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Vladivostok offshore zone not ruled out

Government officials 'thinking about' the idea of an offshore zone within the Free Port of Vladivostok.

Updated on 17 Jun 2016 09:08 GMT

At the fourth meeting of the Supervisory Board of the Free Port of Vladivostok, Yury Trutnev, the Presidential Plenipotentiary Envoy to the Far East Federal District, said the concept of a Free Port of Vladivostok does not preclude establishment of an offshore zone.

"Offshore is a generally recognized world practice," said Trutnev. "There are offshore companies in Europe, Asia and America, not only in Russia. Such companies provide benefit for the territory with the most favourable tax regime.

"Free Port of Vladivostok is not an offshore zone, of course. It is a territory with certain tax preferences and our task is to make it the most attractive for domestic and foreign investors. So the idea of an offshore zone within the Free Port of Vladivostok will quite possibly go further in the future. We are thinking about it," he was quoted as saying by PortNews.

Other offshore zones and low tax regimes worldwide have attracted considerable business to their host countries. Offering a low or zero tax territory is attractive to international businesses as is simplified company registration systems and tight confidentiality. Unlike free economic zones, offshore zones are uniquely tailored for financial transactions.

Cyprus, despite the Cypriot government forcing bank depositors - many of them Russian - to pay their share of an international bailout in 2013, continues to attract many international businesses and is a home from home for many Russian shipping and bunkering companies. Whilst Panama, one of the oldest tax havens in the world, now allows foreign ship operators to register ships online and pay no income taxes.

Established in 1919, Panama, then just a 16-year-old nation, began registering foreign ships under its flag to help Standard Oil avoid American taxes and regulations. During Prohibition, Panama welcomed US ships to sail under its flag and serve alcohol to their passengers, but it was the 1970's that heralded the boom in offshore business when the country passed strict confidentiality laws.

At the Free Port of Vladivostok, the Supervisory Board has now approved 27 new investment projects with a total investment of more than RUB 14.3 billion ($200 million). These projects will bring around 1,700 new jobs via a yacht port and water park, amongst other facilities.

Federal Law of the Russian Federation (No 212-FZ) 'On the Free Port of Vladivostok' came into force in October last year. Its territory covers 14 municipalities including all the key ports of the region, including Vostochny, Nakhodka, Vladivostok and Zarubino.

At the last meeting of the Supervisory Board, zero land tax was approved for the city of Vladivostok and has since been adopted by 32 municipalities. It is to be discussed by a further 12 municipalities in the near future.

Far East Development Corporation JV is identified by the government of the Russian Federation as the manager of Priority Socio-Economic Development Areas (PDAs) and the Free Port of Vladivostok, 100 percent of which is held by the Russian government. Free Port Vladivostok is run by the Supervisory Board chaired by the Deputy Prime Minister of the Russian Federation.

The Free Port regime provides for a range of preferences and tax benefits, and to date the Corporation is said to have received over 80 applications from potential residents. In order to acquire residency status a company must be incorporated within the territory and plan to invest at least RUB 5 million ($76,000) within three years. So far, over RUB 160 billion ($2.4 billion) has been invested and around 20,000 jobs are set to created.

Compiled using data from PortNews

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