This information is derived from the State Department's Office of Investment Affairs’ Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 7/17/2017

Policies toward Foreign Direct Investment

The Ministry of Economic Development (MED) is responsible for overseeing investment policy in Russia. The Foreign Investment Advisory Council (FIAC), which is chaired by the Prime Minister and includes over 50 international companies and banks, allows select foreign investors to directly present their views on improving the investment climate in Russia. FIAC also advises the government regarding regulatory rule-making.

Russia’s basic legal framework governing investment includes Law 160-FZ of July 9, 1999, “On Foreign Investment in the Russian Federation”; Law No. 39-FZ of February 25, 1999, “On Investment Activity in the Russian Federation in the Form of Capital Investment”; Law No. 57-FZ of April 29, 2008, “Order of Investing by Foreign Persons in Companies Having Strategic Importance for Ensuring the Defense of the Country and Security of the States”; and the Law of the RSFS No. 1488-1 of June 26, 1991, “On Investment Activity in the Russian Soviet Federative Socialist Republic (RSFSR).” This framework nominally attempts to guarantee equal rights for foreign and local investors in Russia. However, exemptions are permitted when it is deemed necessary to protect the Russian constitution, morality, health, human rights, and national security or defense, as well as for promoting the socioeconomic development of Russia. Foreign investors may freely use their revenues and profits obtained from Russia- based investments for any purpose as long as they do not violate Russian law.

Limits on Foreign Control and Right to Private Ownership and Establishment

Russian law places two primary restrictions on land ownership by foreigners. First, land located in border areas or other specifically assigned sensitive territories is restricted from foreign ownership. Second, foreign citizens and foreign legal entities cannot own more than 50 percent of a plot of agricultural land. As an alternative to agricultural land ownership, foreign companies typically lease land for up to 49 years, the maximum legally allowed.

President Vladimir Putin signed in October 2014 the law “On Mass Media,” which took effect on January 1, 2015 and restricts foreign ownership of any Russian media company to 20 percent (the previous law applied a 50 percent limit only to Russia’s broadcast sector). U.S. stakeholders have also raised concerns about similar limits on foreign direct investments in the mining and mineral extraction sectors; they describe the licensing regime as non-transparent and unpredictable as well.

Russia’s Strategic Sectors Law (SSL) establishes a list of 45 “strategic” sectors or activities, such as national defense and state security, in which the establishment of companies, investments, and transactions or purchases of controlling interests by foreign investors must be pre-approved by Russia’s Commission on Control of Foreign Investment, which was established in 2008 to monitor foreign investment in strategic sectors. The Commission received approximately 395 applications for foreign investment between 2008 and 2015, of which 195 were reviewed, according to the Federal Antimonopoly Service (FAS). Of those, the Commission granted preliminary approval for 183 cases, rejected 12 cases, and found that 150 applications did not require approval >>  
International organizations, foreign states, and the companies they control are treated as a single entity under this law, with their participation in a strategic business subject to restrictions applicable to a single foreign entity.

Other Investment Policy Reviews

The WTO conducted the first Trade Policy Review of the Russian Federation in September 2016. Reports relating to the review are available at >>

Business Facilitation

The Agency for Strategic Initiatives, created by President Putin in 2011 to increase innovation and reduce bureaucracy, has released since 2014 a yearly ranking of Russia’s regions in terms of the competitiveness of their investment climates. This initiative provides potential investors with important information about which regions are most open to foreign investment. By providing a benchmark to compare regions, known as the “Regional Investment Standard,” this initiative has also stimulated competition between regions, resulting in an overall improved investment climate in Russia. See (in Russian) for more information.

The Federal Tax Service (FTS) operates Russia’s business registration website. A company must register with a local FTS Office within 30 days of launching a new business. The business registration process must not take more than five days, according to Law 129-FZ of 2001. Foreign companies may be required to notarize the originals of incorporation documents included in the application package. To establish a business in Russia, a company must pay a registration fee of RUB 4,000 and register with the Federal Tax Service. See for more details.

The Russian government established in 2010 an ombudsman for investor rights protection to act as partner and guarantor of investors, large and small, and as referee in pre-court mediation facilitation. The First Deputy Prime Minister was appointed as the first federal ombudsman. In 2011 ombudsmen were established at the regional level, with a deputy of the Representative of the President acting as ombudsman in each of the seven federal districts. The ombudsman’s secretariat, located in the Ministry of Economic Development, attempts to facilitate the resolution of disputes between parties. Cases are initiated with the filing of a complaint by an investor (by e-mail, phone or letter), followed by the search for a solution among the parties concerned. The breakdown of problems reported to the ombudsman has shown a majority of cases related to administrative barriers, discrimination of companies, exceeding of authority by public officials, customs regulations, and property rights protection.

In June 2012 a new mechanism for protection of entrepreneur’s rights was established. The head of the business organization “Delovaya Rossia” was appointed as the Presidential Commissioner for Entrepreneur’s Rights.

Outward Investment

The Russian government does not restrict Russian investors from investing abroad. In effect since 2015, Russia’s “de-offshorization law” (376-FZ) requires that Russian tax residents notify the government about their overseas assets, potentially subjecting these to Russian taxes.


 

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Russia Economic Development and Investment Law