Zero VAT rate to be set for ship repair yards investing in production development
At least 20% of revenues are to be invested throughout 7 years
RF Government has developed amendments into the Tax Code which foresee a zero VAT rate for ship repair yards engaged in dock and yard repair of ships if they allocate at least 20% of revenues for the development throughout a 7-year period. Such an obligation will be stipulated by the state agreement, Prime Minister Mikhail Mishustin said at the Government meeting held today, February 1, according to the transcript published on the official website of RF Government.
That is foreseen by the Shipbuilding Industry Development Strategy.
Mikhail Mishustin reminded that the President “had set a task to ensure maximum of operations on equipment and repair of ships to be conducted within the country. In pursuance of this task the Government has prepared amendments into the Tax Code … In the result, the saved resources will let the business enhance its investment capabilities, invest more in long-term projects, purchase advanced and costly equipment needed for servicing modern high-tech ships and equipment.
The proposal on setting a zero VAT for works on repair of domestic ships at Russian shipyards has been under discussion from 2019. In March 2022, the Ministry of Industry and Trade addressed Prime Minister Mikhail Mishustin with a request to support civil sector of ship repair industry amid sanctions by setting a zero VAT for repair of commercial ships. In August, at the meeting on developing the shipbuilding industry held by Vladimir Putin, Denis Manturov, Deputy Prime Minister – Minister of Industry and Trade, told the President about the solution found. “We worked together with the Finance Ministry and found a way to offer zero-rate VAT for ship repairs, on the condition that providers sign investment contracts with us and undertake to invest the profit they make in upgrades, which in fact will pave the way to creating a new sector. We are now drafting corresponding amendments to the Tax Code with our colleagues,” said the Deputy Prime Minister.
As of today, zero VAT is applied to services (including ship repair) covering sea-going vessels, inland navigation vessels and vessels of mixed sea/river class and provided in ports as well as pilotage, classification and certification services. VAT of 20% is applied to ship repair conducted in docks and at shipyards and repair of vessels that are not decommissioned and placed at the berths of shipyards, not ports.
