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Varieties of special economic zones in the Russian Federation and the rest of the world

Разновидности особых экономических зон в РФ и остальном мире

Due to the fact that special zones for business appear in the country, the country’s economy gets a big boost of growth. Each country is interested in the stability and growth of the economy, and, moreover, it has rapidly developed and strengthened in relation to other countries. In the article we will consider the concept and varieties of special economic zones, as well as what benefits they bring to entrepreneurs.

What does a special economic zone mean?

The very definition of a special economic zone implies something different from the usual norms. Thus, this is a certain territory where a special legal status is in effect, which implies lower tax rates, comfortable conditions are created for conducting any kind of activity related to commerce in one way or another. 

As you can see, in order to understand what a special economic zone means, you do not need to deeply understand economic processes – everything is quite simple and understandable. In Russia, the SEZ can also be called a free economic zone, which does not change the essence of the concept as a whole. 

The opening of such sectors is supervised at the state level and regulated by the relevant provision of legislation No. 116-FZ, adopted in 2015. Territories of free economic development function not only in Russia, the nearest neighbors and distant foreign states also take a course on a similar principle of doing business. 

In order to enjoy the benefits for doing business that are available in a special zone, it is necessary to be registered within its limits. It is also not allowed to own branches outside of special areas. Special conditions for entrepreneurs include:

  • low interest lending; 
  • relaxation in the payment of tax contributions;
  • benefits and subsidies of different levels depending on the zone.

Let the FEZ have quickly attracted the interest of domestic entrepreneurs and have grown throughout the country, the development itself has been going on for many years. It is known that such territories functioned in China back in 1979 and this is one of the factors why the country’s economy developed so rapidly and actively.

Special Economic Zone in the Russian Federation

Goals and objectives of SEZ implementation

It is obvious that the main goal of SEZ implementation is to achieve progress in the sphere of state economy. The formation of free areas contributes to the simplified launch of production lines, the organization of new places for workers. The flow of funding is also increasing, since high technologies, developed and comfortable infrastructure, highly educated and well-trained specialists are concentrated in one territory.

The state is interested in concentrating money within the country. Foreign investments are always in demand, because economic development is formed due to them. A number of other obvious factors of the introduction of free economy zones should also not be ignored:

  • reducing logistics costs;
  • reducing the distance between the product and the consumer;
  • mastering modern technologies and integrating them into production;
  • increasing export volume;
  • development import substitution;
  • attraction of foreign and domestic financing;
  • development and implementation of new methods of organizing the workflow;
  • reorganization of the workspace according to modern world standards.

More than 40 NEOS have already been established in the Russian Federation. Among them are 23 industrial production, 7 technical and innovative, 10 tourist and recreational and 2 port. Thanks to the existence of these territories, it was possible to attract more than 200 billion rubles to the budget. 

Types of domestic SEZs

It is legally allowed to create several certain types of special zones within the state.

Industrial production

Industrial and production SEZ

Such a territory (PPZ) implies joining the customs territory of the state. Inside the zone, as a rule, there is a certain production enterprise, and those wishing to invest in it are provided with preferential terms of cooperation. They can be: 

  • one industry;
  • one enterprise;
  • industrial park;
  • export-production.

The goals of creating such territories, as a rule, are aimed at solving problems of export or import substitution. A commercial organization registered within the territory covered by the operation of the PPZ can become a resident. It is necessary to conclude an official contract with local government bodies that allows the production of goods or the introduction of technologies.

Technical and implementation

Technical and implementation SEZ

Another type of special economic zones of an industrially oriented direction is technical and implementation (TVZ). Such areas are located outside the customs zone. Within these territories, design and design bureaus conducting research activities are located. Among them:

  • technopolises;
  • technoparks. 

The basic task that TVZ solves is development, research and development activities, commercialization of finished products or technologies.

A TVZ resident may be an individual entrepreneur or a commercial organization registered within the municipal territory where the free zone operates. It is required to sign an official agreement with local administrative authorities to conduct technical and innovation or industrial production activities, under the established conditions.

Tourist and recreational

Tourist and recreational SEZ

Such zones (TRZ) are created to provide tourist and recreational services. These include:

  • Altai Valley; 
  • Curonian Spit; 
  • Turquoise Katun; 
  • The gates of Baikal and others.

The main tasks that are solved through the formation of TRZ are to increase the tourist attractiveness of the region, expand the possibilities of resorts of medical and wellness areas, develop functionality aimed at the treatment and prevention of diseases. They can also be used for the extraction of mineral waters or medicinal mud.

