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MOSCOW INVESTMENT DIGEST May 2020

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Dear colleagues!

The Moscow Department of Investment and Industrial Policy in cooperation with the Moscow City Investment Agency presents you the next digest of the main investment events in the capital.

NEWS

Income Tax Will Be Reduced by Investment Amount in Fixed Assets

The capital introduces a new support measure for manufacturers – investment tax credit.

The right to an investment deduction will be granted to companies, located in Moscow and with the status of a Moscow investor. The benefit provides for a significant reduction in the amount of income tax to the budget of a constituent entity of the Russian Federation. Due to the regional part of the tax, it is possible to write off up to 90% of investments in fixed assets. Unused amount of regional benefits can be transferred to future periods (up to 7 years). The amount of tax to be credited to the Federal budget can also be reduced up to zero, but within 1 year. 

The new support mechanism will be provided to actively investing industrial enterprises. The main prerequisites for the investment tax deduction in Moscow is the fulfillment of formal requirements, which are active business in Moscow, no bankruptcy and liquidation in progress, as well as a number of economic requirements. 

The average monthly wage of employees should be at least the average monthly income from the labor activity in Moscow according to the Federal State Statistics Service (RUR 68,000). The minimum annual amount of enterprise expenses for fixed assets for the ‘Moscow investor’ status of the 1st category is RUR 200 m (excluding VAT), the 2nd category – RUR 300 m (excluding VAT). 

Starting from 2023, due to changes in the federal legislation, the preferential income tax rates established by the regions will expire. Until January 1, 2023, industrial complexes and industrial parks can choose either a profit benefit according to their status (now it is 12.5%) or the application of an investment tax credit. At the same time, they still have privileges on property and land.

Moscow Will Sign 1st Offset Contract in Food Industry

Wimm-Bill-Dann will invest at least RUR 2.1 bn in the creation and modernization of food production. 

‘We summed up the competition for the right to conclude an offset contract, as a result of which the investor will supply the city with food products for children and lactating women for 8 years from 2022. The offset will be signed with the company Wimm-Bill-Dann. The volume of supply under the contract will be RUR 30.5 bn,’ - said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations. 

‘Under the terms of the tender, the enterprise must invest in production, which will produce 38 food items delivered through the city dairy distribution points: milk, juices, fruit, vegetable, meat and meat and vegetable purees, cereals, cottage cheese, kefir, sour-milk mixture, and also dry formula mixes’, -  explained Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy. 

For Moscow, it will be the 4th offset contract. The first 2 contracts were concluded in pharmaceuticals. As part of them, new drugs production factories for the treatment of oncological, cardiological, endocrine, and immune diseases are being built in the city. The 3rd offset, signed with Gemamed at the end of the last year, involves the creation in the city of almost 100% import-substituting production of medical devices for ostomy patients. The total investment for the 3 signed contracts is RUR 9.8 bn, the supply volume is RUR 41 bn. Subsequently, medicines and medical devices will be supplied to the capital. 

‘One of the main objectives of the offset contract is to stimulate business investment in new enterprises or to modernize existing facilities. According to the contract system law, an offset contract can be concluded for up to 10 years, the minimum investment is RUR 1 bn, the delivered goods must be of Russian origin, that is, with a high degree of localization,’ - explained Leonid Kostroma, Director of the Moscow City Investment Agency. 

In the future, along with healthcare and the food industry, Moscow plans to conclude offsets in such industries as transport, machinery and materials for housing and communal services, and IT equipment.

Almost All Industrial Facilities in Moscow Resumed Operation

Moscow industrial facilities got permitted to resume their operations since May 12. The key condition for the resumption and continuation of activities was strict compliance with sanitary measures. The latest data say that 711 of 720 large and medium-sized companies are currently operating. 350 of them haven’t even stopped their production: they were supplying the city with food, drugs, construction materials for hospitals and other urgent goods. This was announced by Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations. 

Deputy Mayor noted that, despite the decline in capacity utilization in a number of areas, the expected increase in shipment volumes by 5% is observed in pharmaceuticals and the production of medical devices. Several support programs have been developed for Moscow companies. They are helped to return investments, get soft loans, reduce rent or defer payments. In total, there are about 70 measures to support businesses and residents in the city today.

