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Special Economic Zone (SEZ) in Russia

Its an area in a country that is subject to different economic regulations than other regions within the same country.

Special Economic Zone (SEZ) in Russia

SEZs are usually created in order to facilitate rapid economic growth in certain geographic regions. This economic growth is accomplished by leveraging tax incentives as a way of attracting foreign dollars and technological advancement.

SEZs may also increase export levels for the implementing country and other countries that supply it with intermediate products. However, there is a risk that countries may abuse the system and use it to retain protectionist barriers (in the form of taxes and fees). 

SEZs can also create a high level of bureaucracy due to their regulatory requirements. This can have the effect of funneling money away from the system, making it less efficient.

While there are benefits for businesses, individuals, or entities operating within an SEZ, the macroeconomic and socioeconomic benefits for a country using an SEZ strategy are subject to debate.

Special economic zones provide special condition of doing business for the residents which is guaranteed by the Russian Government:
  • Tax preferences: Income tax: for the SEZ residents tax rate is 0-13.5% instead of 20%; The residents of technology and innovation and tourist and recreational special economic zones which are combined into cluster are exempt from income tax; Property and transport tax exemption for 10-15 years;
  • Investors receive modern transport, social, customs and other infrastructure for business development created at the expense of state budget;
  • Special custom regime – is a regime of free customs area which means that investors in the special economic zones’ territory don’t have to pay customs duty and value-added tax for foreign goods and it is also forbidden to use prohibitions and restrictions of economic character;
  • Reduced administrative barriers (the system "single window" simplifies the interaction with regulatory authorities). Single window means that investor give all documents to one special agency and this agency assist in agreement procedures that reduce the time on initial stage of the investment project.
  • Access to the qualified personnel resources.
Now there are 28 special economic zones of 4 different types in Russia:
  • 6 Industrial and production zones (Tatarstan, Lipetsk, Samara, Sverdlovsk, Pskov and Kaluga regions);
  • 5 Technology and innovation zones (Moscow, St.Petersburg, Tomsk, Dubna (Moscow region) andTatarstan);
  • 14 Tourist and recreational zones (Altai, Buryatia, Stavropol, Primorsky Territory, Irkutsk region, also there is cluster in the Krasnodar Territory, Ingushetia, Dagestan, North Ossetia-Alania, Adygeya, Kabardino-Balkar Republic, Karachi-Cherkess Republic and Chechen Republic);
  • 3 Port zones (in Ulyanovsk, Murmansk regions and Khabarovsk Territory).