Crimea, a popular destination for Russians tourists, is a peninsula located on the western coast of the Sea of Azov and on the northern coast of the Black Sea. It has a population of 1,965,177 (2013 est.). Since 21st of March 2014 when the Russian President signed a final decree, the territoryof Crimea has been officially administered by Russia. In November the same year, the Russian President signed a federal law for the development of Crimea as a free economic zone which will exist for 25 years with the possibility for extension.
In this context, the Russian Prime Minister stated that “In the free economic zone investors will be exempt from some taxes for a period of up to 10 years depending on the categories of taxes, and administrative barriers will be lowered.” The Crimean parliament already reduced the corporate profit tax to6 percent.In addition, the Russian government will provide two-year tax holidays for small and medium-sized businesses working in the free economic zone.It should be noted that Russia has experience in establishing free economic zone in the territory of Europe. The free economic zone of Kaliningrad provides a tax exemption to local residents for the first six years.
With the aim to clarify the legal requirements applicable to Crimea, the Russian customs administration has created a special section on its website for economic operators from Crimea. The section contains, for example, news, applicable legislation, customs procedure, and answers to certain commonly asked questions. The website is available in Russian at http://crimea.customs.ru/ .
In order to facilitate the influx of investors, Russia will allow foreigners coming to Crimea to get a visa for up to 30 days upon arrival to the Crimean consulate. Such visas, however, will be valid only on the territory of Crimea. Moreover, Russia constantly invests in its new possession. For example, Russia will cover Crimea’s annual budget deficit amounting to USD 1 billion and upgrade the local electricity infrastructure at a cost of USD 2 billion. Russia also plans to increase the salaries and the pensions of Crimean government employees to the level of their counterparts in mainland Russia. Such an increase in salaries and pensions will cost to Russia USD 1 billion per year.
The proximity to mainland Europe together with the attractive tax regime may transform Crimea in a highly developed offshore center. Russia hopes to make its new territory so prosperous so that it can be called the “New Singapore of the Black Sea”. Whether Russian’s ambitions would merely remain a dream or would shape a new modern offshore center remains to be seen.