Sergei Sobyanin Opened New Breadmaking Lines in Cheryomushki Bakery

‘A new leasing program for investment support was developed together with the city administration. I hope that, in addition to these lines, there will also appear additional capacities for baking tasty bread for Muscovites,’ - said the Moscow Mayor. 

Cheryomuski is currently a leading breadmaker in the city. 955 people work there. In 2016, the Moscow Government assigned the plant the status of an industrial complex. Thanks to this, he was able to get additional funds for development due to tax benefits in the amount of more than RUR 15 m. 

In 2018, the plant began implementing an investment project to create a new production workshop: 4 modern production lines with a total capacity of up to 100 tons of products per day are planned to be placed on an area of 6,000 m2. Thus, the volume of investments in the new workshop creation will be RUR 1.5 bn. 

This spring, Cheryomushki plant commissioned the 1st phase of the new workshop - 2 lines for the production of hearth and shaped bread with a capacity of 50 tons per day. The 2nd phase of the project, 2 more lines for the rifled loaves production, are planned to be commissioned in 2023. As a result of the project, about 100 new jobs will appear.

New Production Facilities Will Appear in Technopolis Moscow SEZ

Gringo, a manufacturer of forklift trucks, will invest about RUR 1 bn in the development of new production. Construction of the plant will begin this year at the Alabushevo site of the Technopolis Moscow SEZ.

The new production will significantly replace imported equipment and by 2024 provide up to 30% of the needs of the Russian market of forklifts.

The construction of a new plant with an area of 10,000 m2, the administrative building, the testing ground and storage facilities will be completed next year. The new plant will create more than 70 new jobs.

Another SEZ resident, Diagnostika-M company, will invest RUR 267 m in the creation of an innovative search and inspection and X-ray equipment. Production area of more than 10,000 m2 will also appear on the site in Alabushevo in the Q4 2020. The resident plans to create 153 jobs. The company's equipment is used to ensure safety in transport, for customs inspection, as well as at strategic facilities and checkpoints of institutions.

Moscow Investment Portal Got 6 New Services

The recently taken large-scale redesign has resulted in adding new online services to the existing ones what makes doing business in Moscow more comfortable.

One of the new services allows you to send an online application for soft loans provided by the Moscow Fund for Industrial and Enterprise Support. A soft loan is a government support tool that provides the opportunity to receive financing at 2% –5% per annum for up to 5 years. Industrial enterprises, companies engaged in research and development, as well as exporters from the capital, can count on it. 

In addition, it became possible to apply online for subsidies to reimburse part of the cost of paying leasing payments, as well as to reimburse part of the cost of paying interest on loans received from credit institutions and loans received at development institutions of the Russian Federation.

On the portal, the user also can send an official application for the assignment of an investment priority project status, which gives the investor the right to receive regional tax benefits (for profit, property, land) and preferences for leasing plots. All sent applications will be displayed in your account, where you can also track the status of their consideration.

Today, the Investportal online services also allow you to apply for the status of an industrial complex, industrial park, industrial park or SEZ resident, calculate the cost of a patent, ask a question to the Moscow Government through a direct application line and much more.

SUPPORT MEASURES

Moscow Has Taken Next Measures to Support Entrepreneurs

In total, 3 packages of business support measures have already been taken in Moscow. RUR 85 bn were allocated for this. The decision to introduce next support measures for metropolitan entrepreneurs affected private medical clinics and news stalls. This was announced by Moscow Mayor Sergei Sobyanin.

‘The list of industries most affected by the pandemic includes private medical clinics that have experienced a significant reduction in the number of patients. In order to support private medicine, we decided to extend the deadline for paying advance payments for property tax and land tax until December 31, 2020,’ - the Mayor said. Private clinics renting land and non-residential property owned by Moscow will be exempt from rent. 

‘Print’ news stalls, which were also strongly affected by restrictive measures, will be exempted from payments for the right to carry out trading activities for 3 months (from April 1 to June 30). 

