The Regulatory Framework for Government Investment Support

The regulatory framework for supporting investment activity is structured as a multi-level system. The basic contour of legal regulation of investment policy includes the Budget Code, the Tax Code, the law on investment activity¹, the law on protection and promotion of capital investments, as well as regional regulatory legal acts governing investment policy.

One of the key areas of state regulation of investment processes is their regulatory and legal support. Regulatory and legal support includes the development of legislative acts regulating the procedure for carrying out investment activity, protecting investors' rights, public-private partnership mechanisms, special business regimes, and special financial and investment mechanisms for business. Analysis of legislative and regulatory acts on the application of budgetary support for investment activity in the entrepreneurial sector has shown that in recent years the state has been actively improving mechanisms of legal stability for investors and implementing digital platforms for supporting investment projects.

Subsidies and grants as a basic instrument of budgetary investment stimulus

Subsidies to legal entities and individual entrepreneurs in budget law are defined as gratuitous and non-repayable funds provided to compensate for lost revenues and (or) financial support (reimbursement) of costs in the production/sale of goods, works, and services². Budgetary support for business through subsidies is oriented not toward state participation in capital, but toward compensation/co-financing of costs and reducing the expenses of achieving socially significant goals (innovation, import substitution, infrastructure, employment).

At the law enforcement level, two procedural documents of the Government of the Russian Federation are of particular importance. First, Resolution of the Government of the Russian Federation No. 1780 of October 25, 2023 "On approval of the rules for providing subsidies, including grants in the form of subsidies, from the budgets of the budget system of the Russian Federation to legal entities, individual entrepreneurs, and individuals," which establishes the rules for providing subsidies from budgets of the budget system and creates a framework for the content of agreements and evaluation of results. Second, Resolution of the Government of the Russian Federation No. 1781 of October 25, 2023 "On approval of the rules for selecting recipients of subsidies, including grants in the form of subsidies, provided from the budgets of the budget system of the Russian Federation to legal entities, individual entrepreneurs, as well as individuals – producers of goods, works, and services," which establishes universal requirements for selecting subsidy recipients (including grants in the form of subsidies) and establishes a standardized model for admitting participants to procedures, including verification of compliance with mandatory conditions (including financial discipline). These resolutions, on the one hand, specify the provisions of Article 78 of the Budget Code, and on the other hand, serve as the basis for adopting regulatory legal acts that develop legislative norms for budgetary support of investment activity.

To demonstrate the development of legislation on budgetary support for investment activity, we identify two groups of such support:

1. direct subsidies;
2. preferential loans and leasing (preferential funding, compensation for lost revenues).

Regulatory legal acts governing the provision of budget support in the form of direct subsidies:

• Decision on the procedure for granting subsidy No. 25-67553-01903-R "Subsidies to Russian organizations for financial support of costs associated with the development and implementation of Russian software for producers of capital goods";
• Decision on the procedure for granting subsidy No. 25-67416-01961-R "Subsidies to Russian organizations for reimbursement of costs associated with certification of materials and (or) additive equipment of Russian production";
• Decision on the procedure for granting subsidy No. 25-60987-01963-R "Subsidies to Russian manufacturing organizations for reimbursement of costs associated with production robotization".

Regulatory legal acts governing the provision of the second group of support:

