19 July 2024

Russian Export Support Measures: Subsidies and State Aid

July 19, 2024

BRACE Law Firm ©

The system of current state measures is oriented toward promoting the expansion of export volumes through targeted support for foreign trade participants under the difficult conditions of confronting Western sanctions and economic restrictions.

Support measures are implemented within the framework of the National Project International Cooperation and Export. [1] It is expected to be implemented during the period from October 2018 until the end of December 2024.

The measures considered in this article involve significant assistance to Russian exporters; however, obtaining support requires the provision of a significant number of documents. Furthermore, specific obligations for exporters are provided for individual support measures.

What Are the Conditions and Order for Providing Export Subsidies?

Subsidies to legal entities (except for subsidies to state (municipal) institutions), individual entrepreneurs, as well as individuals who are producers of goods, works, and services, are provided on a gratuitous and non-refundable basis for the purpose of compensating for lost income and (or) financial security (compensation) for costs in connection with the production (sale) of goods (with the exception of tobacco and alcohol products, except for alcohol products intended for export deliveries, grapes, and wine products produced from said grapes: wines, sparkling wines (champagne), liqueur wines with a protected geographical indication, with a protected designation of origin (special wines), and wine materials, unless otherwise provided by regulatory legal acts of the Russian Government), the performance of works, and the provision of services.[2]

The procedure for provision is the same for all types of subsidies we are considering, taking into account the specific features of one subsidy or another.

The subsidies we are considering are provided upon compliance by the Russian exporting organization with the following general conditions:

the organization is a legal entity registered in the territory of the Russian Federation;
the organization has no unfulfilled obligation to pay taxes, fees, insurance premiums, penalties, fines, and interest payable in accordance with the legislation of the Russian Federation on taxes and fees;
the organization has no overdue debt regarding the return of subsidies or budget investments to the federal budget provided, including in accordance with other legal acts, as well as other overdue (unsettled) debt on monetary obligations to the Russian Federation;
the organization is not in the process of reorganization (with the exception of reorganization in the form of an acquisition of another legal entity by the organization that is a selection participant), liquidation, bankruptcy proceedings have not been initiated against it, and the organization's activities have not been suspended in the manner provided for by the legislation of the Russian Federation;
the registry of disqualified persons contains no information about a disqualified head, members of a collegial executive body, a person performing the functions of a sole executive body, or the chief accountant of the organization (if any);
the organization is not a foreign legal entity, including one whose place of registration is a state or territory included in the list approved by the Ministry of Finance of Russia of states and territories used for intermediate (offshore) ownership of assets in Russia,[3] as well as a Russian legal entity in the authorized (share) capital of which the share of direct or indirect (through third parties) participation of offshore companies in the aggregate exceeds 25 percent;
the organization does not receive funds from the federal budget based on other regulatory legal acts of the Russian Federation for the purpose of stimulating the production and supply of competitive industrial products;
the organization is not in the list of organizations and individuals for whom there is information about their involvement in extremist activities or terrorism, or in lists of organizations and individuals associated with terrorist organizations and terrorists or the proliferation of weapons of mass destruction compiled within the framework of the implementation of powers provided for by Chapter VII of the UN Charter by the UN Security Council or bodies specially created by decisions of the UN Security Council.

Special conditions may be established when compensating for certain costs.

It should be noted that the subsidy is provided within the limits of the budgetary obligations communicated in the established manner to the relevant federal executive body authorized to provide the subsidy.

For the purpose of compensating for the organization's costs incurred in foreign currency, the size of the subsidy is determined in Russian rubles at the ruble exchange rate against the relevant foreign currency established by the Bank of Russia on the date the organization made the payment of costs in accordance with the payment order.

The subsidy is provided on the basis of an agreement between the Joint-Stock Company Russian Export Center (the "REC"), the organization, and the Federal executive body on the provision of the subsidy. The agreement and supplemental agreements, including those on the termination of the agreement, are formed as an electronic document and signed with enhanced qualified electronic signatures of persons entitled to act on behalf of each of the parties to the agreement. The agreement provides for, among other things:

the size of the subsidy;
the value of the result of providing the subsidy, which is ensuring the volume of industrial product supplies;
the organization's obligation to return the subsidy to the federal budget revenue in the event that audits conducted by the relevant federal executive body or state financial control authorities establish a violation of the conditions and procedure for providing the subsidy, the presentation of false information, as well as in the event of the actual failure to achieve the value of the result of providing the subsidy;
the organization's consent to the relevant body conducting audits of compliance with the conditions and procedure for providing the subsidy, including regarding the achievement of the result of providing the subsidy, as well as audits by state financial control authorities of compliance with the procedure and conditions for providing the subsidy;
cases and conditions for terminating the agreement on the provision of the subsidy;
the organization's obligation to submit reports on the achievement of the value of the result of providing the subsidy;
conditions on coordinating new terms of the agreement, as well as on terminating the agreement if agreement on new terms of the agreement is not reached in the event of a reduction in budgetary obligation limits leading to the impossibility of providing the subsidy in the amount determined in the agreement.

An announcement about the conduct of the selection is placed on the official website of the relevant federal executive body, indicating:

the dates for conducting the selection;
the date of the beginning of submission or the end of the acceptance of applications for participation in the selection of selection participants, which cannot be earlier than the 10th calendar day following the day the announcement about conducting the selection is placed;
the name, location, postal address, and email address of the REC as the organization conducting the selection;
the result of providing the subsidy;
the domain name and (or) website page indicators on the Internet where the selection is ensured;
the conditions for selection participants and the list of documents submitted by selection participants to confirm their compliance with the indicated requirements;
the procedure for submitting applications for participation in the selection and requirements for the form and content of applications for participation in the selection;
the procedure for withdrawing applications and returning applications, determining, among other things, the grounds for returning applications, and the procedure for making changes to the applications of selection participants;
the rules for reviewing applications;
the procedure for providing selection participants with clarifications of the provisions of the announcement about conducting the selection, and the date of the beginning and end of the term for such provision;
the period during which the selection winner must sign the agreement;
the conditions for recognizing the selection winner as having evaded the conclusion of the agreement.

