Policy: Foreign Investment

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

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.

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.

In 2016, the number of projects on Russian territory into which foreign investors put their money
increased to 205 - the highest indicator for Russia since research began in 2005, according to the
compilers of the ranking.

Germany and the U.S. hold the top spots in terms of the number of their investment projects in Russia.
"The number of German projects has risen by almost 20 percent - from 36 to 43. For the U.S. 2016 was a
record year: The number of projects by American companies went up by 31 percent to reach 38 - which
is the highest level in the whole period since the research began," notes Alexander Ivlev, Ernst & Young
country managing partner for Russia.

Since the situation has gradually started to return to normal, investors are turning their attention to
Russia again. In particular, a large volume of investment is coming from Germany and France,
Nigmatullin notes. China and the Arab countries, however, are not yet in a hurry to invest large amounts
of their own money, the analyst adds.