Article 67. Procedure and Conditions of Granting Investment Tax Credit

1. An investment tax credit may be granted to an organisation if it must pay the appropriate tax provided one of the following applies:

1) such organisation conducts research, development, testing and evaluation works or modernizes its production facilities, including a modernization effort aimed at creating jobs for disabled persons or protection of the environment from industrial pollution;

2) such organisation is engaged in introducing new equipment or innovations, including the creation of new or improvement of existing technologies and the creation of new kinds of raw and other materials;

3) such organisation is fulfilling a very important order relating to the socio-economic development of a region or is rendering very important services to the population.

2. An investment tax credit is granted:

1) for reasons specified in subitem 1) of Item 1 of this Article, for the amount of the credit that is equal to 30 per cent of the value of the equipment acquired by the concerned organisation provided this equipment is used for purposes specified in this subitem;

2) for reasons specified in subitems 2) and 3) of Item 1 of this Article, for the amounts of credit that are determined by agreement between the proper authority and the concerned organisation.

3. Reasons entitling an organisation to an investment tax credit must be documented by such organisation.

4. An investment tax credit is granted to an organisation if such organisation files an appropriate petition; an agreement of due format is concluded to this effect between a respective authority and the organisation.

The format of an investment tax credit is prescribed by the executive authority that takes a decision to grant an investment tax credit.

5. A decision to grant or deny an organisation an investment tax credit is taken by a proper authority within one month of the receipt of such organisation's petition. An organisation's having one or several investment tax credit agreements may not be an obstacle to effecting another such agreement with this organisation for other reasons.

6. An investment tax credit agreement shall mention the order of reducing tax payments, the amount of the credit (and specify the tax covered by the granted investment tax credit), the duration of the agreement, the interest that accrues to the amount of the credit, the procedure for the repayment of the principal amount and interest accrued, documents relating to the property that is used as pledge or security, responsibility of parties.

An investment tax credit agreement shall contain provisions against the sale or transfer for possession, use or disposal, throughout the duration of the agreement, of equipment or other property the purchase of which causes this organisation's effecting such agreement; otherwise, the conditions of such sale (transfer) are laid down.

Interest charged on the amount of the credit may not be lower than 1/2 and higher than 3/4 of the refinancing rate of the Central Bank of the Russian Federation.

A copy of the agreement is filed by the organisation at the local tax authority within five days of the conclusion of such agreement.

7. A constituent member of the Russian Federation shall have the power to pass a law, and a local government shall have the power to pass a normative act, relevant to regional and local taxes, respectively, and establish other reasons and conditions for granting an investment tax credit, including the maturity of the investment tax credit and the interest rate applicable to the principal amount of the credit.

Article 68. Termination of Operation of Deferment, Payment by Instalments, Tax Credit or Investment Tax Credit

1. The operation of tax deferment, payment-by-instalments arrangement, tax credit or investment tax credit is terminated upon the expiration of the duration of appropriate decision or agreement or it may be terminated before the expiration of such period in cases prescribed by this article.

2. The operation of a tax deferment, payment-by-instalments arrangement, tax credit or investment tax credit terminates early if the taxpayer pays up the entire tax or fee amount due and appropriate interest before the expiration of the agreed-upon period.

3. The operation of a tax credit or investment tax credit may be terminated early by a court decision in case the person concerned violates the conditions of a tax deferment or payment-by-instalments arrangement, the operation of the tax deferment or payment-by-instalments arrangement may be terminated prior to the maturity date by decision of the authority that took the original decision to reschedule the period of repayment of a tax and fee early.

4. If the operation of a tax deferment or payment-by-instalments arrangement is terminated prior to the maturity date, the taxpayer shall, within 30 days of receipt of appropriate decision, pay up the entire amount of arrears plus the penalty for each day beginning on the day following the date of receipt of such decision through the date of full payment of such amount.

An outstanding amount of arrears is defined as a difference between the amount of arrears named in the decision to grant a deferment (payment- by-instalments arrangement) plus the interest calculated in accordance with the decision to grant a deferment (payment-by-instalments arrangement) for the period of operation of the deferment (payment-by-instalments arrangement) and the actually paid amounts and interest.

5. Notice that it has been decided to terminate a deferment or payment-by-instalments arrangement or to terminate a tax credit agreement or investment tax credit agreement is given by the appropriate authority to the taxpayer or to the payer of the due by registered mail within five business days of the passage of such decision. A notice of the repeal of the decision on the delay or the instalment plan shall be deemed to be received upon the expiry of six days after the date of sending a registered letter.

A copy of such decision is sent meeting the same deadlines to the local tax authority at the place where the taxpayer or obligated person is registered.

6. An authority's decision to terminate early a deferment or payment-by-instalments arrangement may be appealed by the taxpayer or the payer of the due at a court of law in a manner prescribed by the legislation of the Russian Federation.

7. The operation of a tax loan agreement or an investment tax credit agreement may be terminated prior to the maturity date as agreed upon by the parties or by a court decision.

8. If throughout the period of duration of a tax credit agreement or an investment tax credit agreement the organisation that enters into such agreement fails to comply with the contractual conditions of sale or transfer for possession, use or disposal of equipment or other property the purchase of which caused the conclusion of such agreement, such agreement shall be terminated by court decision. If so, the organisation shall, within 30 days of the receipt of such decision, pay all outstanding tax amounts that have not yet been paid under the agreement, plus appropriate penalties and interest on outstanding tax amounts accruing every day while the investment tax credit agreement is in operation based on the refinancing rate of the Central Bank of the Russian Federation in effect during the period from the conclusion to the termination of such agreement.

9. If an organisation that is granted an investment tax credit for reasons stated in subitem 3), Item 1, Article 67 of this Code, is in breach of its obligations the investment tax credit is contingent upon, such agreement shall be terminated early by a decision of an arbitration court. If so, during an agreed-upon period but in any case within three months of the date of termination of the agreement, the organisation shall pay up the entire amount of outstanding tax and interest on this amount that accrues every day while the agreement is effective based on a rate equal to the refinancing rate of the Central Bank of the Russian Federation.