THE REPUBLIC OF NORTH OSSETIA- THE TERRITORY OF GROWTH

Investor’s Guide Dear Investor,

I would like to invite you to discover The Development Agency of the the Republic of North Ossetia- North Ossetia-Alania was Alania. This is one of the most established for this purpose. southern and warmest regions of Aiming to implement Republican . I am confident that North Socio-Economic Strategy 2030 the Ossetia will provide you with Agency operates as an authorized business opportunities full of service for investors and investment enormous potential. Our region projects in the Republic in the one- offers not only a beautiful stop shop mode. environment and a mild climate, but We clearly understand what also a platform for forward-thinking investors need today. I assure you, and innovative people. that those who invest in North Every year, the business community Ossetia will feel comfortable on our launches dozens of new investment territory, and today all the projects in our region, and we host administrative resources are aimed many important international at this. business and cultural events. We Welcome to North Ossetia-Alania! have established positive long term relationships with international We look forward to seeing you partners, including Metro Cash & among our business partners! Carry, Leroy Merlin, Hyundai, Samsung, DHL, Glavbolgarstroy, etc. To boost the economics of the region the Socio-Economic Strategy 2030 was developed.

V. Z. Bitarov Head of the Republic of North Ossetia-Alania GENERAL INFO ON THE REPUBLIC OF NORTH OSSETIA–ALANIA

North Ossetia-Alania is one of the Total area: 8,000 km2 republics of Russian Federation. It is situated on the northern slopes Population: 701,745 people of the central between Urban population share: 46% two of the highest mountain peaks in Europe, Elbrous and Capital city: Vladikavkaz Kazbeck. Language: Russian, Ossetian

North Ossetia-Alania is one of the Time zone: GMT +3 hours smallest, most densely populated Airport: Beslan (airport capacity is and multi-cultural republics in Russian Federation more than 200 000 people per year)

Watch more about North Ossetia: Ranked 7th in terms of population density in Russia https://www.youtube.com/watch?v=dDIqEB (87.8 people per 1 km2) KllZ4&feature=youtu.be 3 PLACE FOR LIVING

North Ossetia has an original, rich and diverse culture. The republic is now experiencing an 136 libraries intensive development in music, visual arts, theatre and cinema. 137 community hall institutions State North-Ossetian Philharmonic which is the official branch of the «Mariinsky theatre» was opened in 2017 in Vladikavkaz. 18 museums Choreography is one of the most distinctive elements of Ossetian culture. And the State Academic Folk Dance 7 theaters Ensemble "Alan“ represents a long tradition of ancestors. 2 choral ensembles The medical treatment is free of charge for foreigners. The modern medical center is the biggest in North Caucasus was opened in Beslan, providing high quality medical services. 3 institutions of vocational education The Republic cares about the health of its citizens, holding mass fitness leading by Olympic champions with about 1 000 participants. 6 concert organizations

The Republic of the North Ossetia-Alania takes leading position in the North Caucasian Federal District on a share of 275 monuments of the population, which play sports. 33 gold, 40 silver, 59 federal and 159 of bronze medals have been won by adult athletes in regional significance. 2015 in different championships.

Valery Gergiev Caucasus Musical and Cultural Centre will be built in Vladikavkaz. 4 HUMAN RESOURSES

Republic enjoys availability of qualified personal 5 790 Graduates with average salary 290 euro that is 1,7 times 3 universities lower than average in Russia. Social Sciences Business incubator with 200 work spaces for 6 R&D institutes employees, graduate students and university 7 948 Students students who are implementing their own 2 041 Graduates innovation–driven business projects. Work spaces are leased out free of charge for terms of 3 years or 1 academy less. Economy 3 936 Students Average monthly wage, 2017 (in rub.) 10 private higher 1 163 Graduates €943 educational 67 899 institutions Technical Sciences €692 50 000 5 060 Students 24 schools of 1 711 Graduates €421 €485 extended 30 397 31 500 education €291 Natural Sciences 21 000 5 027 Students 875 Graduates

TOP 2 in RF according to a High Education Rate among gainfully occupied population 5 TRANSPORT

