Will Crimea become offshore zone?

Will Crimea become offshore zone?

Crimea’s government is considering setting up an offshore zone on the peninsula, the head of Crimea Sergey Akksenov said.

"The idea is only being discussed,” including by the Russian Ministry of Economic Development. There have been proposals by MPs, senators, and government members to find a convenient mechanism that has never been used before and could be piloted in Crimea. So far we have not yet identified such a mechanism," RBK cited him as saying.

A source close to the authorities also confirmed a possible creation of an offshore zone on the peninsula.

The director of the Institute of International Economics at the Russian Academy of Sciences, Ruslan Grinberg, speaking with a correspondent of Vestnik Kavkaza, assessed the idea of ​​opening an offshore in Crimea as 'exotic'. "First and foremost, it should be said that offshore zones have proved to be a malicious phenomenon for the economy. There are no advantages in offshorizing our economy," he stressed.

"As for the establishment of an offshore zone in Crimea, where the free economic zone is operating, it's a fantastic idea. In my opinion, there are much more important things in Crimea, and reliance on additional capital inflow into the Crimean offshore is absolutely unfounded. I do not believe that it will attract any money," Ruslan Grinberg explained.

A free economic zone (FEZ) has been in operation in Crimea since 2015. Its residents are exempt from paying corporate income tax into the federal budget, and pay less in taxes to the regional budget. They also get a 10-year property tax rebate and a three-year land tax rebate. In exchange, small and medium businesses must invest three million rubles ($53,000) in production in the first three years of operation. Bigger businesses promise to invest 30 million rubles ($5.3 million). A total of 883 companies are currently listed as residents of the Crimean FEZ; their combined projected investments stand at 80 billion rubles ($1.4 billion).

The Chairman of the Board of the National Currency Association (NCA), Dmitry Piskulov, agreed that Russia does not need its own offshore. "It will become a way of avoiding normal taxation for many companies, if in this case an offshore zone means a low-tax zone. Crime as a region needs to develop its entrepreneurship. This can be achieved by certain tax breaks for companies operating there, but not by creating an offshore zone," he said.

"It is necessary to clarify what the status of an offshore zone will give the territory, which offshore features will be chosen, how they plan to attract business, in particular, whether it will be allowed to formally register headquarters in such offshore or they must transport staff to Crimea. In the second case, of course, there will be jobs and additional demand for products and services," the chairman of the Board of the National Currency Association concluded.

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