Investment climate in Russia

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The Role of Foreign Investments in Russia

Attracting foreign capital to Russia is amongst the main strategic priorities for the development of Russian economy.

Russia views foreign investments as a driver for:

  1. Accelerating economic and technical progress
  2. Revamping and upgrading production facilities
  3. Mastering advanced production management methods
  4. Ensuring employment, training personnel capable of responding to the challenges of a market economy

Russia is interested in an inflow of enterprise capital over borrowed capital because in this case (a) the country’s external debt does not grow (b) cooperation with foreign companies provides Russian businesses with new technologies, management methods and direct access to global markets with competitive products real investments are the impulse the economy needs to overcome depression and ensure healthy economic growth.



Advantages of Investing in Russia:

  • Dynamic Economic Growth. Russia boasts one of the most dynamically developing and attractive economies in the world. Since 1999, GDP growth has averaged 6.8% per year and reached 8.1% in 2007 (compared to 4-5% average world economic growth). Thanks to the strengthening ruble, in dollar terms the 1999-2007 GDP growth was an astounding 26% per year, far outstripping international growth rates. 
  • Favorable Geographic Position. Russia’s geography facilitates building effective international and domestic supply-production-market chains. Russia links Europe with Asia and also borders the North American continent, offering the following advantages:
    • Worldwide sea routes — Russia is bounded by three out of four world oceans
    • Major functioning and planned airport hubs
    • Rail and road transit routes (leads the world in length of electrified railroads)
    • Pipelines, developed networks of various types of warehousing facilities
    • Other transport and logistics infrastructure.
  • Vast Natural Resources. Russia takes 1st place in the world in per capita resources. It is well placed amongst the richest countries in terms of natural gas, oil, coal, minerals, metals and energy. With its forest resources being the largest in the world, Russia also has tremendous reserves of drinking and fresh water.
  • Fast Growing and Technologically Advanced Economy. Russia’s economy is one of the most dynamically developing and attractive in the world. Strong Russian scientific knowledge provides excellent opportunities for research and development partnerships with Russian research institutes and universities. Critical technological areas eligible for government co-financing on a competitive basis are Aerospace, Aviation, Shipbuilding, Automotive, Machinery, Metallurgy, Construction, Chemistry and pharmaceuticals, Nuclear physics and many more.
  • Large Consumer Market. With a population of over 140 million people and constantly increasing income per capita, Russia provides a large and booming internal market offering attractive growth potential. Strong internal demand for all kinds of goods and services and insufficient supply from local sources create a gap that is largely covered by imports.  Russia was ranked third among developing countries in the A.T. Kearney Retail Trade Index 2008. The country has become the largest automotive sales market in Europe as of 1H 2008 sales results (PricewaterhouseCoopers study).
  • Strong Government Support. Investment in the Russian economy is strongly supported by federal and regional authorities. Such federal initiatives as the Investment Fund, Foreign Investment Advisory Council and Special Economic Zones as well as public-private partnership opportunities and large investment and development programs serve to accelerate the investment inflow and to further enhance the Russian investment climate. Russia offers:
    • Public-private partnership programs
    • Concessions
    • Existing infrastructure, large investment and development programs
    • New institutional instruments:
      • Development Bank of Russia (Vnesheconombank)
      • Investment Fund of Russia
      • Russian Special Economic Zones
      • Russian Venture Company
      • Russian Agricultural Bank
      • Industrial Assembly
      • Law on Concessions
  • Attractive Taxation System. With a personal income tax rate of 13% for residents, corporate tax rate of 24%, and VAT rate of 18%, Russia has one of the most generous non-offshore tax regimes in the world, aimed at promoting investment and further developing the economy. Russia has recently introduced a European-style participation exemption regime that exempts dividends received from qualifying participations. In addition, the capital gains tax is currently scheduled to go to 0% in 2010, and reorganization for companies is tax-neutral according to the Russian Tax Code. The Russian Tax Code is one of the most comprehensible of such codes in the world. And thanks to ongoing improvements, as well as a policy of resolving contradictions and ambiguities in tax legislation in favor of the taxpayer, the tax system is becoming increasingly oriented toward the investor. Tax reform continues to move forward in Russia, with a noticeable reduction in the frequency of onsite tax audits from once a year to once every two or three years, according to Ernst & Young's 2008 survey of taxation issues in Russia. Respondents this year noted a dramatic reduction in the number of reported tax disputes being taken to court (65% versus 82% last year). A considerable majority (89%) of reported cases which went to court judgment continue to be settled in favor of the taxpayer.
  • Highly Skilled and Well-Educated Human Capital. Russia has one of the most highly skilled workforces in the world. Excellent educational background, extensive R&D and engineering practice allows Russian professionals to take up leading positions in areas such as natural and applied sciences, programming, R&D, engineering, etc. Russia offers:
    • A knowledge-based economy
    • A highly educated workforce
    • Strong scientific and research base
    • Extensive R&D and engineering facilities and practice
  • Stable Social and Political System. Following a transition period, the Russian economy has achieved macroeconomic and financial stability. Living standards have been steadily improving, with per capita GDP topping US$10,000 in recent years.
    • Strong macroeconomics:
      • World's 7th largest economy by purchasing power parity (2007)
      • World's 3rd highest foreign exchange reserves (current)
      • Significant government Reserve (US$140.98 bln.) and National Welfare (US$48.68 bln.) Funds
    • Politically stable system:
      • Long period of prudent economic and social policies
      • Respectful and fair foreign relations policy
      • Russia is a member of G8, the United Nations, APEC, SCO, and the CIS
    • Social stability and nationwide support:
      • Government approval rates are some of the highest among the world's leading democracies
      • Steadily rising quality of life
      • Prudent social policy devoted to improving all aspects of quality of life
      • The country has a tolerant multi-ethnic, multi-cultural and multi-confessional population



