Duty Free For
High-Tech Production

Where are Moscow high-tech enterprises located, how do they manage to lower the fiscal load almost twice and why many of them are willing to have their customs control zone? A talk with Customs Infrastructure Department Head Of The Special Economic Zone Olga Kovalyova.
Olga Kovalyova
Customs Infrastructure Department Head Of The Special Economic Zone
– What is so special about a special economic zone in Moscow?

– You need to understand that the site of the Technopolis Moscow SEZ itself is unique. Today there are 25 SEZs in Russia and only six of them are of technical&innovative or innovative type. It is territories of this type that are becoming more and more popular in developed countries today, because they conduct research activities, create the most innovative and high-tech products. Traditionally, such zones have been created outside the city, and even more often in depressed and lagging regions. Our site is located right in Moscow, but it is not the only thing that is special.

The capital's special economic zone is an interesting platform, the task of which is to ensure a scientific and technological breakthrough in the field of microelectronics, biopharmaceuticals and new materials. These industries have a significant potential both in terms of providing high-quality domestic products, and in terms of the economic effect associated with investment attraction and high-tech development. The Moscow government supports such industries by granting various preferences, one of which is the free customs zone (FCZ) regime.

– And what is a free customs zone regime?

– A free customs zone is a special customs procedure that allows the special economic zone residents to import equipment, components, raw materials, and utilities for establishing production on the SEZ territory on preferential terms, that is, these goods are placed in the resident's premises without the necessity to pay customs duties, taxes and fees.

In order to apply the procedure and receive benefits, the SEZ residents need to create a customs control zone (CCZ) within their sites. This way, almost every resident has its own small piece of the border.

It was in Pechatniki, in the Technopolis Moscow SEZ, that the most favorable situation was created for arranging FCZ, namely, the Moscow Customs Scientific and Innovation Point for Actual Control and a temporary storage warehouse were created to significantly optimize all customs procedures.

– Why did you decide to arrange targeted customs control zones? How did you manage to implement this initiative in Moscow?

– Most special economic zones turn their territory into a single customs control zone. In the Pechatniki SEZ, we decided to go the other way: each resident allocates a part of the premises for a customs control zone depending on the production needs and specifics, which makes it possible to apply the FCZ procedure. Complying with the customs legislation requirements in this CCZ is the resident's responsibility.

This procedure was necessary, since initially, when our fifth site in Pechatniki became part of the Zelenograd SEZ, the SEZ was located in the Moscow regional customs area of the Skhodnensky customs checkpoint. This was extremely inconvenient for our residents, because in this case all goods arrived first at Skhodnya, and only then in the SEZ. The customs clearance procedure was more complicated and more time-consuming.

Currently, thanks to the cooperation of the FCS specialized units and the Moscow SEZ, the following scheme has been developed and implemented: the Pechatniki site of the Moscow Technopolis SEZ is located in the region where the Moscow Customs Scientific and Innovative Point is operating, which actually controls the CCZ residents' activities, thus, goods arrive directly at the Tekstilshchiki site and, after they are cleared, they are transported within the SEZ to the resident customs control zone. Customs clearance is carried out by the Dubna specialized customs checkpoint, where exclusively the cargoes of special economic zones are registered.

Now, the entire process is as convenient as possible and does not take much time, all vehicles arrive in the customs control zone of the Moscow SEZ. Here transit and delivery are closed, then the goods declaration is sent electronically to the customs point in Dubna.
The solutions proposed in The Moscow SEZ
can be compared
with global ones in terms
of infrastructure, services, and city support
– And what is the difference between the Import-40 and Import-78 declarations?

– I will explain it in my own words. SEZ is a separate territory, where the free customs zone procedure is applied. Special economic zones resemble special duty-free stores located at major international airports. From the customs perspective, they are considered as located outside the state border. So, each SEZ resident has its own piece of land, which has its own borders.

I will give you an example. If a cargo is brought from Switzerland to Russia, it arrives at the customs point, where customs clearance according to the Import-40 procedure takes place (release for free circulation), and after paying taxes and customs duties, the company can freely dispose of it.

