Two original Russian-language federal laws signed on the same day. Law No. 266-FZ (92 pages) creates a free economic zone covering the whole territory of the four occupied regions; Law No. 268-FZ (28 pages) amends the Tax Code of the Russian Federation to give participants in that zone reduced tax rates and contribution tariffs.
The free economic zone is the principal economic incentive for Russian businesses and individual entrepreneurs to register and operate in the occupied territories under Russian law. Law No. 266-FZ defines the zone, sets a management company under the federal Fund for the Development of Territories, and lays down how a business becomes a participant by concluding an investment agreement. Participants receive a free customs zone regime, simplified land and construction procedures and, through Law No. 268-FZ, preferential rates of profit tax, property tax, land tax and insurance contributions. The two laws are cited in TOT Insights research as one of the channels through which Russia redirects economic resources in the occupied territories towards incoming capital and towards residents who have accepted Russian jurisdiction, and as part of the evidence that annexation is produced through employment, registration and tax status as much as by declaration.
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Law No. 266-FZ
Scope (art. 1 and following). A free economic zone is established on the territories of the DPR, LPR, Zaporizhzhia Oblast and Kherson Oblast for a fixed term, with the possibility of extension.
Management. The Ministry of Construction is the authorised federal body; the Fund for the Development of Territories acts as management company, keeps the register of participants and concludes investment agreements.
Participants. Legal entities and individual entrepreneurs registered in the four regions that submit an investment declaration and undertake a project of a minimum size; participation is recorded in a unified register.
Preferences. Free customs zone procedure, preferential land allocation without tender for zone projects, simplified urban-planning and construction rules, and protection against adverse changes in legislation for the term of the agreement.
Law No. 268-FZ
Amends article 5 of part one and part two of the Tax Code to set, for zone participants, a reduced federal profit-tax rate and a regional rate that the regions may lower, exemptions from property and land tax for a period after registration, and reduced tariffs of insurance contributions, all conditional on registration and activity within the four regions.
Analytical note
Registration in the zone requires a Russian legal form, Russian tax registration and, for individual entrepreneurs, Russian documents. The preferences therefore operate as an incentive for businesses from Russia to enter the territory and for local businesses to re-register under Russian law, embedding the economy in Russian jurisdiction in the same way that passportisation embeds the population.