view non-residential premises, buildings and land plots auctioned by the city, in the comfort of your own home. New functionality is displayed at the web pages of facility description charts. Currently, a virtual 3D tour is available for 400 facilities.

For your convenience, the lots, for which a virtual tour is offered, are marked with a special icon in the “Bidding. Property” section. 360 degree view is possible at each point of the 3D tour. This allows you to view the facility from all sides. For some land plots, the information about buildings to be erected according to the town planning plan is displayed. The 3D tours also include the integrated plans by property inventory authorities.

A biopharmaceutical cluster will be created in the Moscow SEZ

21 enterprises will become the residents of the cluster located in the Technopolis Moscow Special Economic Zone (SEZ). The companies are engaged in the development, research, production and sale of medicines, biologically active food products, medical items and equipment, rehabilitation means, health care goods and services.

“Clustering allows to create the best conditions for a particular industry, taking into account the companies’ specific requirements. For the companies united in a cluster, it is also easier to establish a dialogue with research centers, universities, service organizations and regional development institutions,” Head of the Moscow Department of Investment and Industrial Policy Aleksandr Prokhorov said.

The Svoboda cosmetic factory is relocated to a new site

New factory buildings for cosmetics and hygiene products manufacture will be located in the Chermyanskaya Street (the Northeastern Administrative District). The total construction area will be 47,300 sq. m. The facilities commissioning is scheduled for 2023. The investments in the project will make RUR 1.1 bn.

The relocation and expansion project will allow the enterprise to introduce new technologies and automate a number of processes, increasing the total output.

The Svoboda factory specializes in the production of cosmetics, including over 300 items with various properties and purposes. The plant has its own research center, which comprises seven specialized laboratories to develop and launch the production of modern cosmetic products.

The government and business representatives discussed Moscow's investment strategy

On December, 21, a round table was held in Moscow to discuss the capital’s investment strategy until 2025 and the measures to support the real economy. The meeting was attended by the representatives of the Moscow Government, the Agency for Strategic Initiatives, enterprises and business associations.

According to Head of the Moscow Department of Investment and Industrial Policy Aleksandr Prokhorov, 81 industrial companies are already receiving tax incentives thanks to the real economy support program being implemented in Moscow. They are assigned with special statuses: an industrial complex, a technopark or a technopark anchor resident.

"Small and medium-sized businesses registered as taxpayers in Moscow can receive compensation for interest on loans for business support and development", Head of the Department of Science, Industrial Policy and Entrepreneurship Aleksei Fursin explained, in his turn.

Investment projects in Moscow are supported according to the “one” window principle. Together with investors, the Moscow City Investment Agency develops economic and legal conditions for projects, including those implemented in form of a public-private partnership, and introduces systemic measures to improve the investment climate. We provide support throughout the project implementation. Today, the Agency is supporting 190 investment projects,” Head of the Moscow City Investment Agency Leonid Kostroma explained.

MACROECONOMICS

Investments in fixed assets in Moscow grew by almost 6%

During the first three quarters of the current year, the volume of investments in fixed assets in Moscow amounted to RUR 1.2 tn, which is 5.6% higher than during the same period in 2017. At the same time, according to the Moscow City Statistics Service, the share of extrabudgetary investments made 73% from January to September of 2018, which is 4% higher than during the same period of the previous year.

“The representatives of the Moscow industry and business are actively investing in the production expansion and revamping. The volume of investments in vehicles, equipment, and intellectual property items has increased. Today, Moscow is creating an optimal environment for production development, so we can talk about a new milestone of the Moscow industry development,” Vice-Mayor of Moscow for Economic Policy and Property-Land Relations Vladimir Yefimov stated.

“The mutual trust between the city and businessmen is growing. No doubt, this is one of the factors behind the growth of investments in fixed assets and the constant high level of extra-budgetary investments. We can see that investors are using less bank loans and budget funds and increasingly prefer their own financial resources,” Head of the Moscow Department of Investment and Industrial Policy Aleksandr Prokhorov concluded.

A record number of individual entrepreneurs was registered in Moscow

Moscow ranks No. 1 among Russian regions in terms of the increase in the individual entrepreneurs (IP) number. During the 10 months of this year, this number has increased by 16% against the period from January to October last year.

“In October, almost 7,000 people in Moscow became individual entrepreneurs. This is Moscow’s new record number of newly registered entrepreneurs”, Vice-Mayor of Moscow for Economic Policy and Property-Land Relations Vladimir Yefimov informed.

This year, the total number of individual entrepreneurs in Moscow made 316,600 on the first day of November, which is 11.9% more than on November 1, 2017.

Today there are special tax regimes, namely a simplified system and a patent system, to support the Moscow small and medium-sized businesses. In addition, start-up entrepreneurs have tax holidays that can partially reimburse the costs incurred under lease and loan agreements, as well as exhibition costs.