Upon receipt of an application for participation in the selection and documents (information), the REC ensures their registration in the order of their receipt. Next, the REC ensures the sending of requests to federal executive bodies for the submission of documents (information) to obtain, for each organization that submitted an application for participation in the selection, information necessary to confirm the organization's compliance with the conditions for providing the subsidy and to perform the calculation of the subsidy size. After receiving the requested documents (information) from the federal executive bodies, the REC performs the following actions:

conducts a verification of the organization's compliance with the conditions for providing the subsidy, as well as the compliance of the application for participation in the selection with the requirements established in the announcement about conducting the selection;
performs the calculation of the subsidy size;
conducts a verification of the completeness and accuracy of the information contained in the application and the documents (information) attached to it submitted by the organization, and their compliance with the purpose, conditions, and procedure for providing the subsidy.

The REC rejects applications for participation in the selection in the following cases:

non-compliance by the organization with the conditions for providing the subsidy;
inconsistency of the application and the documents (information) attached to it submitted by the organization;
failure to submit (submission in an incomplete volume) of documents (information) by the organization;
the organization's failure to comply with the purpose, conditions, and procedure for providing one subsidy or another based on the results of the REC's verification of information received from federal executive bodies on the sent requests;
the inaccuracy of information presented by the organization, including information about the location and address of the legal entity;
the organization's submission of an application for participation in the selection after the established date;
the insufficiency of budgetary obligation limits based on the relevant notification received from the relevant federal executive body;
the existence of the organization's statement on the withdrawal of the application for participation in the selection.

Based on the results of the selection, the REC sends conclusions to the relevant federal executive body on the possibility of providing the subsidy and a draft registry of subsidy recipients.

In the event of receiving notification from the federal executive body on the adoption of a decision to refuse the provision of the subsidy indicating the reasons for refusal, the REC sends a notification to the organization in which it indicates the grounds for refusing to provide the subsidy. Upon receiving notification on the adoption of a decision to provide the subsidy and on the approval of the registry of subsidy recipients, the REC also sends a notification to the organization about the decision adopted.

The REC implements measures for the return of the subsidy in the event that state financial control authorities, the relevant federal executive body, and (or) the REC identify a violation by the organization of the conditions and procedure for providing the subsidy, as well as in the event of the actual failure to achieve the value of the result of providing the subsidy.

An organization may be refused the provision of the subsidy in the following cases:

establishing the fact of the inaccuracy of information in the documents (information) submitted by the organization;
the insufficiency of budgetary obligation limits;
the inconsistency of the application for participation in the selection and the documents (information) submitted by the organization with the requirements for applications established in the announcement about conducting the selection, or the failure to submit (submission in an incomplete volume) by the organization of the indicated documents;
recognizing the organization as having evaded the conclusion of the agreement.

The transfer of the subsidy is carried out as a lump sum to the organization's settlement account opened in an institution of the Central Bank of the Russian Federation or a credit organization within 10 business days from the day the agreement is concluded.

The organization shall, once for each agreement concluded in the reporting quarter, submit reports on the achievement of the value of the result of providing the subsidy no later than the 30th day of the month following the reporting quarter.

In the event of a violation by the organization of the conditions established during the provision of the subsidy, identified, among other things, by the facts of audits, including in the event of failure to achieve the values of the result of providing the subsidy, the subsidy funds in the volume of the identified violations, but not exceeding the volume of the received subsidy, are subject to return to the federal budget revenue within the terms established in the demand.

We note that information about selection participants, the results of the review of applications of selection participants, and the results of the selection, including about agreements concluded with selection participants, is information of limited access.

Subsidies for Product Transportation

Transportation costs are understood to mean costs for the transportation of industrial products carried out by a carrier, incurred directly by the organization that is a selection participant.[4] Industrial products are Russian products that comply with the requirements for confirming the country of origin and are included in the list of products for the purpose of implementing state support for organizations implementing corporate programs for increasing competitiveness, approved by the Ministry of Industry and Trade of the Russian Federation (the "Ministry of Industry and Trade"),[5] as well as assembly kits of products (with the exception of products relating to the sphere of activity of the Ministry of Energy of the Russian Federation and products for the purpose of supporting the production and sale of which the provision of exclusively investment financing is permitted).

The subsidy is provided on the condition that the organization, when carrying out the transportation of industrial products under supply contracts, incurred costs for the transportation of industrial products under agreements for the provision of services for the delivery of industrial products with a carrier, and the transportation of industrial products was carried out from departure points located in the territory of the Russian Federation to final destination points.

For the purpose of providing the subsidy, the period for carrying out supplies is defined from July 1 of the year preceding the current fiscal year to June 30 of the current fiscal year for all branches of industry in the event the subsidy is provided starting from 2023, with the exception of a series of codes of the Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union (the "TN VED EAEU") relating to timber[6] and organizations of the timber industry complex.

In the presence in one application for participation in the selection of supplies of industrial products relating to different supply periods, the REC may reject the application for the provision of the subsidy.

The organization shall, no later than August 20 of the current fiscal year, submit an application to the REC for participation in the selection in electronic form or on a paper medium with the submission of the following documents (information) confirming the organization's actually incurred costs and their compliance with the purpose:

bills (invoices) and (or) VAT invoices (universal transfer document) or certificates of completion of work (services rendered) and payment orders with a credit organization's note on the execution of payment, confirming actual costs for the transportation of industrial products by carriers;
a register of industrial product supplies, that is, a document containing information from primary accounting documents about actually carried out (completed) transportations of industrial products;
an extract from the register of shareholders (for joint-stock companies);
information on the list of trade and other organizations selling industrial products in the event that the organization that submitted the application for participation in the selection is not a party to the contract for the supply of industrial products to buyers (if any);
an application for registration in the state integrated information system for public finance management "Electronic Budget" according to the form established in the announcement about conducting the selection, in the event of the absence of registration in this information system. By sending the application for registration, the organization confirms the accuracy of the submitted documents (information).

