Tax monitoring is carried out in relation to a NWPC participant organization regardless of the compliance of its indicators with other criteria stipulated by the legislation on taxes and levies.

At the same time, the main problem faced by CPCK participants in practice (N F09-9496/22) is that not all constituent entities of the Russian Federation and municipalities have currently adopted legal acts regulating the conditions and procedure for concluding a CPCK.

What are the advantages of concluding a CPCN?

The advantages of concluding a NWPC can be seen in the existence of a number of state benefits that are provided to participants in investment projects, including: (1) legislative stabilization; (2) reimbursement of participants' expenses.

Stabilization of legal acts

One of the main benefits of the SPLC is a condition for fixing the provisions of the legal acts - the stabilization clause. Stabilization clause - non-application of acts (decisions) worsening the conditions of business and (or) other activities in relation to the NWPC participant in comparison with the conditions determined at the time of the conclusion of the NWPC.

At the conclusion of SPLC shall not be subject to the acts that worsen the conditions of the participant of entrepreneurial activity and entered into force after the conclusion. In particular, the mentioned legal acts include town-planning, customs, tax, land legislation.

The duration of the stabilization clause depends on the volume of capital investments: 

• 6 years - for projects with capital investments of less than 10 billion rubles;
• 15 years - for projects with capital investments of more than 10 bln rubles but less than 15 bln rubles;
• 20 years - for projects with capital investments of more than 15 billion rubles.

Some acts have a special procedure for determining the duration of the stabilization clause. In particular, with regard to acts of land, town-planning and environmental legislation the stabilization clause is valid for 3 years from the effective date of the relevant act (decision).

If only a subject of the Russian Federation is a party to the NWPC, only acts adopted at the level of this subject may be stabilized. With regard to legislation on taxes and fees, the acts regulating the provisions on regional, federal and local taxes are subject to stabilization, if the respective public-law entities participate in NWPC.

Compensation of costs of a NWPK participant

NWPK participants can be reimbursed for infrastructure construction costs as well as interest payments on loans and credits. Such compensation may be received both in the form of a subsidy from the budget and in the form of a tax deduction. 

The taxpayer - participant of the NWPC has the right to reduce the amount of taxes by the amount of the tax deduction in the following order:

• With regard to support infrastructure facilities, including accrued interest on loans and credits for their acquisition - not more than 50% of tax deductions for 5 years.

Supporting infrastructure includes objects (transport, energy, etc.) that are used solely for the purpose of implementation of the investment project.

• With regard to the objects of the accompanying infrastructure, including accrued interest on loans and credits for their acquisition - up to 100% of tax deductions for 10 years.

Ancillary infrastructure includes facilities (transport, energy, etc.) which are used both for the purpose of implementing the investment project and for other purposes. At the same time, these facilities must: (1) be in state (municipal) ownership or be subject to transfer into their ownership; or (2) be owned by a natural monopoly entity or be subject to transfer into their ownership.

A party may reimburse the said expenses only if certain conditions are met:

• One party to the agreement is the Russian Federation.
• Infrastructure facilities are necessary for the implementation of the project and have already been put into operation.
• Separate tax accounting is carried out in relation to the participant's infrastructure and other facilities.
• The participant in the NWPC has no tax arrears.
• The amount of compensation is limited to the amount of tax payments payable to the budget.
• The project is not included in the investment programs of natural monopolies and in the programs for the prospective development of certain sectors of the economy.

_________________________________

As can be seen, the NWPC is an effective mechanism of state support for long-term projects, which (1) fixes the content of a number of key regulatory acts along the entire path of the project, and (2) provides participants with the opportunity to compensate the costs incurred. Entering into and implementing an agreement can help the taxpayer substantially reduce the tax burden from the core business.

The Tax Compliance team has considerable experience in assisting organizations in obtaining state support measures, including the use of the tax incentive mechanism. In this regard, Tax Compliance expresses its readiness to provide appropriate legal assistance to all organizations that are planning to receive the benefits of the SPBC.