State Bodies and Legislation

The Government of the Russian Federation devotes significant attention to foreign investments in Russia as a tool of socio-economic and innovative development of the country. A broad network of institutions established in the recent years aims at simplifying investment procedures and providing comprehensive assistance to foreign investors.

In 1994 the Foreign Investment Advisory Council (FIAC) was established by the Russian government’s decree in order to secure continued and coordinated state policy in the field of foreign investments in Russia. The key task of the council is to assist Russia in forging and promoting a favorable investment climate based on global expertise and the experience of international companies operating in Russia. The council is chaired by the Russian Prime Minister and includes CEOs from 42 international companies and banks. Its Executive Committee is headed by the Minister of Economic Development. For further information please visit FIAC’s website.

Furthermore, the Ministry of Economic Development of the Russian Federation is actively involved in promoting foreign investments in Russia. The Ministry is currently running several projects aimed at providing investors with information on doing business in Russia.  Please visit Invest in Russia and Russia is Your Business Partner to get more information. The Modern Russia project provides interactive communication with investors. In the Contacts section of the website you can fill in a form in order to file a request on any relevant issue.

The Government of Russia is particularly attentive to any problems foreign investors face. The Department of investment policy and private-public partnership of the Ministry of Economic Development provides a detailed description of whom investors should address in case of difficulties.

As for specific measures purported to promote foreign investments in Russia, in 2005 the Government introduced so-called Special economic zones (SEZs), which goal is to create exceptionally favorable conditions for investors in certain Russian regions. What is more, the authorities of Russia give financial stimuli to major investors. For this purpose, the Government established the Investment Fund of the Russian Federation in 2006 to co-finance the projects of over 5 billion rubles (around $170 million). The sphere of innovation is another area of Government’s concern which is the reason why the Russian Venture Company was established with the purpose of promoting Russian national venture investment industry, development of innovational economic sectors and Russian technology-intensive projects.

The main sectors of investment which receive government support are


Foreign investments in Russia are regulated by several Federal laws:

Danish investors in Russia are additionally supported by such Russian-Danish bilateral acts as:


Investment Opportunities

One of the opportunities for foreign investments in Russia is public procurement. For the purpose of improving the procedure of procurement, the authorities of Russia developed a website where public orders and other relevant information are published. On you can find all the orders for goods and services placed by federal and regional authorities of Russia.

Ministry of Economic Development of Russia has worked out a Map of Investment Opportunities in order to provide detailed information on investment projects and proposals in Russia.

The description of other investment opportunities and investment support measures can be found below. 


Special Economic Zones

One of the tools used to stimulate investments in Russia are so-called Special economic zones (SEZ) which are based in Russian regions that offer unique advantages to investors.

Special economic zones (SEZ) are territories a state bestows with special legal status and economic benefits to attract domestic and foreign investors to Russia’s industry of priority.

Systematic development of special economic zones in Russia began in 2005 once the Federal Law on SEZ was adopted on July 22, 2005.

The objective of creating special economic zones is to develop the hi-tech sectors of the economy, import-substituting production, tourism and health resort and treatment services, to develop and manufacture new products and to expand transport infrastructure.

To promote high-tech industries, the state creates very favourable conditions for SEZ residents.

Special treatment includes the following advantages:

• Relations with governmental regulatory authorities become as simple and transparent as possible due to the ‘single window’ system

• Investors enjoy state-built infrastructure for business development, which reduces costs of launching new production facilities

• The free customs area status implies major customs privileges

• A number of tax benefits are offered

More information on different types of SEZ and the advantages offered could be found in the SEZ section.



Investment Fund of the Russian Federation

Large infrastructure and innovation investment projects, which have both national and regional importance and are carried out under the framework of public-private partnership, receive state support from the funds of the Investment Fund of the Russian Federation.

The Rules of Budget Allocation of the Investment Fund of the Russian Federation determine the policies and selection of projects eligible for receiving budget financing from the Investment Fund of the Russian Federation.