• Decision on the procedure for granting subsidy No. 25-67414-01909-R "Subsidies to Russian credit institutions for reimbursement of lost income associated with providing loans at preferential interest rates to Russian organizations for the purchase of industrial robotics";
• Decision on the procedure for granting subsidy No. 25-62196-01907-R "Subsidy to the joint-stock company 'Russian Bank for Small and Medium-Sized Business Support' for reimbursement of lost income associated with providing loans at preferential interest rates in 2025 - 2028 to small and medium-sized enterprises in the machine tool industry";
• Decision on the procedure for granting subsidy No. 25-60302-02036-R "State support for Russian credit institutions and specialized financial companies to reimburse their lost income on loans issued to small and medium-sized enterprises, as well as individuals applying the special tax regime 'Tax on Professional Income,' at a preferential rate";
• Decision on the procedure for granting subsidy No. 25-68951-02098-R "Subsidies to Russian credit institutions for reimbursement of their lost income on loans issued in 2023 - 2026 to small and medium-sized enterprises in the territories of the Donetsk People's Republic, Luhansk People's Republic, Zaporizhzhia region, Kherson region";
• Decision on the procedure for granting subsidy No. 25-62194-01832-R "Subsidy to the joint-stock company 'Russian Bank for Small and Medium-Sized Business Support' for reimbursement of its lost income on loans provided in 2022 - 2028 to high-tech, innovative small and medium-sized enterprises and small technology companies at a preferential rate";
• Program for Stimulating Lending to Small and Medium-Sized Enterprises, approved by decision of the Board of Directors of JSC "SME Corporation" on March 15, 2022, protocol No. 131;
• Decision on the procedure for granting subsidy No. 25-67554-01915-R "Subsidies to Russian credit institutions for reimbursement of lost income associated with providing loans at preferential interest rates to customers of foundry and (or) heat treatment equipment when implementing investment projects with the involvement of Russian engineering companies";
• Order of the Ministry of Industry and Trade of the Russian Federation No. 4576 dated November 19, 2021 "On approval of the procedure for determining the volume and conditions for providing subsidies to the federal state autonomous institution 'Russian Foundation for Technological Development' for the purposes of implementing projects to create serial production of components and assemblies for wheeled vehicles and specialized equipment";
• Order of the Ministry of Industry and Trade of the Russian Federation No. 189 dated March 14, 2016 "On approval of the procedure for determining the volume and conditions for providing subsidies to the federal state autonomous institution 'Russian Foundation for Technological Development' for the purposes of implementing projects to create serial production of machine tool products";
• Decision on the procedure for providing subsidy No. 24-64132-01596-P "Subsidies to Russian credit institutions and the state development corporation VEB.RF to compensate for lost income on loans provided to Russian industrial organizations for the purposes of implementing investment projects aimed at producing priority products at a preferential interest rate";
• Decision on the procedure for providing subsidy No. 23-60109-00982-P "Subsidies to Russian credit institutions to compensate for lost income on loans issued to Russian organizations and (or) individual entrepreneurs for the acquisition, construction, modernization, reconstruction of real estate properties for the purpose of conducting activities in the industrial sector";
• Decision on the procedure for providing subsidy No. 25-67415-01910-P "Subsidies to Russian leasing organizations to compensate for lost income related to leasing industrial robotics to Russian organizations."

On one hand, we can certainly speak about the development of legislation regulating budgetary support for investment activity. We can also agree with the authors that "an indisputable achievement of Russian legislation is that no less than 90% of total industrial subsidies are distributed on a competitive basis according to transparent rules³." However, questions remain regarding further improvement of procedures for providing budgetary support and eliminating such extensive duplication in regulatory legal acts, as well as addressing gaps.

From the perspective of an entrepreneur's investment behavior, subsidies can be conditionally divided into four groups by economic function, although legally they all fall under the general framework of subsidies/grants in the form of subsidies:

1. capital subsidies – partial compensation of capital expenditures (equipment, construction and installation work, technological modernization);
2. interest subsidies – compensation for lost income to financial institutions on preferential loans, which reduces the cost of borrowed capital for the investor;
3. innovation and technology subsidies (R&D, technology implementation, technology audits, pilot implementations);
4. subsidies for infrastructure connection and infrastructure (network hookups, access roads, industrial sites).

For the investment sector, it is fundamentally important that the right and methodology for monitoring R&D results and innovation subsidies require separate attention: academic research highlights the need for regulatory and methodological support for monitoring the results of work funded by subsidies at all stages of the budget process—planning, execution, and reporting.⁴.