Air routes link the republic Two global transport Rail transport in RNO-Alania with major CIS cities as well corridors: is represented by North as several European The Georgian Military Road Caucasus Railways, a branch countries. is the shortest and the of OAO Russian Railways. The Under the Federal Program cheapest overland republic has 144 km of “Development of Russia's transport corridor for operating track. A special Transport System over the Russia and Transaucasian passenger express train, period of 2010–2015”, 1.08 Region from North to “Ossetia” runs from billion rubles was allocated South. Vladikavkaz to Moscow every for the renovation of the The Transcaucasian day. In addition, there are Beslan airport facility in Highway is the shortest trains to St Petersburg, Vladikavkaz in 2015. This way between European Novorossiysk, Adler and helped to increase freight center of Russia to Anapa. and passenger traffic as and Iran from West– East. well as improved the quality of service for aircraft, passengers, and luggage. 2,300km of public motorways and roads representing a density of 286 km of road per 1,000 km2 – 4th place among Russia's regions 6 1,923 km 2,365 km 4,058 km

to Moscow Armenia – Vladikavkaz – Moscow Turkey – Vladikavkaz – Moscow

7 MARKET POTENTIAL

Top priority sectors by investment inflow are: Direct investments by economy Logistics, Agriculture, Industry, Tour is m as sectors in m. rub., 2018 follows.

The gross regional product is 2,2 times 13964 lower per capita than an average across 21057 Russia, but advances all the republics except Dagestan in Caucasus.

The GRP structure by industry represents high 14953 level of social and innovative services 50,3 bln 24793 rub as well as trade, transport logistics complex 31 bln rub and agro-industrial complex which produced 24 bln rub of regional GRP in 2017 year. Tourism/Medecine Agriculture Logistics Industry

GRP structure by industry, 2017 in m. rub. 50 356

30 864 24 044 15 689 2 572 4 271 4 075

Agro-industrial Energy and fuel Industry Construction and Trade transport Tourist and Social and complex complex housing logistics complex recreational innovative complex services LOGISTICS

Market potential

The trade-transport and logistics complex accounts for 23% of the gross domestic output of the Republic of North Ossetia- Alania, 19% of the average annual number of employees, 26% of the added value of products produced in the Republic, 24% of investment, 15% of tax payments, 19% of the average annual number of employees with a labor productivity of 0.497 million rubles per person. In general, the market of transport and logistics services is at the stage of formation and is represented by the following companies: . Ltd Green specializes in multimodal transportation to the countries of Transcaucasia, the countries of Eastern and Western Europe, China. International logistic operators . Ltd Stars of transport provides auto and railway transportation services and warehousing of goods on the territory of Russia.

. Ltd Continent carries out auto and railway transportation services and warehousing of goods on the Russian territory.

. TLK "Southern Gate" offers storage and transportation services and customs clearance of goods on the border with . 9 INDUSTRY

North Ossetia–Alania has a well-developed RNO-Alania produces: manufacturing sector and diversified agriculture. 39,3% of Russia’s zinc The most common mineral resources: poly-metallic ores containing mostly zinc and 46,2% of lead lead, limestone, dolomites, marble and basalt, clay, sand, broken natural stone, gravel 15% of hard metal alloys 30% of electric contactors The non-ferrous metals industry is one of the republic’s core manufacturing segments, which 48,8% and about half of curtain has been developed largely on the basis of significant mineral fields and deposits. The fabric produced in Russia. republic is a home to manufacturers of zinc, lead, wolfram, copper mill products and hard The republic boasts 2 oil fields metal alloys and repair shops for railway rolling with total potential reserves of stock. 10 million tones.

The Electrozinc and Pobedit plants specialise in the production of heavy and hard metal More than 500 industrial companies alloys based on wolfram, zinc and including 50 large and medium organizations. molybdenum. 10 KEY ONGOING PROJECTS

Over 320 m. euro of direct investment inflow in 9 key development 2018/2019 years will boost the economy of the areas within socio- economic strategy republic, creating more than 500 jobs. of RNO-Alania until 2030 year:

Top 9 priority Investment projects 2018/2019 Y AGRICULTURE INDUSTRY

TOURISM

LOGISTICS

EDUCATION

MEDEСINE

DEVELOPMENT TEAM CULTURE & ARTS DEVELOPMENT

SPATIAL & INFRASTRUCTURE DEVELOPMENT 11 INVESTMENT INCENTIVES

Government of republic is keen to create an environment that is both business–and Additional advantages investment-friendly by granting guarantees, tax for investors incentives and also by offering administrative support.  Investors support by Agency Tax holidays are granted for 2 years for newly in the «one stop shop» mode established individual entrepreneurs in respect of income tax.  Obtaining lease rights for regional and municipal land The conclusion of a special investment contract plots without auction in short (SPIC) makes it possible to fully reimburse time (to 2 weeks) expenses for R & D.  Fast and easy utilities plug in Republican tax rates under the SPIC for 7 years are listed below:  Market analysis and providing up-to-date analytical and Type Rate Rate reference information of tax Standard under SPIC in RF in RNO-Alania  Proposal of partnership in North Ossetia Profit Tax 20% 13.5 %  Search of Sales Markets Property Tax 2% 0%  Human Resources provision Land Tax 1.5% 1.5%

Lowest Profit tax in Russia, excl. Special Economic Zones Read more about taxes in North Ossetia 12 NATURE

North Ossetia has unique natural and climatic Climate environment. More than half of the territory of The climate of North Ossetia is continental but rather dry in the Republic is occupied by high mountains, the flatlands. rich in deciduous and coniferous woods, as Winters are short and mild well as alpine pastures. while summers are hot. The average long term annual temperature is +4.8˚С and 300 springs and wells of acidulous, chloride +20.1˚С in January and July, hydrocarbonate, sodium and boron waters. respectively.

216 unique natural monuments There are 260 sunny days per year. The average annual air humidity is 65–80%. More than 240 of glaciers. North Ossetia’s climate The highest waterfall in Europe «Bolshoi Zeigalan» permits the successful (750 m) along with 30 waterfalls development of many industries, while the republic’s subsoil, with its wealth of Ecological Environment Rate – TOP 10 in Russia mineral resources, offers the Federation requisite conditions for economic development. 13 DEVELOPMENT AGENCY RNO-ALANIA

Development agency of the Republic North Ossetia-Alania has been created in August, 2017 and is Republican authorized service for investors and investment projects. 30

projects The Agency main goal is to implement republican 2030 socio-economic development strategy.

The agency deals with: 67

 Attraction of investments. billion rubles  Maintenance and implementation of investment (0,9 bln USD) projects.  Participation in formation of favorable investment climate. 97  Increase of investment appeal of the Republic. investment “Today we are opening the 90th shopping sites center, but I must say that so easily and consistently we managed with business- project only in Vladikavkaz which had resulted in the top-of-the-line conditions by the 4821 ha leadership of the Republic”. with a total area of investment Jerry Kalmis, sites CEO, METRO Cash & Carry Russia 14 OUR CONTACTS

Republic of North Ossetia-Alania Vladikavkaz, 2, Lenina Str. Tel.: +7 (8762) 41-11-91 E-mail: [email protected] Website: www.investinalania.ru

15 TAX LEGISLATION IN RUSSIA Appendix 1

The tax legislation in the Republic of North • Stock lending (including interest) and repo Ossetia-Alania is determined in accordance with transactions the Tax Law of the Russian Federation. The • Interest on monetary loans main aspects of tax legislation in the Russian • Warranty services, including the cost of spare Federation have been outlined below. parts • Gambling Corporate income tax • Licensing or assignment of certain intellectual property rights The maximum profits tax rate of 20% percent • Assignment of claims arising from loan • 3 percentage points for the period 2017- 2020 agreements payable to the federal budget • 17 percentage points for the period 2017- 2020 payable to the regional budget Regional governments have the right to reduce their Taxable amount portion of profit tax. The taxable amount is normally defined as the In RNO-Alania this figure is equal to 13,5%. market value of goods (services, works) The tax accounting period is the calendar year. supplied including the amount of excise duty The taxable base is generally calculated on an and excluding the amount of VAT. accrual basis.

