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Russia’s Special Administrative Regions Gain Offshore Investment Interest

The number of new companies registered in the Special Administrative Regions (SAR) on Russky Island in Vladivostok, and Oktyabrsky island in Kaliningrad exceeded 400 in April, with the registration of new residents indicating the continuing interest in re-domiciliation into Russia’s legal jurisdiction. The SAR’s offer specific benefits not available on the Russian mainland, including lower tax rates, access to international currencies and duty-free import-export facilities.

The mechanism for redomiciling companies has been in place since 2018, when a set of laws was adopted to create SARs on the Oktyabrsky and Russky islands to welcome back Russian and attract foreign businesses away from increasingly restrictive foreign jurisdictions. With the onset of significantly expanded sanctions restrictions in 2022, the number of participants returning to Russian SAR’s from abroad has rapidly increased.

The Russian Ministry of Economic Development noted that as of April 23, there were 307 participants on Oktyabrsky Island (including 2 international public benefit funds, 3 international personal funds and 302 international companies) and 99 international companies participating on Russky Island. The math indicates the total number of companies offshoring in the Russian Far East is now 406. In December 2023, the Federation Council approved the law on amendments to the Tax Code streamlining and simplifying business operations.

The Ministry noted that in 2023, 200 new residents registered in the SAR’s, which is 2 times more than in 2022 and more than 7 times more than in 2021 (27 participants moved to the SAR’s in 2021). The number of foreign companies that moved to the SAR’s in 2023 and the number of companies that have moved as of this writing in 2024 indicate that the pace of re-domiciliation to Russia is continuing, albeit at a slightly less dynamic pace.

The Far East and Arctic Development Corporation (FEDC) noted that currently 99 international companies with total assets of about 5.5 trillion rubles are members of the Special Administrative Region on Russky Island, the largest being Interros, SUEK, Polyus, and Transneft.

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