State support based on the funds of the Investment Fund of the Russian Federation comes in the following forms:

  • Co-financing for investment projects under agreement terms with the registration of ownership rights in Russia
  • Contributing funds to legal entities' share capital
  • Providing state guarantees to investment projects.

The minimum cost of a project eligible for budget allocation from the Investment Fund of the Russian Federation is RUB 5 billion.

The government committee on investment projects of national importance has approved 21 investment project using funds from the Investment Fund of the Russian Federation. The total amount of investment into these projects will exceed RUB 1 trillion, with approximately 30% of the money coming from the Investment Fund.

More information on the Investment Fund could be found on the Ministry of Regional Development website.



Russian Venture Company

Russian Venture Company (OJSC RVC) was created to facilitate state support in the area of implementation of capital investment projects.

The purpose of OJSC RVC is to stimulate the creation of the venture investment industry in Russia. The share capital of OJSC RVC was contributed from the funds of the Investment Fund of the Russian Federation in 2006-2007.

In 2007, OJSC RVC participated in the creation of three new venture funds with aggregate capital of more than RUB 8 billion. In 2008, two venture funds were formed; five more are expected to appear. The aggregate capital of seven venture funds to be formed between 2007 and 2009 will amount to almost RUB 19 billion.

In total , OJSC RVC will contribute to the creation of 10 to 15 venture funds with aggregate capital of approximately RUB 30 billion. These funds will provide venture capital for up to 200 new innovative companies.

In addition, on 9 August 2006, OJSC Russian Investment Fund of Information-Communication Technologies was created, whose share capital in the amount of RUB 1.45 billion will be financed with funds from the Investment Fund of the Russian Federation.

For additional information visit: Russian Venture Company




Skolkovo is a Russian “territory of innovation” located 30 km west of Moscow, where an unprecedented legal regime is established in order to minimize administrative barriers and tax burden for resident companies.

Skolkovo is to become an innovation hub that will stimulate innovative entrepreneurship and disseminate entrepreneurial culture across the country to integrate Russia into the global economy by:

1.fostering advancement of human capital in Russia and by attracting foreign specialists and creating conditions for local innovative talent development

2.creating globally competitive products and services based on cutting-edge research

3.establishing global innovative companies in Russia

In order to attract internationally recognized specialist, leading institutions and businesses Skolkovo offers:

  • No VAT for up to 10 years if profit is less then USD 10M/year and turnover is under USD 30M/year
  • No income tax if profit is less then USD 10M/year and turnover is under USD 30M/year
  • 14% unified social tax rate for residents
  • Refund of import customs duties and VAT expenses paid during import to the RF customs territory.
  • OECD tech regulations apply

More information can be found in a brochure and the official website of the Skolkovo Foundation.


How to Start Business in Russia

Preparatory stage: establishing a non-commercial company representative office in Russia in order to provide preparatory assistance.

Main stage: Establishing a legal entity and starting commercial activities in Russia.


Preparatory stage 

Registering and accrediting a representative office

  • State duty for registering a representative office in Moscow – $3500.
  • Period of issue – apprx. 1 month

Work permission for foreign citizens

  • State duty – 4000 RUR per person
  • Period of issue – 3 months

Visas for foreign citizens

  • State duty – 4000 RUR
  • Period of issue – apprx. 1,5 months

Office rent 


  • Class А - $ 1000-2000 sq.m/year
  • Class В - $ 700-1600 sq.m/year
  • Class С - $ 200-350 sq.m/year

Nizhny Novgorod

  • Class А - 1000 -1100 RUR sq.m/year
  • Class В - 580 - 820 RUR sq.m/year
  • Class С - 500 - 700 RUR sq.m/year


  • Класс В - 926 RUR sq.m/year
  • Класс С - 500-600 RUR sq.m/year


  • Recruitment services cost around 25% of annual salary budget.


  • Individual income tax
  • Unified social tax

Submitting annual tax accounts

Average service cost for preparing and submitting tax accounts:

  • $ 3000 – $ 18 000 for preparing and submitting individual income tax and unified social tax accounts (total)
  • $ 3750 – $ 15 000 for preparing and submitting other tax accounts


Main stage 

Establishing a legal entity


Limited liability company (LLC)

Closed Joint Stock Company (CJSC)

Open Joint Stock Company (OJSC)

Minimal required authorized capital

10 000 RUR

10 000 RUR

100 000 RUR

Registering a legal entity

$ 3000 – $ 18 000

$ 3000 – $ 18 000

$ 3000 – $ 18 000


  • Recruitment services cost around 25% of annual salary budget.

General administrative expenses

  • Book-keeping and tax accounting
  • IT-support
  • Renting fixed assets
  • Advertising and marketing
  • Consulting

Work permission for foreign citizens

  • State duty – 4000 RUR per person
  • Period of issue – 3 months

Visas for foreign citizens

  • State duty – 4000 RUR
  • Period of issue – apprx. 1,5 months


  • General taxation system



Useful Material

Sources: Invest in Russia, Special economic zones, Russian Venture Investment Center