We note that within the framework of one group, the supply of industrial products and the costs associated with it may be included in the registry of supplies in no more than one application for participation in the selection. In the event that there are products in a supply that do not relate to industrial products, as well as in the event that the supply includes industrial products not indicated in the application for participation in the selection, the amount of actual costs for transportation is reduced proportionally to the net weight of such products.

The value of the result of providing the subsidy is established in an amount no less than 9 times exceeding the volume of the provided subsidy.

In addition to industrial products, Russian exporters may compensate for part of the costs associated with the transportation of agricultural and food products.[7]

The purpose of providing the subsidy is to reduce the costs of Russian organizations during the transportation of products to ensure the food security of the Russian Federation, taking into account the economic and territorial accessibility of agro-industrial complex products.

Costs of Russian organizations are understood as costs for the transportation of products by a carrier, incurred by a Russian organization carrying out supplies of products under supply contracts.

Costs are compensated in relation to that agricultural and food products which is included in the list of product codes of the TN VED EAEU indicated in Decree of the Russian Government No. 1104 dated September 15, 2017. These are, for example, meat of bovine animals, fresh or chilled; cheeses and curd; birds' eggs, in shell, fresh, preserved, or cooked, etc.

The transportation of agricultural and food products must be carried out from departure points located in the territory of the Russian Federation to final destination points by road, rail, water transport, or several of the indicated types of transport.

To obtain a subsidy from a Russian organization for the compensation of part of the costs for the transportation of products by a carrier incurred when carrying out supplies in the 3rd and 4th quarters of the year preceding the current fiscal year, and in the 1st and 2nd quarters of the current fiscal year, a request for proposals (applications) sent by organizations for participation in the selection is conducted, based on their compliance with the selection criteria and the order of receipt of proposals (applications) for participation in the selection.

For participation in the selection, a Russian organization shall, no later than November 1 of the current fiscal year, submit an application in electronic form to the REC with the submission of the following documents (information) confirming actually incurred costs:

VAT invoices (universal transfer document) or certificates of completion of work (services rendered) and payment orders confirming actual costs for the transportation of products by carriers applying special tax regimes;
VAT invoices (universal transfer document) and payment orders confirming actual costs for the transportation of products by carriers applying the general taxation regime;
a registry of supplies;
an extract from the register of shareholders (for joint-stock companies).

We draw your attention to the fact that the number of applications that may be submitted by a Russian organization to the REC during the period of the selection is not limited.

The selection criteria are:

the costs of the Russian organization when carrying out the transportation of products under supply contracts, according to which the value of the products exceeds the size of the requested subsidy no less than 3 times;
the absence for the Russian organization during the 3 years preceding the date of submission of documents to the REC of an established unsettled fact of a violation by the Russian organization of the procedure and conditions for providing the subsidy, as well as the fact of submission by it of false documents;
the compliance of the Russian organization with the established requirements.

Subsidies to Russian organizations within the limits of budgetary obligations communicated in the established manner to the Ministry of Agriculture of the Russian Federation are provided to Russian organizations in the order of the receipt of applications at the REC.

Subsidy for the Purpose of Compensating for Part of the Costs for the Purpose of Creating New Competitive Industrial Products Associated with Conducting R&D and (or) Homologation of Existing Industrial Products for Foreign Markets

Another support measure is associated with the provision of subsidies to Russian organizations for the compensation of part of the costs for the purpose of creating new competitive industrial products associated with conducting R&D and (or) homologation of existing industrial products for foreign markets.[8]

New competitive industrial product is understood to mean product not previously produced by the organization or with new technical and (or) performance characteristics, created as a result of conducting research and development in accordance with the requirements of foreign markets.

Homologation of existing industrial products for foreign markets means conducting research and development for the purpose of creating industrial products with new technical and (or) performance characteristics to ensure the compliance of existing industrial products with the requirements of foreign markets, that is, mandatory requirements and (or) customer requirements (in the event of the existence of the indicated requirements in the product supply contract) for new competitive industrial products presented in the foreign markets to which the products were supplied or their supply is planned.[9]

The subsidy is provided to the organization for the compensation of part of the costs actually incurred by the organization no earlier than July 1 of the year preceding the year of the conclusion of the agreement on the provision of the subsidy, associated with one of the following types of activity:

conducting research and development for the purpose of creating new competitive industrial products;
homologation of existing industrial products for foreign markets.

In addition to the general requirements considered earlier, an organization claiming to receive a subsidy for the compensation of part of the costs associated with the homologation of existing industrial products for foreign markets must possess the rights to the design and (or) technical documentation for the produced products on the basis of a license agreement or other legal basis.

The subsidy is provided to the organization for the compensation of one or several of the following types of costs:

labor costs of employees directly engaged in performing R&D or homologation of existing industrial products for foreign markets, as well as costs for deductions for insurance premiums for mandatory medical insurance, deductions for insurance premiums for mandatory social insurance for the event of temporary incapacity for work and in connection with maternity, and deductions for insurance premiums for mandatory pension insurance accrued on the indicated labor costs. The size of subsidized costs for one employee cannot exceed more than 5 times the average monthly labor payment level in the Russian Federation for the types of economic activity "Scientific research and development" and "Other professional scientific and technical activity," calculated according to information from statistics bodies for the previous year indicated on the official website of the Federal State Statistics Service;
material costs directly associated with performing R&D or the homologation of existing industrial products for foreign markets, including costs for preparing a laboratory and research complex, the purchase of research, testing, control and measurement, and auxiliary equipment, the purchase of component parts, raw materials, and materials, and the production of experimental models, mock-ups, and stands;
labor costs of employees included in the administrative and management personnel of the organization (in an amount not exceeding the level of the average salary in the subject of the Russian Federation in which the project is implemented), as well as costs for mandatory pension insurance, mandatory social insurance for the event of temporary incapacity for work and in connection with maternity, mandatory medical insurance, and mandatory insurance against accidents at work and occupational diseases accrued on the indicated amounts of labor costs for said employees;
costs for the payment of work (services) of organizations involved for performing R&D or homologation of existing industrial products for foreign markets;
costs associated with the lease of buildings, structures, technological equipment, and tooling necessary for performing R&D or homologation of existing industrial products for foreign markets;
costs for the maintenance and operation of research equipment, installations and structures, and other fixed asset objects directly associated with performing R&D or homologation of existing industrial products for foreign markets;
costs for the payment of state fees for the registration in the RF of intellectual property results obtained within the framework of performing R&D or homologation of existing industrial products for foreign markets;
costs for the production of an experimental batch of products, its testing, as well as its trial;
costs for the acquisition of comparison products.

The subsidy recipient organization is determined by conducting a competition based on the best conditions for achieving results for the purpose of achieving which the subsidy is provided. The competition is conducted annually in the presence of budgetary obligation limits.

For the purpose of conducting the competition, the Ministry of Industry and Trade, no later than February 1 of the current fiscal year, places an announcement about conducting the competition in the state industrial information system indicating the necessary information.

In addition to information about the applicant organization, information is also provided about the name of the product that will be created and (or) changed, the project implementation period in accordance with the action plan, the volume of sales of new competitive industrial products in value terms, as well as the size of the requested subsidy and obligations for achieving the values of the result of providing the subsidy and the indicators necessary for achieving the result of providing the subsidy, as well as:

the calculation of the size of the requested subsidy;
the action plan;
information about R&D carried out within the framework of the project, indicating the requirements of foreign markets and the new competitive industrial products produced or planned for production based on the results of the R&D conducted.

Applications may be rejected, among other things, in the following cases:

the planned export revenue from the sale of products in relation to which the organization requested a subsidy for conducting R&D does not exceed the amount of the received subsidy by 4 times in value terms;
the planned export revenue from the sale of products in relation to which the organization requested a subsidy for the homologation of existing industrial products for foreign markets does not exceed the amount of the received subsidy by 4 times in value terms.

The ranking of applications is carried out according to the ranking methodology. Organizations are included in the draft registry of subsidy recipients in accordance with the ranking methodology in descending order until state support volumes by industry branches are exhausted.

Based on the results of the review of applications, a decision is made to provide the subsidy or to refuse to provide the subsidy.

If the reason for the refusal was the organization's failure to fulfill the action plan regarding the achievement of the control events of the next stage of the project implementation established by the action plan, and (or) the indicators necessary to achieve the result of providing the subsidy, then for the elimination of the reasons, the following terms are established by the Ministry of Industry and Trade:

9 months — in relation to the stages of project implementation established by the action plan associated with conducting research and development, concluding with the creation of new competitive industrial products for foreign markets;
6 months — in relation to the stages of project implementation established by the action plan associated with the homologation of existing industrial products for foreign markets.

The indicated terms are determined from the day the organization submits the report on the progress of the implementation of the action plan, based on the verification results of which the failure to fulfill the action plan was identified. Upon non-compliance with the indicated terms, the agreement on the provision of the subsidy is terminated unilaterally by the Ministry of Industry and Trade of Russia with a demand to the organization to return the amount of the subsidy provided to the organization and to pay a fine for the failure to achieve the indicators necessary for achieving the result of providing the subsidy in the size of 1/300 of the key rate established by the Bank of Russia on the date of the adoption of the decision on the payment of the fine for each day of the use of the returned funds from the date of their receipt until the date of the transfer to the federal budget revenue.

Compensation for Costs for Certification of Compliance of Russian Industrial Products with the Requirements of Foreign Markets

The next support measure that we will consider is a subsidy for the compensation of costs for the certification of compliance of Russian industrial products with the requirements of foreign markets.[10]

Such products are the products of the pharmaceutical and medical industry included in the list of products for the purpose of implementing state support for organizations implementing corporate programs for increasing competitiveness, including medicinal products, with the exception of products relating to the sphere of activity of the Ministry of Energy of the Russian Federation and products for the purpose of supporting the production and sale of which the provision of exclusively investment financing is permitted.

Medicinal products — substances or combinations thereof coming into contact with the human body, penetrating into the organs and tissues of the human body, used for the prevention, diagnosis (with the exception of substances or combinations thereof not contacting the human body), treatment of disease, rehabilitation, for the preservation, prevention, or interruption of pregnancy and obtained from the blood, blood plasma, organs, tissues of a human or animal body, plants, minerals by methods of synthesis or with the use of biological technologies. Medicinal products include pharmaceutical substances and medicinal preparations.

Clinical trial of a medicinal product — the study of the diagnostic, medicinal, preventive, pharmacological properties of a medicinal product in the process of its use in a human, including the processes of absorption, distribution, change, and elimination, by applying scientific evaluation methods for the purpose of obtaining evidence of the safety, quality, and efficacy of the medicinal product, data on undesirable reactions of the human body to the use of the medicinal product and on the effect of its interaction with other medicinal products and (or) food products.

The period for carrying out costs is:

no earlier than the year preceding the current fiscal year and no later than June 30 of the current fiscal year — in the event of compensation for costs in accordance with the payment order associated with product certification in foreign markets;
no earlier than 3 calendar years preceding the current fiscal year and no later than June 30 of the current fiscal year — in the event of compensation for costs in accordance with the payment order associated with the certification of medicinal products in foreign markets.

The subsidy is provided upon compliance by the organization with established requirements. Furthermore, the organization must have a certificate (certificates) of compliance active on the date of the submission of the application, obtained no earlier than July 1 of the year preceding the current fiscal year and no later than June 30 of the current fiscal year, the actual costs for obtaining which were carried out by the organization.

