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The Minister of Economy of Abkhazia commented on the controversial points of the agreement with Russia

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The Minister of Economy of Abkhazia commented on the controversial points of the agreement with Russia

Deputy Prime Minister and Minister of Economy of Abkhazia Kristina Ozgan commented on the agreement signed between the government of Russia and the government of Abkhazia “on the implementation of investment projects by Russian legal entities in the territory of the Republic of Abkhazia” and the progress of amendments thereto.

Ozgan recalled that the draft of the agreement was agreed with the Russian side and the final version was determined in 2023. Accordingly, the governments of Russia and Abkhazia gave orders to approve the text of the agreement. In early 2024, parliament adopted a law that provides for the executive branch to inform members of parliament about draft international treaties prepared for signature.

In June this year, the project was sent to the People’s Assembly, the parliament of Abkhazia. At the end of July, modifications to the intergovernmental agreement were presented.

“To resolve the issues identified by the deputies, the Ministry of Economy sent a detailed comment to each amendment in order to eliminate discrepancies that arose during the discussion. The main and fundamental comments concerned the benefits of the value-added tax and the definition of areas of activity in the tourism industry, which were resolved based on the results of negotiations with the Russian side. As a result, the benefit for the full refund of VAT paid, initially provided for in the draft intergovernmental agreement, in the final version was determined at 50% of the current rate of value added tax. The expression “other accommodation facilities” in the context of the tourism industry is also excluded from the text of the agreement. — Ozgan clarifies.

On the other hand, the Minister of Economy focused on those issues that arouse the greatest interest in society.

“These are issues related to land, legal use of land, the right to pledge investment objects, issues of creation and registration of a branch of a Russian bank with state participation in the territory of Abkhazia. All issues related to the use of land and pledging of investment objects, provided as rights for investors who will implement investment projects on the territory of the Republic of Abkhazia, all rules included in this agreement are absolutely identical to those rules of civil legislation and agrarian legislation of the republic. The procedure for providing land for use to such legal entities is not provided for any more than that currently operating within the framework of agrarian legislation. There are relevant articles of the Civil Code that provide for the right to provide property as collateral, and the investment objects will certainly be property. Therefore, this part of the agreement does not contain anything contrary to the current legislation of the Republic of Abkhazia.” – said the minister.

In addition, Ozgan noted that the issue of registration of a branch of a Russian bank with state participation in the territory of the Republic of Abkhazia arises from the current law “On Banks and Banking Activities”, which provides for the creation of a subsidiary of a bank foreigner on the territory of the Republic of Abkhazia.

“In the agreement we have provided for a limitation of this rule, which does not provide for the registration of a subsidiary, but of a branch with a limited set of functions that will be determined by the National Bank of the Republic of Abkhazia.” – pointed out the minister.

Issues related to the benefits of value added tax, according to her, are not an innovation, which is provided for in the agreement exclusively for Russian legal entities implementing investment projects in Abkhazia. A similar rule is contained in the law on special economic zones, which stipulates that within a special economic zone, projects in various fields of activity can be implemented without restrictions, and such a project also provides benefits in the form of full exemption from value added tax . and import customs duties 24.5 years from the start date of the activity.

The agreement provides for the reimbursement of the value added tax actually paid after the put into operation of the investment object in the amount of 50 percent of the established VAT rate.

As reported EADailyThe governments of Abkhazia and Russia signed an agreement allowing Russian companies to implement investment projects in Abkhazia on October 30. This has drawn harsh criticism from the Abkhaz opposition, which claims the authorities are squandering the republic’s assets and sovereignty.

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