And if we are talking about a resident company having local production in the SEZ territory, then everything is different: the cargo arrives at the actual checkpoint, customs closes the transit, and the resident submits an Import-78 declaration. This declaration informs the customs that the cargo has arrived and will be placed in the resident's customs control zone approved by order of the Federal Customs Service. In fact, the residents are not exempted from taxes and duties, this is the biggest misconception that I am trying to dispel. In the first case, after the Import-40 procedure is completed, and taxes and duties are paid, the Swiss freight becomes the goods of the Customs Union and is released for free circulation. And in the second case, after the customs clearance according to the Import-78 procedure, the goods remain considered foreign goods, and only that is why residents do not pay taxes and duties.

The SEZ companies just do not pay VAT or duties until a certain point. They move foreign cargo from the customs control zone of the Technopolis Moscow SEZ to "their own small foreign country". They can use the goods within their own zone. For example, if this is equipment, they can produce something with the help of it or derive something from it. But if the residents are willing to take these goods out of the zone, they are obliged to carry out customs clearance again as for Import-40 into Russia or export abroad and then pay taxes and duties.

– And if, for example, a company leaves the SEZ and starts working off-site, will it be deprived of customs and other preferences?

– Yes, that's right. In this case, you do not only lose the opportunity to use the entire open pool of preferences but should also close your customs zone. If you have lost or refused the status, you should also close all open free customs zone procedures and pay the stipulated fees and taxes. Otherwise, if you violate the customs legislation twice while applying the procedure, you will be deprived of the resident status. The application of the FCZ procedure is strictly regulated and sanctioned.
– Tell me, what is the advantage for the foreign companies that have local production in the SEZ? Can you say that it is precisely the free customs zone regime?

– Sure, because customs and tax benefits are the advantage of working in the SEZ territory. In our case, we provide residents with ready-made Brownfield solutions, so no land tax exemption preference is considered here. Therefore, FCZ is one of the main bonuses.

At the same time, it has many nuances. For example, it is very profitable to import equipment for this procedure, because the FCZ procedure is limited only by the lifetime of the entire SEZ. But violating the procedure is dangerous. If the company has committed unlawful actions and exported goods subject to FCZ procedure from CCZ without having closed the procedure as provided for by the legislation, then it also becomes criminally liable for evading tax and customs payments.

That means, you need to competently and responsibly approach the issue, having studied all the features together with a SEZ specialist. All the nuances are discussed individually, so it is important that we support companies throughout the whole time, discuss, direct and advise. Often it is necessary to explain the procedure in lay terms, so that the client could understand whether it is good for him or not. It is important to do economic forecasts, see what you can save on this.

In some cases, this is impractical, because it may happen that the finished product will cost more than, for example, the amount saved on utilities.

– Does it mean that, if a company imports equipment and uses it to manufacture products, these products are not taxed either?

– This is not entirely true. If you produce a finished product using the equipment imported according to the FCZ procedure, there are several options. I always give a pen example. The first option is that you assemble a pen only from Russian components. In this case, there is a simple notification procedure for importing components (raw materials) and exporting finished products. Thus, you should notify customs that you have imported caps, inks, etc., because you import everything into your customs zone.

The second option is that you produce the pen partially from Russian and partially from FCZ-imported components. It is important to understand that if the finished product contains any foreign components, it can be exported from the zone only after customs clearance. Therefore, a product can be released into free circulation on the territory of the Customs Union, after the established taxes and duties have been paid.

– Could anything still be improved? What are your plans for the future?

– If we compare the Moscow SEZ with the global ones, the solutions offered in Moscow can be compared to the global ones in terms of infrastructure, services and city support. But we still have a huge capacity. Now we are working to find the most convenient way to arrange the customs clearance of the goods arriving at the address of the Alabushevo residents.
Corporate Issue, Moscow Department
of Investment and Industrial Policy
E-mail: pressprom@mos.ru
Audience: 16+