Support will be given to small companies that are engaged in innovation. To prove the useful properties of new products to potential customers, the Moscow Government is launching a pilot testing program for such companies. Several dozen Moscow universities, industry institutions, commercial companies and other sites are ready to provide their infrastructure for pilot testing of innovative products in real or as close as possible conditions. You can apply for participation in the pilot testing on the i.moscow website.

Moscow Reduced Land Rent Rate for the Moscow Pharmaceutical Company by 5 Times

MPK Biotiki, a Moscow manufacturer of innovative pharmaceuticals, has confirmed its status as an industrial complex and received a preferential rent rate for a 0.15 ha land plot in the amount of 0.3% of its cadastral value, as well as a profit and property tax relief. 

‘If earlier the tenant paid more than RUR 384,000 a year rent a land plot, now the annual rent rate of a land plot including the benefits is RUR 76,800. The preferential rent rate has been granted for 10 years, and it is enough for the enterprise to confirm its status once a year in a special city commission,’ - said Maxim Gaman, Head of the City Property Department. 

Moscow technoparks, technopolises and industrial complexes may receive a reduced annual rental rate on land from 0.01% to 0.3%. Enterprises not only receive benefits from the city, but also commit themselves to invest the money saved in their own development. The investments of the existing industrial complexes in Moscow over 5 years amounted to more than RUR 34 bn, more than 56,000 jobs were created on them.

40 Moscow Developers Received Rental Deferral of More Than RUR 1.4 bn

Entrepreneurs can apply for support to the Department of City Property by the end of the year, indicating in the application the number of the contract or financial and personal account. 

‘In total, about 200 Moscow developers who build real estate on the city’s land can receive this measure of support. Half of them have already applied to us for a deferment, 40 companies have received the required deferment, we continue to process the remaining applications. Now the total area of plots for which the privilege has already been granted is 107 ha, over 3.6 m m2 of commercial property are being built on them,’ - said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations. 

For the 31 construction companies that have already received a lease delay, the city also suffered a rent increase for changing the purpose of land use.

Developers who pay increased rental rates from the 3d year of construction, were able to transfer the increased payment until the end of the year, which will allow them to return to construction work with less financial burden. The volume of payments transferred to December 2020  for them amounted to RUR 227.65 m.

AUCTIONS

Electronic City Property Sale and Rent Auctions Resumed

Moscow has resumed the auctions whose bidding campaigns were extended from early April until the end of non-working days. Prior to lifting the restrictions in full, all auctions will be held in electronic format - this is 90 % of the total number of land and property auctions.

During the period of extension of application campaigns, a significant part of the lots could be studied using a virtual tour on the Moscow Investment Portal.

In addition, employees of the Your Investment Consultant Information Desk at the address: Pechatnikov pereulok, 12 receive and issue documentation based on the results of the bidding. The applicant is admitted to the premises for personal reception subject to the use of personal protective equipment and compliance with the requirement of social distance. Applications for participation in land tenders are also accepted at the indicated address.

Land Plots for New Socially Important Facilities Listed for Auction

Winners of open auctions will be able to rent 4 urban land plots at the starting price - 1.5% of the cadaster value. The minimum rent rate gives a chance not only to large companies, but also to small capital investors to enter the Moscow market

Following the auction, private investors will be able to begin construction of 2 production facilities in the areas of Lyublino and Otradnoye, a sports complex with a swimming pool in the Nekrasovka area, as well as a medical center in the Kosino-Ukhtomsky area. 

The minimum starting price of the annual rental rate for these facilities starts from RUR 44 th. The investors who won the auction, after putting the object into operation, register 100% of the area of the future object in their property. 

You can get familiar with the lots on the Moscow City Investment Portal in the Land for Construction section. 

In total, 6,000+ units are presented on en.investmoscow.ru in the City Property Sale and Rent section.

 

Thank you for your attention!

With respect and hope for cooperation,

Moscow Department for Investment and Industrial Policy

www.mos.ru/dipp

Moscow City Investment Agency

www.investmoscow.ru

Supplier Portal

www.zakupki.mos.ru

The digest archive is presented at the Moscow Investment Portal.

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