VAT Property tax VAT applies to companies (including Property tax is a regional tax and therefore its representative offices and branches of foreign companies), entrepreneurs and any person application is governed by regional regulations importing goods into the customs territory of as well as the Tax Code. the Eurasian Economic Union (of which Russia Taxpayers is a member state). Companies and entrepreneurs may apply for exemption from The following entities are subject to property VAT if their aggregate revenues for three tax: consecutive months, excluding VAT, are below • Russian entities RUB 2 million. There are three main VAT rates, depending on • Foreign entities that act through permanent the nature of the supply. establishments in Russia or own immovable The standard VAT rate is 18%. This rate applies property in Russia to all goods and services that do not qualify for • Separate subdivisions of Russian legal entities another rate or exemption. A reduced rate of that have their own balance sheets 10% VAT applies to some food, medical and baby products. A zero VAT rate is applicable to Tax rates certain operations, for instance, to export of goods outside Russia. The maximum tax rate for property on which the tax base is calculated based on its residual value according to the Tax Code is 2.2 percent, Activities that are exempt from VAT and this is the rate currently imposed in the include: majority of Russia’s regions, including Moscow and St. Petersburg. However, a reduction or • Lease of office space and accommodation to accredited foreign representative offices and exemption is offered by some regional foreign individuals authorities, often conditional on investment in • Medical services and the sale of certain the region. medical equipment The tax period is a calendar year. Nevertheless, • Banking and insurance services advance tax payments must be calculated and • Sales of “FITTs” (financial instruments for term paid based on the results of each calendar transaction— broadly, financial derivatives quarter. 16 REGISTRATION OF FOREIGN Appendix 2 BUSINESS IN RUSSIA State support to stimulate investment activity in Variant 1: an Affiliated company North Ossetia takes the following forms: . guarantees granted by the RNO-Alania to Limited Liability Company (LLC) investors for attractive investments; LLC is the most widespread form of the legal entity . individual tax concession (see tax incentives); with the smallest number of the obligatory . co-financing up to 43% of the cost of the requirements burdening owners of the company. The investment project; capital of LLC shares in “parts” (shares) which don’t . partial refund of interest paid by enterprises and act as “stock certificates” and therefore are not under organizations for credit resources granted for requirements of the Russian legislation of securities investment project implementation; and aren’t a subject of registration as securities in the . offering access to real estate leases at reduced appropriate Russian government bodies. Share of rates; participation of each owner of the company is defined . involvement of the Republic of North Ossetia- depending on the size of a contribution to the capital. Alania in developing, examining and implementing priority investment programs; . state orders placed by the Republic of North Joint-Stock Company (JSC) The joint-stock Ossetia-Alania under the procedure established company is seldom used for creation of the new by Russian law and legislative acts of the enterprises in Russia in view of more complicated Republic of North Ossetia-Alania; legislative requirements therefore only the main data . Subsidies up to 10 million rubles for on this type of the companies are reported further. reimbursement of lost income The joint-stock company exists in two main forms: open joint stock company (the number of participants Land tax isn’t limited) and closed joint stock company (number Land tax is a local tax, so its application is of participants is not more than 50). governed by local regulations as well as the Tax Code. Taxpayers Variant 2: a Representative office The land tax applies to legal entities and The foreign company can do business in Russia using individuals who own land or have a permanent representative office. Representative office of the right to use it. Legal entities and individuals who foreign company isn’t an independent legal entity, use land free of charge or under lease agreements represents interests of the foreign company in Russia. are not subject to land tax. The head of the representative office is appointed by the foreign company and acts on the basis of the power of attorney. Representative offices are Tax base registered in the State Registration Chamber of the The tax base is the cadastral value of the land as Ministry of Justice of the Russian Federation and/or determined on 1 January of the reporting year the Russian Chamber of Commerce and Industry. Local authorities set the land tax rate. Under the Except accreditation, process of registration of a Tax Code, these rates may not exceed the representative office includes registration in tax following limits: authorities, bodies of statistics and the state off- • 0.3 percent of the cadastral value of land that is budget funds, and also opening of bank accounts. either Variant 3: a Branch (i) used for agricultural purposes, (ii) occupied by residential properties or utilities, The foreign company can do business in Russia using (iii) acquired for private farming, or a branch. The branch of the foreign company isn’t an (iv) used for special purposes, e.g. military or independent legal entity. The branch of the foreign customs needs company is a division of this firm which fulfills all or a part of its functions. The branch has the right to • 1.5 percent of the cadastral value of other land conduct independent commercial activity. Branches Registration of foreign business in Russia have to be accredited in the State Registration Chamber of the Ministry of Justice of the Russian Nowadays, 3 general variants of foreign business Federation. Except accreditation, process of organization are practiced in the Russian registration of branch includes registration in tax Federation: authorities, bodies of statistics and the state off- (i) an affiliated company; budget funds, and also opening of bank accounts. (ii) a representative office; (iii) a branch 17