Parliament Adopted Bill Stimulating Russian Shipowners

19.10.2011 Russian State Duma has adopted a draft law stimulating Russian shipowners for fleet renewal, placing orders at Russian shipyards, and registration of ships in Russian International Register of Vessels (RIRV).

Amendments are introduced into Inland Water Transport and Merchant Shipping Code, Tax and Labor codes of the Russian Federation, and a number of laws. In particular, the state provides guarantees for Russian shipyards. Also, the document exempts shipbuilding organizations located in special economic zones fr om land and property taxes for 10 years (instead of 5 years actual presently).

Besides, the bill provides shipowners with additional preferences like release from tax on incomes received by virtue of ships built by Russian shipyards. Through the period of 2012-2027 crewmembers of Russian vessels will not pay insurance contributions to Superannuation Fund, Social Insurance Fund, and Federal Compulsory Hospital Insurance Fund.

According to ITAR-TASS, chairman of parliamentary committee for economic policy and enterprising Yevgeny Fedorov considers that "this law will develop the entire industry". "We start systematic and mass support of national shipbuilding by regarding it as a sector able to give impulse to the whole national economy", he said.

President of JSC United Shipbuilding Corporation Roman Trotsenko is sure that adoption of this law "will help to create several hi-tech shipbuilding centers". "In prospect, 250 000 employees will work in special shipbuilding zones with specific tax and customs regulations", forecasts Trotsenko. As for him, the whole range of measures will improve competitiveness of Russian shipbuilding and provide favorable conditions for working at the most hi-tech niches of world market.

The document drawn by Ministry of Transport and Ministry of Trade and Industry with participation of United Shipbuilding Corporation was submitted by government to State Duma late in May. The draft law is aimed at creation of legal tools and economical background for vessels to fly Russian flag, stimulation of Russian shipowners for fleet renewal and order placing at Russian shipyards. The document introduces amendments into Inland Water Transport and Merchant Shipping Code, Tax and Labor codes of the Russian Federation, and four federal laws.

Privileges provided by the draft law will be extended to shipowners whose vessels are registered in RIRV. Shipowners whose vessels were built by Russian shipyards after Jan 1, 2010 and registered in RIRV will enjoy wider privileges. Registration in RIRV is possible for sea-, river-, and sea/river-going vessels. At coastal cruises, such ships are exempted from income tax.

The bill imposes lim its on initial RIRV registration for ships older than 15 years currently flying foreign flags and for ships older than 15 years conducting only coastal cruises.

Second reading of the draft law secured a 15-year long zero insurance tariffs paid by shipowners for crewmembers with further budgetary compensation (Superannuation Fund, Social Insurance Fund, Federal Compulsory Hospital Insurance Fund).

In addition, the document provides possibility to conclude fixed-term labor contracts between shipowner and crewmembers as agreed by parties. Conclusion of termless and cruise contracts is allowed as well.

Shipyard and ship-repair companies granted the status of special economic zone residents will also enjoy a number of privileges. In the second reading, the draft law more exactly specified privileges for shipyards as of property and land taxes, i.e. release from payment of mentioned taxes for 10 years (instead of presently actual 5-year term).

According to the lawmakers, adoption of such bill would reduce payback time of a new vessel from 20 to 12 years. This fact would make Russian shipowners decide to place orders at national shipyards.

The draft law was submitted to State Duma by Russian Government on May 30, 2011 and discussed at the first reading on July 1, 2011.

Third reading of the bill supporting Russian shipbuilding and navigation is scheduled in Oct 2011.