Certificate of compliance — a document obtained based on the results of product certification in foreign markets or the certification of medicinal products in foreign markets, issued by an authorized and (or) accredited (notified) body for conformity assessment or an authorized registration body.

Certification of medicinal products in foreign markets — a set of work (activities) aimed at the provision by authorized bodies of foreign states of a decision on the admission of Russian-produced medicinal products to circulation in a foreign market, including (but not limited to) clinical trials of medicinal products and (or) conducting inspections for compliance with the requirements of good manufacturing practice rules, the registration of medicinal products and (or) the prequalification of medicinal products by the World Health Organization necessary for the supply of medicinal products to foreign markets.

Product certification in foreign markets — a set of work (activities) carried out for the purpose of assessing the compliance of products, including registration and product compliance assessment procedures and (or) procedures for the manufacturer (supplier) of products for the purpose of free circulation, and (or) the production of products according to mandatory requirements and (or) customer requirements (in the event of the presence of the indicated requirements in the product supply contract) presented in foreign markets, with the exception of the certification of medicinal products in foreign markets.

The subsidy is provided to the organization for the compensation of the following types of costs (one or several) associated with product certification in foreign markets incurred by the organization during the cost implementation period:

costs for conducting testing of product samples in an accredited (notified) testing laboratory for compliance with mandatory requirements and (or) customer requirements (in the event of the existence of indicated requirements in the product supply contract) presented in foreign markets;
costs for conducting an inspection verification (audit, including recertification, certification) of product production by an authorized and (or) accredited (notified) body for conformity assessment or an authorized registration body;
costs for obtaining a certificate of compliance, including state fees and duties, and the translation of technical documentation into a foreign language.

The subsidy is provided to the organization for the compensation of the following types of costs (one or several) associated with the certification of medicinal products in foreign markets carried out by authorized bodies of foreign states incurred by the organization during the cost implementation period:

costs for the registration of a medicinal product, including costs for conducting analysis of medicinal product samples in accordance with the requirements of the country of registration; costs for conducting an inspection verification (pre-audit, audit, including recertification, certification) of the organization's production site by an authorized and (or) accredited (notified) body for conformity assessment or an authorized registration body for compliance with the requirements of the country of registration's good manufacturing practice; costs for obtaining a registration certificate or other document confirming the medicinal product's compliance with the requirements of the country of registration, including state fees and duties, and the translation of technical documentation into a foreign language; costs for the transportation, storage, and disposal of medicinal product samples for the analysis of medicinal product samples in a testing laboratory accredited (notified) in accordance with the country of registration's requirements;
costs for conducting clinical trials of a medicinal product in foreign markets, including costs for conducting clinical and preclinical trials (including studies of the safety, efficacy, and bioequivalence of the medicinal product), toxicological studies, studies of the pharmacological properties of the efficacy and safety of the medicinal product, post-registration studies of the therapeutic use of the medicinal product and analysis of biological samples of the study subjects, including the purchase of a comparison preparation, concomitant therapy preparations, as well as costs for obtaining authorization to conduct a clinical trial; costs for the payment of the services of contract research organizations, and (or) research centers, and (or) researchers for the pharmaceutical development of the medicinal product and support for clinical trials (recruitment and insurance of patients, monitoring of the clinical trial, compilation of a database, statistical processing of results and formulation of results, development of the design of the clinical trial and documents necessary for obtaining authorization to conduct the clinical trial); costs for the transportation of the investigated medicinal product, the comparison preparation, and the concomitant therapy preparations provided for by the clinical trial protocol, biological samples of the study subjects to the territory of the country in which the study is being conducted, and to each research center, as well as for their storage and disposal;
costs for conducting prequalification of a medicinal product by the World Health Organization, including: costs for the payment via contributions (fees) of the services of the World Health Organization or other organizations defined by the World Health Organization for the evaluation of medicinal products, the inspection of production sites directly associated with the prequalification of medicinal products; costs for the formation of a dossier on the medicinal product for the submission of an application to the World Health Organization in accordance with the medicinal product prequalification procedure.

For participation in the selection, the organization shall, no later than August 15 of the current fiscal year, submit an application to the center signed by the organization's head or a person authorized by them (with confirmation of the powers of indicated person), with the submission of required documents (information) confirming the organization's actually incurred costs and their compliance with the purposes of providing the subsidy.

The result of providing the subsidy is ensuring the number of certificates of compliance obtained by the organization, the costs for obtaining which are compensated at the expense of the subsidy.

Compensation for Part of the Costs Associated with the Registration in Foreign Markets of Intellectual Property Objects

This subsidy is provided to Russian producers — legal entities and individual entrepreneurs producing goods, services, works, and technologies that include intellectual property objects,[11] namely: inventions, utility models, industrial designs, trademarks, plant varieties, animal breeds, and designations of place of origin of goods and (or) geographical indications.

Subsidies are aimed at ensuring legal protection and security abroad of the results of intellectual activity and means of individualization included in the recipient's products, as well as at increasing the activity of patenting competitive domestic intellectual activity results and means of individualization abroad for the purpose of reducing the subsidy recipient's losses and protecting interests during product supplies to foreign markets.

The result of providing the subsidy is the number of intellectual property objects registered by subsidy recipients in foreign markets as of the end of the current fiscal year, that is, the receipt of security documents (patents, certificates) for intellectual property objects in foreign states on the basis of the Patent Cooperation Treaty signed in Washington on June 19, 1970, the Paris Convention for the Protection of Industrial Property dated March 20, 1883, the Madrid Agreement, the Protocol to the Madrid Agreement Concerning the International Registration of Marks concluded in Madrid on June 27, 1989, and the Geneva Act of the Hague Agreement.

Subsidies are provided for the purpose of compensating for part of the actual costs incurred by the subsidy recipient in the 1st–3rd quarters of the current year and the 4th quarter of the preceding year.

