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State Support
The strategic policy of the Government of the Republic of Karelia in the sphere of investments is implemented by means of special legislation supporting investment activity; according to this legislation all investors get the most favorable conditions while implementing investments projects in the Republic; these conditions are:
- tax benefits on property tax and profit tax, the part that goes to the republican budget;
- state guarantees, provided by means of a competitions, to investments projects that use financing from the regional budget;
- allocating, by means of a competition, the money from the budget of the Republic for financing investment projects and providing subsidies for partial reimbursement of expenses of paying the interest for loans, used to finance investment projects.
The most popular measure of the state support in 2007 was providing state loans for financing investment projects (pursuant to the changes made in the Budget Code of RF, on January1, 2008 providing state loans for investment projects as a way of state support of investors is discontinued).
As a result of the competition held in 2007, 11 investment projects have been named the winners, with the total amount of state financing of 239 million rubles.
Among them:
- “Karelavtotrans” state unitarian enterprise– purchasing Grand Cruiser 6129 buses, budget loan 20 million rubles. Five buses were purchased as a result of this project.
- Continuation in 2007 of financing of the project by “Karelstroymehanizastiya” joint stock company – building of the plant producing reinforced concrete.
In October 2007 in Petrozavodsk there was set into operation a plant producing reinforced concrete, with capacity of 15,000 cubic meters per year. The cost of the project is about 200 million rubles; 81 million of this money is a budget loan. The plant will provide steady supply of reinforced concrete blocks for the constructions sites of the company.
Another popular measure of state support of investment activity is tax benefits.
The law of the Republic of Karelia of December 30, 1999 #384-3ะส «On Taxes and Levies on the Territory of the Republic of Karelia” provides the following tax benefits:
Concerning the tax on profit for organizations – it has the lower rate of tax, which goes to the republican budget, the rate is 13.5% for the period of factual recouping the investment not exceeding the planned period provided in the investment project, but no longer than five years;
Concerning tax on property of the enterprises – exemption from the tax on property which is purchased or produced for implementation of the investment project, for the period of factual recouping of investments, not exceeding the planned period provided in the investment project, but no longer than five years.
Nine investment agreements were enforced in 2007, on providing the most favorable conditions for investments, including two new agreements: on building a mining-processing complex on production of mineral decorating by “Karelmineral” joint-stock company and the project of new equipment for “Karelprirodresurs” joint stock company, for producing high-quality gravel in the areas of deposits of natural stones.
“Karelmineral” joint-stock company – the project “Construction of mining-processing complex to produce mineral decorating, with capacity 80,000 tons.” Overall amount of investments is 227.2 million rubles. The results of the project: construction of the modern high-tech facility of producing construction materials with 42 new jobs and entering the market with new type of product.
“Karelprirodresurs” joint stock company – investment project “Technical reconstruction of the enterprise” with setting intro operation two complexes to screen and crush stone to produce high-quality gravel, capacity 2 million tons per year, at the natural stone deposits “Raykonkoski” and “Leppyasurya” in Suoyarvi district. Overall amount of investments – 249.4 million rubles. 97 new jobs have been created.
Overall amount of financing for all the investment agreements is 3.4 billion rubles; the majority of the projects are implemented with participation of foreign capital, including “Setles”, “Svedwood Karelia”, “Karhakos”, “Electromeka”.
In order to widen the forms and methods of state stimulation of investment activity, developing investment loans, in the end of 2007, by the initiative of the Government of RK, there was passed a special legislation about providing subsidies for partial reimbursement of expenses to enterprises-investors of paying the interest for loans, received for financing investment projects. The draft of procedure of organizing tenders for such subsidies has been worked out; at present this draft is in the approving stage.
Besides, there has been prepared the bill “On Amendments and Changes in the Law of the Republic of Karelia on Investment Activity in the Republic”; its goal is further development of the legislature providing investment activity in the region.
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