Budget investments and state capital contributions as an "investment" form of support

Budget investments as a legal mechanism assume that the state can allocate funds in certain cases for investment purposes, including providing budget investments to legal entities that are not state (municipal) institutions or unitary enterprises, subject to special procedures and reflection of such decisions in budget legislation. At the level of assessing the scale of support, it is important that budget investments "on the business side" are difficult to statistically separate from other expenditures without detailed registry accounting, and this problem is noted in academic literature in the context of evaluating industrial subsidies and budget support for commercial organizations.⁵.

From a practical standpoint, budget investments are more applicable to capital-intensive projects related to priority sectors and development institutions than, for example, to standard small and medium-sized business projects. However, for the entrepreneurial sector they are important as a systemic element—for instance, when a project is financed by a development institution, and the budget investment forms its capital and creates the ability to provide preferential financing.⁶.

Infrastructure budget credits (IBK) are an example of a support instrument where budget funds are directed not directly to entrepreneurs, but to regional budgets to finance infrastructure projects that create conditions for housing construction, industrial development, and investment projects in the territory. The rules for selecting infrastructure projects for providing such budget credits are established by Resolution of the Government of the Russian Federation No. 1189 of July 14, 2021 "On approval of the Rules for selection (approval) of infrastructure projects (measures), the source of financial support for the costs of implementation of which are budget credits from the federal budget to the budgets of constituent entities of the Russian Federation for financial support of the implementation of infrastructure projects, and changes to the parameters (characteristics) of selected (approved) infrastructure projects (measures) and on amendments to the Regulation on the Government Commission on Regional Development in the Russian Federation."

We agree with authors who emphasize that "infrastructure budget credits are the most capital-intensive financial instrument of the federal project 'Infrastructure Menu'⁷. This means the instrument requires strengthened control mechanisms, transparent assessment of long-term effects, and accountability in the use of funds.

The development of budget lending has led to the emergence of treasury infrastructure credits. The Federal Treasury, as part of its operations managing balances on the unified account of the federal budget, provides budget credits to regional budgets to finance infrastructure projects using temporarily available funds for a term of 15 years. The procedure for selecting infrastructure projects for such financing in 2025 was specified by Russian Federation Government Resolution No. 566 of April 28, 2025 "On Approval of the Rules for Selection (Approval) of Infrastructure Projects (Measures), the Source of Financial Support for Implementation Expenses of Which Are Budget Credits for Financial Support of Infrastructure Project Implementation from Temporarily Available Funds of the Unified Account of the Federal Budget, and Changes to Parameters (Characteristics) of Selected (Approved) Infrastructure Projects (Measures)".

New investment projects represent a similar mechanism linked to freeing up regional budget funds by reducing the volume of budget credit debt. The freed-up budget funds are directed toward creating and developing infrastructure for investment projects in accordance with criteria established by Russian Federation Government Resolution No. 1704 of October 19, 2020 "On Approval of the Rules for Determining New Investment Projects, for the Implementation of Which Funds of a Constituent Entity Budget of the Russian Federation, Freed Up as a Result of Reducing the Volume of Debt Repayment by a Constituent Entity of the Russian Federation to the Russian Federation on Budget Credits, Are Subject to Allocation for Engineering Surveys, Design, Expert Review of Design Documentation and (or) Results of Engineering Surveys, Construction, Reconstruction and Commissioning of Infrastructure Facilities, as Well as for Connection (Technological Connection) of Capital Construction Facilities to Engineering and Technical Support Networks".

It should be noted separately that the effectiveness of state regulation of investment activity in a federal state (especially one as large as the Russian Federation) largely depends on coordinated actions among different levels of government—federal, regional, and municipal. Insufficient alignment of goals and instruments can lead to program duplication and inefficient resource allocation.

State regulation of investment processes must become a multilevel system aimed at ensuring a balance of interests among the state, business, and society. Its effectiveness is determined not so much by the volume of direct government investment as by the quality of institutions, transparency of the regulatory framework, and sustainability of financial instruments used to stimulate investment activity.