Tax incentives for investment projects implementation

Cruise port in Sevastopol:opportunities for the city

Алексей Глебов

Today, one of the most scale and attractive investment projects in Sevastopol is to strengthen the infrastructure of Sevastopol Commercial Seaport in order to take at least two ocean liners (2,500 people on board) daily. It"s in the planning stage that cruisers will call at Sevastopol 4 days per week for 4-5 months (cruise season) that will provide the arrival of approximately 500 thousand tourists annually.
The regular rate of touching ship at a port is about $ 5 per person. It means that Sevastopol Commercial Seaport will receive around $ 2.5 million proceeding. Moreover according to experts opinion every seafarer spends $ 50 or so on food, souvenirs and entertainment (for the little-known port of destination).
As a result, with a strong indication we can predict the total tax deductions of about $ 4.5 million, but taking into account the multiplier effect, which will provide even greater infusion into the economy of the city.
In addition Royal Caribbean offers not only development of the cruise port, but also construction of 4- Star hotel in Sevastopol Commercial Seaport with 200 rooms, and special-purpose commercial areas. It"s expected that the gross revenue from related activities will be at a rate of $ 8 million annually.
Consequently, strengthening the infrastructure of Sevastopol Commercial Seaport allow the Sevastopol city to reach a higher level of socio-economic development due to the general flow of money into the economy of the city, including increased revenues to the local budget.
Nowadays, the problem of development Sevastopol as a cruise port requires a decision on the engaging of the cruise operator, who will help the city to attract tourist flows, accepting foreign liners. In terms of this question, the most important priorities for the Sevastopol are the following conditions: first of all, the cruise operator has to be large, established company, the one that has long-term experience and extensive network of cruise tours, where Sevastopol will be included as one of the points destination. Secondly, a Company with proper experience in the cruise field has all the necessary technologies of doing business in such industry, like certain "know-how" and all the rest that is claimed for the successful implementation of the cruise port project or base cruise port on the base of Sevastopol berthing capacity.
Up to this date, official negotiations between the Sevastopol authorities and representatives of the second-largest cruise holding Royal Caribbean International were conducted.
According to Royal Caribbean"s research it is necessary to raise investment in the volume of 20 million euro for the construction of a terminal capable of receiving ocean liners and about 40 million euro to invest in the development of related infrastructure (hotel and commercial area).Thus, the total investment required for project implementation, stay at 60 million euro level. Taking into consideration format of the infrastructure projects and long payback period the best bet will be to provide additional preferences in order to attraction private capital. The suggestions made by Royal Caribbean about providing incentives for the implementation of the investment project can be used as a basis.
1) Zero rates of customs duties on equipment and materials imported for the construction of the project.
2) Zero tax rate on income of foreign managers and specialists, involved into the project.
3) Zero rate of income tax for the project during 10 years.
4) Zero tax on dividends or capital export for the project.
At the same time, providing such benefits and preferences are not within the sphere of local authorities and a decision about their provision can be made only by Cabinet of Ministers of Ukraine.