Subsidies are provided for the purpose of compensating for part of the actual costs (one or several) incurred by the subsidy recipient:

on the preparation, submission of an international application, and prosecution in relation to such an application;
on the payment of duties associated with the submission and review of an international application (compensated in the size of 100%);
on the preparation, submission of a national and (or) regional application (including applications for the registration of an exclusive right to a designation of place of origin of a good and (or) geographical indication), formulated in accordance with the regulatory legal acts of national patent offices, and prosecution in relation to it;
on the payment of duties provided for by the regulatory legal acts of national patent offices associated with the submission, review of applications, issuance of security documents (patents, certificates), and maintaining applications or the action of legal protection in force during the first 3 years (compensated in the size of 100%);
on the preparation, submission of an application for the international registration of a trademark in accordance with the Madrid Agreement and (or) the Protocol to the Madrid Agreement Concerning the International Registration of Marks concluded in Madrid on June 27, 1989, and prosecution in relation to such an application;
on the payment of duties associated with the international registration of a trademark in accordance with the Madrid Agreement, the Common Regulations under the Madrid Agreement Concerning the International Registration of Marks and the Protocol to that Agreement dated April 1, 2016, and the Administrative Instructions for the Application of the Madrid Agreement Concerning the International Registration of Marks and the Protocol to it dated January 1, 2008 (compensated in the size of 100%);
on the preparation, submission of an application for the international registration of an industrial design in accordance with the Geneva Act of the Hague Agreement and prosecution in relation to such an application;
on the payment of duties payable for obtaining the international registration of an industrial design in accordance with the Geneva Act of the Hague Agreement, the Common Regulations under the 1999 Act and the 1960 Act of the Hague Agreement dated January 1, 2019, and the Administrative Instructions for the Application of the Hague Agreement dated July 1, 2019 (compensated in the size of 100%).

The subsidy recipient's costs for paying for services for the preparation, submission of an application, and prosecution in relation to it are compensated in the volume of 70 percent of the costs actually incurred by the subsidy recipient, but no more than the limit values for subsidies. Thus, the limit value for an application submitted to the US national patent office is 325 thousand rubles, to the European Patent Office — 525 thousand rubles, and to the People's Republic of China — 200 thousand rubles.

In the application for the provision of the subsidy, the person wishing to receive it must indicate:

information from the applications for intellectual property objects received by the Federal Service for Intellectual Property for the purpose of compensating for part of actual costs; confirmation of the absence of encumbrances on the rights to the intellectual property object;
information about documents confirming costs associated with the registration in foreign markets of intellectual property objects;
the purposes of the legal protection of the proposed intellectual property object abroad (including the creation of one's own production abroad, the sale of goods in foreign markets, the sale of rights to technology by concluding a license agreement or a contract for the assignment of an exclusive right);
a description of the final product (technology), including its competitive advantages;
a description of the consumer of the final product (technology);
a description of target markets for product realization;
a description of the business model for bringing products to foreign markets;
an evaluation of the probable economic effect from bringing products into civil circulation abroad that will include the proposed intellectual property object.

The indicator necessary for achieving the results of providing the subsidy is the organization's implementation of product supplies that include the intellectual property objects for the registration of which the subsidy was provided, and (or) the provision of rights to use the indicated intellectual property objects in accordance with the application for participation in the selection during the 3 years from the date of receiving the first security document (patent, certificate) for an amount exceeding the size of the provided subsidy no less than 5 times for small and medium-sized business organizations and no less than 15 times for the remaining organizations.

Subsidies for the Purpose of Compensating for Part of the Costs Associated with the Creation and Ensuring the Functioning of a System of After-Sales Service of Products in Foreign States

This subsidy is provided for the purpose of compensating for part of the costs associated with the creation and ensuring the functioning of a system of after-sales service of products in foreign states.[12]

The subsidy is provided to Russian legal entities that are the product manufacturer or an affiliate. The product manufacturer is a legal entity carrying out the production of products in relation to which a conclusion on the confirmation of production of industrial products in the territory of the RF has been obtained (is planned to be obtained). An affiliate is a legal entity recognized as an affiliate of the product manufacturer in accordance with the antimonopoly legislation of the RF carrying out the sale of the manufacturer's products in foreign markets.

Furthermore, the following requirements are established for subsidy recipients:

the organization implements (plans to implement) a project — a set of interconnected activities implemented over a period not exceeding 6 calendar years, aimed at creating and ensuring the functioning of a system of after-sales service of products in foreign states;
in relation to products for the purpose of the promotion of which the project is implemented (planned), an active conclusion on the confirmation of production of products has been obtained, in accordance with which the RF is the country of origin;
for assembly kits of products, that is, several parts connected during manufacturing to each other in one overall structure, supplied for the final assembly of products — a certificate of origin of the good, in accordance with which the RF is the country of origin of the assembly kit of products. For assembly kits of products, the organization confirms the compliance of component parts indicated in the certificate of origin of the good with the assembly kit of products;
the provision to the operator (foreign consumers of Russian products) of a discount on the value of spare parts used during warranty or regulated (planned) product repair in the territories of foreign states, proportionally to the part of the indicated costs actually compensated at the expense of subsidy funds (in the presence of the indicated costs).

The subsidy is provided to the organization for the purpose of compensating for part of the following costs:

costs for the lease of premises used for ensuring after-sales service in the territories of foreign states;
costs incurred for the payment of lease payments under financial lease (leasing) contracts of equipment necessary for service via warranty or regulated (planned) repair;
transport (logistical) costs for the delivery of products and (or) spare parts from departure points located in the territory of the RF to operators, service centers, and warehouses in the territories of foreign states;
the value of spare parts for carrying out warranty or regulated (planned) product repair in the territories of foreign states;
costs for the training (retraining) of personnel engaged in the after-sales service system in the territories of foreign states.

