Russia is demanding a highly favorable regime for its investments in Abkhazia

JAMnews

Sukhum

Russia’s investments in Abkhazia

Moscow is demanding a highly favorable regime for its investments in Abkhazia, including tax and customs duty exemptions, as well as preferential rights for access to infrastructure and utilities.

The draft Russian-Abkhazian agreement on Russian companies’ investment projects in Abkhazia has been submitted to the Abkhazian parliament for approval. This agreement is likely to spark significant public debate, as the proposed benefits are expected to be unpopular with the public.

Specifically, the agreement outlines the following:

Investment projects amounting to 2 billion rubles (around $22 million) will be exempt from customs duties on the import of construction materials and equipment intended for the project’s implementation.
Investors will be exempt from property tax and corporate income tax for eight years from the date the capital construction projects are put into operation.
Investors will have the right to claim value-added tax refunds from the Abkhazian budget for the entire duration of the preferential regime if, by the end of the tax period, the amount of tax deductions exceeds the total tax amount calculated for taxable transactions.
The Abkhazian government must ensure that investors covered by this agreement and listed in a separate registry are given preferential rights over other legal entities for access to capacities and connections to infrastructure and utilities necessary for the project’s implementation.
Investors have the right to obtain quotas for foreign workers and distribute them independently.
Investors will be allowed to secure loans with investment objects as collateral. When ownership of an investment object transfers from one legal entity to another, the rights to use the land occupied by these objects will also transfer.

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If the Abkhazian side fails to fulfill any of the aforementioned points, the investor has the right to demand compensation from the Abkhazian government for the actual damages incurred.

This week, the Abkhazian parliament will hold committee hearings on the draft agreement. Some opposition deputies believe that president Aslan Bzhania, who is advocating for this project, is rushing the parliament to resolve the issue before August 1, when the parliamentary recess begins.

Russia’s investments in Abkhazia