SUPPORT MEASURES

Moscow businessmen will receive more subsidies

For each subsidy type, subsidies provision conditions are improving for small and medium-sized enterprises that are residents of technoparks, industrial parks and special economic zones. Thus, the compensation of own funds spend to purchase equipment will be 25% (instead of 15% in the past). The compensation of the lease payments related to the foreign equipment purchase will make 25%, while for domestically produced equipment it will be 35% (against 15% in the past). The compensation of interest on loans to purchase domestically produced equipment will increase from 7.75% to 12.75%.

In addition, the list of potential subsidy recipients has been expanded: now it includes not only residents of active technoparks, but also those of newly created ones, namely the Moscow investment priority projects.

In 2018, 38 companies have received more than RUR 330 m from the Moscow budget. 18 more Moscow industrial enterprises involved in food, cosmetics, military-industrial, automotive, microelectronics and pharmaceutical industries, will receive subsidies from the city by the end of the year. In total, those will amount to more than RUR 110.5 m.

Rental benefits for small businesses were extended

Moscow Government extended the validity period of preferential rental rates for non-residential facilities (RUR 4,500 per 1 sq. m a year) until December 31, 2019. The benefits were supposed to expire this year, on December 31.

This decision will affect 3,029 small businesses. All of them rent small premises with an area of up to 300 sq. m or are engaged in socially important work, such as trade (social stores), social catering, household services, production, culture and sports.

In addition, the percentage of the planned city premises rent indexation for 2019 was reduced from 10% to 5%. The benefits apply to more than 2,000 tenants that have concluded contracts under market terms.

A high-tech manufacturer was granted a preferential loan

The Moscow Fund for Industry and Entrepreneurship Support granted a preferential loan in the amount of RUR 35 m to OOO Rokor.  The company is a unique high-tech manufacturer of sapphire monocrystal products that are used in watchmaking, process equipment manufacture, and can also be used in microelectronics.

The target loan was provided for the implementation of a project with a total cost of about RUR 99 m. The loan term is 5 years, with the discount rate of 2% per annum, which is several times lower than bank rates.

The company will use the funds to modernize and expand production. It plans to purchase special equipment and build a new production facility. In addition, the borrowed funds will allow the company to purchase the necessary raw products and materials for the main production.

AUCTIONS

25 commercial transfer hub projects will be auctioned in 2019

The commercial projects related to the Pyatnitskoe Shosse, Nekrasovka, Nagatinskaya, Lukhmanovskaya, Yugo-Vostochnaya, Mnevniki, Savyolovskaya, Mamyri, Ulitsa Dmitrievskogo, Timiryazevskaya, Petrovsko-Razumovskaya, Borovskoye Shosse, Klenovy Bulvar, Molodyozhnaya, Lermontovsky Prospekt, Tekstilshchiki, Pechatniki, Aminyevskoye Shosse transport hubs will be put up for online auctions. 1.3 m sq. m of real estate ranging from sports centers and retail facilities to office buildings and housing will be built.

Commercial transfer hub projects are a good example of the mutually beneficial cooperation between investors and the government. Due to the implementation of the first 13 projects, the city received about RUR 1.6 bn.

In total, over 250 transfer hubs are planned to be built in Moscow by 2020. Those will include at-grade ones in the form of intercepting parking lots, where you can leave your car and transfer to the metro, as well as capital ones. The latter will involve the construction of multifunctional centers, hotels, sports complexes and other facilities required for the residents of a particular area.

MOS OTIS minority stake was put up for public auction

25.49% of OAO MOS OTIS shares were put up for auction. The company assets include 10 buildings with a total area of 14,300 sq. m, located in the Sokolinaya Gora Disctrict in the Kirpichnaya street. The company also owns a building in Zelenograd. The premises are partly leased.

In addition to the real estate, MOS OTIS owns more than 500 cars, office equipment and various inventory, in total, ca. 2,000 units.

The production facilities of OTIS Investments L.L.K, which includes OAO MOS OTIS, are located in Europe, America and Asia, where the company is engaged in the production, installation, repair and maintenance, reconstruction and modernization of elevators and elevator equipment, as well as moving staircases and walkways.

Initial auction conditions were reduced by 48% as compared to the previous bidding campaign. Currently, the lot cost is RUR 499 m. Bids can be submitted until January 23. The auction will be held on July 31, 2018.

The Moscow Department for Investment and Industrial Policy

www.mos.ru/dipp

Moscow City Investment Agency

https://en.investmoscow.ru/agency/

Purchasers’ portal

www.zakupki.mos.ru

The Moscow Digest archive is available at the Moscow Investment Portal.