First applications for setting zero VAT not expected from ship repair companies before January 2024
Zero VAT rate is to be set for ship repair yards if they allocate at least 20% of revenues for the development
The first applications for setting zero VAT are not expected from ship repair companies before January 2024, IAA PortNews correspondent cites Dmitry Palov, Head of the Pricing and Economic Analysis Department, Shipbuilding and Marine Equipment, Ministry of Industry and Trade, as saying on the sidelines of the Neva 2023 exhibition.
When taking part in the Strategic Session “Legislative Novels And Formation Of Ship Repair In The Russian Federation” at the Neva 2023, Dmitry Pavlov said state support measures had not covered ship repair until recently. With the introduction of amendments into the federal legislation a temporary measure of setting zero VAT for ship repair is now in force until 31 December 2024. The Ministry of Industry and Trade has developed a relevant order, No 2977, which came into effect on 11 September 2023.
The session participant were not very optimistic about the new measure. According to Nikolay Shablikov, Chairman of the Board of Directors, Nordic Engineering JSCthe decision on setting zero VAT for ship repair yards is a long expected and positive step but the terms for providing that measure raise many questions. In his opinion, the period for making a decision and the period of an investment agreement should be extended. Besides, the document does not contain any criteria related to the objects of investment or to estimation of investment efficiency. Moreover, it will be difficult for small repair yards invest the required 20% of their turnover funds even taking into account tax refunds.
According to Sergey Smirnov, Director of Arkhangelsk Regional Association of Oil and Gas Industry Suppliers “Sozvezdie”, setting zero VAT under the approved conditions means quite a lot tax risks for mid-size and even small-size ship repair companies. “Of course, it is good get this law. Now, there is a discussion and it can be improved,” he added.
Russian President Vladimir Putin earlier signed the law on zero VAT for ship repair yards which came into effect on 1 July 2023. The document introduced amendments into Part 2 of the Tax Code and foresees 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.
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