Priority Social and Economic Development Area ‘Donetsk’

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Priority Social and Economic Development Area (PSEDA) is a part of constituent territory of the Russian Federation including restricted administrative and territorial entity, where the Government of the Russian Federation with its Order set up a special legal regime for doing business and other activities to create positive conditions for attracting investments and speed up regional socio-economic development and favorable conditions for people's living.

Priority social and economic development area is created for 10-year period. Life of priority development area can be prolonged for 5 years.

On March 16, 2018, the Government of the Russian Federation adopted the Resolution No. 280 'On creation of the priority social and economic development area 'Donetsk'.
Priority social and economic development area ‘Donetsk’ (PSEDA ‘Donetsk’) creates in order to promote the development of Donetsk city by the economic diversification, attraction of investments into a single-industry municipality and creation of new work places not related to the activities of the town-forming enterprise 'Donetsk Manufactory M' OJSC, production of export-oriented products and import-substituting products.

The following individuals may become the residents of the priority social and economic development area: profit-making organizations excluding the governmental and municipal unitary institutions, financial organizations including credit organizations and insurance organizations as well as professional members of the security markets, which meet the following requirements:

  1. a legal entity is registered in the priority social and economic development area;
  2. a legal entity does its business only in the priority social and economic development area;
  3. a legal entity shall implement the investment project conforming to the requirements of the Government of the Russian Federation in the priority social and economic development area;
  4. a legal entity is not a town-forming organization of the mono-town Gukovo, Donetsk and Zverevo or its affiliate.

The main requirements to the investment projects of the residents of PSEDA ‘Donetsk’ within the first year after registration of a legal entity in the Register of Residents are defined with the Decree of the Government of the Russian Federation as of 16.03.2018 No. 280:

  • minimum amount of capital investments is 2 500 000 rubles;
  • minimum number of new working places is 10;
  • implementation of the investment project according to the list of the permitted types of businesses.

PSEDA ‘Donetsk’ residents are granted with the following preferences

  • the rate of the corporate profit tax payable to the federal budget is 0% within the initial five years starting from the year, when the first profit was obtained. The tax rate payable to the regional budget may not exceed 5% within the initial five years starting from the year, when the first profit was obtained, and within the next five years — minimum 10%;
  • reduction of insurance rates payable to the state non-budgetary funds within 10 years from the date of legal status registration as PSEDA resident. To the Pension Fund of the Russian Federation — 6% (instead of 26%), to the Social Insurance Fund of the Russian Federation — 1, 5% (instead of 2, 9%), to the Compulsory Medical Insurance Fund — 0, 1% (instead of 5, 1%). Reduced rates are applied concerning the residents, who registered their status within the period at least 3 years from the date of PSEDA creation;
  • fixing the reduced rate for calculation of the mineral extraction tax within 10 years. The rate is taken as equal to 0 prior to the moment, when PSEDA resident starts applying reduced rate to the corporate profit tax— within 2 years, 0,2 — within the next two years of business activity.

The regional law dated 10.05.2012 No. 843-ZS 'On Regional Taxes and Certain Subjects of Taxation in the Rostov Region' (as amended on 05/04/2016 No. 510-ZS) for organizations that are residents of advanced social and economic development territories, the following tax benefits are established:

  • in the form of a zero tax rate (0 %) on profits to be credited to the regional budget — during five tax periods starting from the year when the first profit was received;
  • in the form of full exemption from corporate property tax in respect of the property of the newly created (acquired) as part of the implementation of the agreement on the implementation of activities in the social and economic development territory — for a period of five years from the date of registration of such property.

The decision of the Donetsk City Duma dated April 25, 2018 No. 376 'On the establishment of land tax exemptions for residents of the PSEDA 'Donetsk' was adopted (amended in the decision of the Donetsk City Duma dated November 7, 2011 No. 102).

The list of the permitted types of businesses for the residents of PSEDA ‘Donetsk’

  • Plant breeding, animal breeding and hunt as well as services in these spheres.
  • Fisheries and fish farming.
  • Mining of minerals.
  • Food industry.
  • Production of soft drinks; production of mineral waters and other bottled drinking waters.
  • Manufacturing of clothes.
  • Manufacturing of leather and products made of leather.
  • Treatment of wood and products made of wood and cork except of furniture, manufacturing of products made of straw and materials for weaving.
  • Production of chemicals and chemical products.
  • Manufacturing of rubber and plastic products.
  • Manufacturing of other non-metal and mineral products.
  • Metallurgical production.
  • Manufacturing of ready metal products excluding machines and equipment.
  • Manufacture of machinery and equipment not included into other groups.
  • Furniture manufacture.
  • Manufacture of other finished products.
  • Repair and installation of machinery and equipment.
  • Water intake, purification and distribution.
  • Wastewater collection and treatment.
  • Collection, treatment and disposal of waste; recycling.
  • Warehousing and storage activities.
  • Cargo handling.
  • Providing temporary accommodation.
  • Food and beverage provision activities.
  • Activities in the field of law and accounting.
  • Headquarters activities; management consulting.
  • Research and development.
  • Education.
  • Health activities.
  • Creative activities, activities in the field of art and entertainment.
  • Activities in the field of sports, recreation and entertainment.

 

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