Subsidies are provided to the organization for the reimbursement of part of the indicated costs actually incurred by the organization during a period not exceeding 36 months (including a period not exceeding 6 months before the day of the conclusion of the agreement on the provision of the subsidy during which the organization incurred the indicated costs).

For participation in the competition, organizations within the terms indicated in the announcement about conducting the competition submit an application for participation containing the following documents and information:

documents confirming compliance with requirements;
the project passport;
the project implementation schedule with the separation of costs associated with the creation and ensuring the functioning of the after-sales product service system in foreign states;
information on the existence of an agreement on the implementation of a corporate program for increasing competitiveness (if any);
information on the existence of a conclusion on the confirmation of production of products in the territory of the Russian Federation for the purpose of the promotion of which the project is implemented, or an obligation to obtain such a conclusion by the moment of the conclusion of the agreement on the provision of the subsidy;
a copy of the contract between the product manufacturer, the affiliate, and (or) the authorized organization on the performance of functions for the warranty or regulated (planned) repair of the manufacturer's products in foreign markets (in the event that the functions indicated in this point are not performed by the organization claiming the receipt of the subsidy). In the process of implementing the project, changing the authorized organization is prohibited, as is the reassignment of the rights of the authorized organization to perform functions for the warranty or regulated (planned) repair of the manufacturer's products in foreign markets to other persons.

For the purpose of confirming the incurred costs, the organization submits the following documents and information:

copies of contracts, certificates of acceptance and transfer of premises, and payment orders confirming the costs produced and their compensation to the authorized organization;
copies of contracts, certificates of acceptance and transfer, and payment orders confirming costs for the payment of lease payments under financial lease (leasing) contracts for equipment necessary for service via warranty or regulated (planned) repair;
copies of contracts, bills of lading, customs declarations, certificates of completion of work (services rendered), and payment orders confirming the costs incurred by the organization for performing work (rendering services) of transport (logistical) companies for the delivery of products from departure points located in the territory of the Russian Federation to operators, service centers, warehouses, and assembly lines in the territories of foreign states;
copies of certificates of completion of work (services rendered) and payment orders for warranty or regulated (planned) repair in foreign markets indicating the list of spare parts used and the serial number of the industrial product being repaired;
copies of customs declarations confirming the value of used spare parts necessary for warranty or regulated (planned) repair;
copies of documents confirming the provision to the operator of a discount on the value of spare parts used during warranty or regulated (planned) product repair in the territories of foreign states, proportionally to the part of the costs actually compensated at the expense of subsidy funds;
copies of contracts, certificates of completion of work (rendering services), and payment orders confirming the value of incurred costs for the training (retraining) of personnel engaged in the after-sales service system in the territories of foreign states, and (or) their compensation to the authorized organization;
copies of certificates and (or) certificates on passing the training (retraining) of personnel engaged in the after-sales service system in the territories of foreign states.

The indicators necessary for achieving the result of providing the subsidy are the increase in export revenue from the sale of products in relation to which the organization received a subsidy for creating and ensuring the functioning of an after-sales product service system in foreign states by an amount exceeding the size of the received subsidy no less than 10 times, as well as the number of implemented projects for creating and (or) functioning an after-sales service system.

Subsidy for the Purpose of Reimbursing Part of the Costs Associated with Participation in International Exhibition and Fair Events

This subsidy is provided for the purpose of reimbursing part of the costs associated with participation in international exhibition and fair events and is aimed at fulfilling tasks for improving the mechanisms for implementing agency-service support, including the promotion of high-tech, innovative, and other types of products to foreign markets.[13]

International exhibition and fair event is understood to mean an event conducted outside the RF with the participation of foreign legal entities and individuals at which the organization of individual exhibition stands for Russian participants without the organization of a national collective exposition is planned. Exhibition stand — a single complex of structural elements and (or) exhibits placed on an exhibition area (area for placing exhibition stands of Russian participants provided for the term of the preparation and conduct of the international exhibition and fair event) with the help of which the Russian participant achieves the goals of its participation in the international exhibition and fair event.

To obtain a subsidy, a Russian participant during participation in an international exhibition and fair event must have produced costs for the payment of the lease of the exhibition area (including equipped), necessary furniture and (or) equipment, and (or) for the payment of registration fees for the participant of the international exhibition and fair event.

International exhibition and fair events must be conducted in the year of application and (or) the year preceding it.

Furthermore, the international exhibition and fair events in which the Russian participant participated must not be included in the lists of international exhibition and fair events conducted at the expense of funds provided for the partial financial security of exhibitions and fairs conducted abroad at which Russian expositions are planned to be organized in accordance with the list annually approved by the Government of the Russian Federation, as well as those organized by the REC at the expense of subsidies allocated to it.

For participation in the selection, the Russian participant, within the terms established in the announcement about conducting the selection, submits an electronic application to the REC containing the composition of information approved by the REC based on the proposals of the Ministry of Industry and Trade, consent for the publication (placement) on the Internet of information about the Russian participant, about the application submitted by the Russian participant for participation in the selection, and other information about the Russian participant associated with the selection, with the attachment of the following documents (scan copies in electronic form):

documents confirming the Russian participant's powers to represent the interests of the product manufacturer (affiliate), signed by the head or authorized person (with the attachment of documents confirming the powers of the indicated person) of the manufacturer (in the event the Russian participant is an affiliate of the manufacturer or an authorized person);
a certificate of affiliation of the Russian participant and about the Russian participant's powers to represent the interests of the product manufacturer (affiliate) (in the event the Russian participant is an affiliate of the manufacturer or an authorized person);
contracts for the sale of products outside the territory of the Russian Federation concluded by the Russian participant (manufacturer — in the event the Russian participant is an affiliate of the manufacturer or an authorized person) in the period from the day of the beginning of the international exhibition and fair event until the day of the submission of the application to the REC for participation in the selection based on the results of participation in the international exhibition and fair event. The products that are the subject of such a contract must comply with the nomenclature of products (including exhibited) presented at the international exhibition and fair event. In the event the contract is concluded in a foreign language, the Russian participant attaches a translation into Russian certified in the established manner. No limitations on the number of such contracts have been established; only the period for concluding contracts is limited;
a photo report of the Russian participant about participation in the international exhibition and fair event, which must contain clear and contrasting high-quality photos of the exhibition stand from several angles and of the presented products, including those exhibited on the stand;
the calculation of the size of the subsidy;
documents confirming actually incurred costs by the Russian participant. In the event documents are formulated in a foreign language, the Russian participant attaches a translation into Russian certified in the established manner;
reporting on the achievement of the result of providing the subsidy and the indicator necessary for achieving the result of providing the subsidy, including about the results of the Russian participant's participation in international exhibition and fair events.