A commercial organization or sole proprietor can operate on the territory of the TRZ. It is necessary to be registered within the territories covered by the TRZ. It is also required to conclude an official contract with local governments, in the manner prescribed by law.

Port

Port SEZ

Port zones (POEZ) are formed by a number of the most important transit corridors and allow port logistics services, which are currently in high demand, to be more accessible. To date, POES are already functioning in the central and Far Eastern part of Russia. Each of the zones has its own characteristics and predominant functional areas. 

A resident of such a zone may be an enterprise (with the exception of a unitary one) registered under the law of the Russian Federation within this territory. In order to officially conduct its activities on the territory of the POEZ, it is necessary to conclude an agreement with the governing bodies. It is possible to conduct business only on the basis of the provisions established within a specific free territory. 

What does the special economic zone give to entrepreneurs?

Many entrepreneurs are interested in what the special economic zone gives, and whether it is necessary to open their own business there. In fact, the FEZ offers quite a lot of advantages to companies:

  • subsidies; 
  • reduced tax rates and duties; 
  • protection of partners’ rights; 
  • lower prices for rent, premises for work; 
  • land plots at low prices;
  • a well-formed and comfortable working environment. 

SEZ residents receive substantial benefits, which gives them the opportunity to more actively develop their business and improve. They do not pay the transport, land and property tax of the company. Also, the income tax does not exceed 15.5%, depending on the amount, whereas the standard tax is 20%. Representatives of the information technology sector enjoy special benefits. 

But entrepreneurs themselves must contribute to the development of the territory. To become a resident of the free zone, investments will be required, for some of them the amount may be 120 million. Nevertheless, extensive international and, including, domestic experience shows that this area has huge prospects for development.

SEZ residents

What other SEZs are there in the world?

Not only in Russia there is a SEZ. They are located in different countries and have different destinations. There is a certain classification of economic zones.

By type of economic activity

Classification by types of household activities includes: 

  • trade zones that are located outside the customs territories. Within the framework of the TOR, the goods are stored and prepared for transportation to the final consumer. They pay off quickly, and these include free ports, cities, shops, customs and free trade territories;
  • industrial production, which are included in the area of customs coverage. Here, as a rule, production is organized, and these can be zones of the same industry, enterprises, export-production and industrial parks;
  • technical and implementation are not included in the area of customs coverage, and research, design, and design activities are organized within their framework. These are technoparks and technopolises;
  • service ones establish a privileged regime for companies whose type of activity is related to the service sector. For example, the provision of banking, financial, tourist and recreational, insurance and other types of services. It also includes separate offshore zones;
  • complex offer concessions in the field of economic activity, but within a specific administrative region. Similar areas have been formed in China, Western Europe, Canada, Argentina, Brazil and these include SEZs and SEZs.

By degree of organization

According to the degree of organization, the zones are divided into:

  • territorial, when preferential conditions are established in a specific territory, they also include enclave, with a more liberal policy within one region and open, where there is a policy of customs control;
  • functional, when benefits are provided for conducting specific activities, at the same time, the actual address of the company’s placement does not matter. In fact, the organization receives a free mode of doing business; 
  • territorial-functional are a combination of the two previous types.

By the degree of integration into the national economy

Depending on how integrated the zone is into the domestic economy, there are:

  • integrated, when external relations with representatives of the domestic economy and cooperation with them are traced;
  • enclave or export-oriented, when enterprises work to sell goods abroad to receive foreign exchange earnings.

According to the principle of nationality

According to the principle of nationality, SEZs can be:

  • national, which establish activities within a specific state;
  • cross-border, when companies work not only in their native country, but also for interaction with other countries.

On benefits systems

Many free zones offer their residents special conditions for doing business, so there is a classification according to the systems of benefits: 

  • administrative, when a company gets the opportunity to undergo a simplified registration procedure, simplified entry and exit of foreigners and repatriation of profits;
  • financial benefits, which include investment subsidies, loans at preferential rates from the state, special conditions for paying rent and utilities; 
  • customs or export privileges include exemption from payment of part or all import duties on products, which was manufactured inside the SEZ;
  • trade or customs import privileges imply exemption from payment of part or all of the cost of duties on raw materials imported into the SEZ;
  • tax “holidays” imply a variety of benefits, including partial or complete exemption from VAT, taxes on property and property and others.

Thus, there are quite a lot of varieties of special economic zones and not all of them can be found in Russia.

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