The indicator necessary for achieving the indicated result is the excess of the value volume of the concluded contracts over the amount of the requested subsidy no less than 9 times — for Russian participants that submitted applications for participation after January 1, 2023.

Achieving the indicator necessary for achieving the result of providing the subsidy is a condition for providing the subsidy. The subsidy recipient submits reporting on the achievement of the result of providing the subsidy and the indicators necessary for achieving the result of providing the subsidy as part of the documents submitted for participation in the selection.

In addition to the subsidies for cost compensation presented in this article, there are also other subsidies that may be provided from federal, regional, or local budgets.

The examples of export support measures we have considered, expressed in the provision of subsidies for cost compensation, have a complex, bureaucratized process of providing support measures and sufficiently rigid conditions for providing support, which may affect the effectiveness of export support measures.

In judicial practice, there are cases in which federal executive bodies apply to the court for the recovery of a provided subsidy. Thus, within the framework of Case No. A40-127838/2021, the Ministry of Industry and Trade demanded the return of 46 million rubles issued under a subsidy provision agreement, because the Federal Treasury identified a violation of the rules and conditions of the agreement by the defendant during an audit, namely a violation of the rules by the plaintiff: "the application for participation in the selection of the defendant, not complying with the requirements, was recognized as having passed selection for the right to receive a subsidy for the compensation of part of the costs for the production and realization of pilot batches of means of production to consumers, which led to the improper provision of the subsidy in the amount of 46 million rubles."[14] The indicated amount was recovered from the defendant in full by the court.

Furthermore, the violation by a legal entity, individual entrepreneur, or individual who are subsidy recipients of the conditions for their provision is an administrative offense and entails punishment under Article 15.15.5 of the Code of Administrative Offenses in the form of an administrative fine on individuals and officials in the amount of ten thousand to thirty thousand rubles; on legal entities — from 2 to 12 percent of the amount of the subsidy received. The non-target use of budget funds under Article 15.14 of the CAO RF entails the imposition of an administrative fine on officials in the amount of twenty thousand to fifty thousand rubles or disqualification for a term of one to three years; on legal entities — from 5 to 25 percent of the amount of funds received from the budget of the budget system of the Russian Federation used for a non-target purpose.

Moreover, risks of being brought to criminal liability are possible.

Therefore, when wishing to use financial support measures, we recommend carefully evaluating the possibility of fulfilling the conditions for providing one subsidy or another.

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References

[1] Passport of the national project (program) "International Cooperation and Export" (approved by the presidium of the Council under the President of Russia for Strategic Development and National Projects, protocol dated December 24, 2018, No. 16).

[2] Budget Code of the Russian Federation dated July 31, 1998, No. 145-FZ.

[3] Order of the Ministry of Finance of Russia dated May 26, 2022, No. 83n, On approval of the List of states and territories used for intermediate (offshore) ownership of assets in the Russian Federation.

[4] Decree of the Government of Russia dated July 28, 2022, No. 1347, On state support for Russian industrial organizations for the purpose of compensating for costs for the transportation of industrial products.

[5] Order of the Ministry of Industry and Trade of Russia dated December 15, 2022, No. 5253, On approval of the List of products for the purpose of implementing state support for organizations implementing corporate programs for increasing competitiveness.

[6] TN VED EAEU codes: 4403, 4407 11 940 5, 4407 11 990 5, 4407 12 920 5, 4407 12 990 5, 4407 13 000 4, 4407 14 000 4, 4407 19 970 5, 4407 91 900 5, 4407 92 000, 4407 95 910 5, 4407 95 990 5.

[7] Decree of the Government of Russia dated September 15, 2017, No. 1104, On the provision of subsidies from the federal budget to Russian organizations for the compensation of part of the costs for the transportation of agricultural and food products.

[8] Decree of the Government of Russia dated June 18, 2021, No. 931, On state support for Russian organizations for the compensation of part of the costs for the purpose of creating new competitive industrial products associated with conducting research and development and (or) homologation of existing industrial products for foreign markets, and the recognition as having lost force of decree of the Government of the Russian Federation dated July 8, 2020, No. 1007 and a separate provision of an act of the Government of the Russian Federation.

[9] Ibid.

[10] Decree of the Government of Russia dated April 30, 2021, No. 687, On state support for organizations for the compensation of costs for the certification of compliance of Russian industrial products with the requirements of foreign markets.

[11] Decree of the Government of Russia dated December 15, 2016, No. 1368 "On state support for Russian producers for the purpose of compensating for part of the costs associated with the registration in foreign markets of intellectual property objects."

[12] Decree of the Government of Russia dated June 11, 2021, No. 900, On state support for organizations for the purpose of compensating for part of the costs associated with the creation and ensuring the functioning of a system of after-sales service of products in foreign states.

[13] Decree of the Government of Russia dated December 28, 2020, No. 2316 "On state support for Russian organizations and individual entrepreneurs for the purpose of reimbursing part of the costs associated with participation in international exhibition and fair events."

[14] Resolution of the AS of the Moscow District dated April 18, 2022, in case No. A40-127838/2021.