| |
| | | | | | | |
| | | | |
| | | | | | |


Establishing a business in Russia
How to set up and register a company in Russia, company formations
There are several ways for a foreign investor to establish business presence in the Russian Federation. A foreign investor may set up a Russian legal entity in the form of limited liability company, joint-stock company (which can be private or public) or partnership. The second way is to open a representative office or a branch of a foreign company in Russia.

Legal Status of Companies in Russia
There are 3 main forms of legal entities in Russia: limited liability company (Russian abbreviation - OOO), private joint-stock company (ZAO) and public joint-stock company (OAO). They may conduct full-scale activity. Any Russian and foreign companies and individuals may be founders and shareholders in any number of Russian companies.

Representative Office and Branch are not legal entities under Russian legislation, but subdivisions of the Head company. The Head company may be held liable for activity of Representative Office (Branch) in Russia. Representative Offices are limited to conduct liaison and support activity. Branches may conduct business activity in Russia.

Registration & Accreditation
The state registrar of legal entities is Tax Inspectorate, which keeps the Unified State Register of Legal Entities. Company has to be registered with Tax Inspectorate, State Committee for Statistics and three non-budgetary funds (Pension fund, Medical Insurance Fund and Social Security Fund).

Representative Offices and Branches may be accredited at several state bodies, such as State Registration Chamber, Chamber of Trade and Commerce and various Ministries of Russian Government, although the Consolidated State Register of Representative Offices and Branches is being kept by State Registration Chamber (GRP).

Charter Capital
Minimum charter capital for OOO and ZAO is 10 000 rubles (~330 USD). Minimum charter capital for OAO is 100 000 rubles (~3300 USD). At least 50 per cent of the charter capital shall be paid-up prior company incorporation.
Representative Offices has no charter capital. Branches shall establish so-called basic funds (analogue of the charter capital in legal entities) whish size is not limited.

Registration & Accreditation duties and charges
Registration duty is 2000 rubles (~65 USD). There are also charges for registration of companys seal, registration at State Committee for Statistics, which amount in general no more than 50 USD.
New company formation may take about 1 month.

Accreditation duties for Representative Offices and Branches are considerably higher. The State Registration Chamber duties are:
1-year accreditation duty 1000 USD
2-year accreditation duty 2000 USD
3-year accreditation duty 2500 USD
Branch may be opened for 5-year period duty is 3500 USD.

Buying a Ready Made Russian Company
To reduce the time involved in registering a company, it is possible to buy a company "off-the-shelf". Such services are usually provided by law and accounting firms and the price depends on the type of company and the speed of processing.
Generally, it is possible to buy a ready made Russian limited liability company for $400-$500 US, which is ready for business. Such companies are registered with the registering company's owners and directors and their names are changed to the ones you choose during the sale.

Employing Foreign Staff in a Russian Company
In order to employ foreign citizens a company should obtain Employment permit. Afterwards every foreign employee should obtain personal work permit. This requirement excepts the citizens of Belarus.
According to the new legislation Representative offices and Branches of foreign companies have to obtain Employment permit. Afterwards every foreign employee even the one that has personal accreditation card shall obtain personal work permit. Citizens of Belarus are not considered as foreigners.
Representative Office best suits for an initial period of exploration of Russian market making necessary contacts and getting acquainted with Russian business environment. Russian legal entity or a Branch better suit for full-scale operations.

Taxation of Russian Companies
Tax issues are important part of activity of foreign companies and their Representative and Branch offices on the territory of the Russian Federation. Every Representative Office or Branch whether it conducts commercial activity or not should be registered with Tax Authorities within 30 days after its accreditation and should submit accounting reports.
Value added tax is to be paid by Russian legal entities, including those with foreign investments, foreign legal entities and legal entities involved in import-export transactions. Rates of VAT are the following - 18%, 10% and 0%.
Profit tax. According to the current Russian legislation the taxpayers of profits tax are Russian organizations and foreign organizations that conduct their activity through a branch, a Representative Office, a division, a bureau, an office, an agency or another separate subdivision or place of regular activity of a foreign organization on the territory of the Russian Federation. Rates for profits tax are fixed in the following range: 24%, 20%, 15%, 10% and 6%.
Assets tax should be paid if a Representative Office, or a foreign organization, or its branch, or subdivision has the assets on the territory of the Russian Federation. The maximum size of assets tax rate will not exceed 2.2%. Representative offices that dont conduct commercial activity will not pay assets tax on the assets/property other than real estate that it owns.
Unified social tax represents a social tax package that every employer has to pay to state funds. It consists of contributions to the Pension Fund, Social Security Fund and Obligatory Medical Insurance Fund. The total rate of UST is 35.6%. The somewhat high rate of 35.6% can be reduced quite considerably. The Tax Code of the Russian Federation provides for the so-called regression scale, enabling a reduction of the 35.6% rate depending on employee's total earnings.
Personal income tax. The taxpayers of personal income tax are individuals - residents of the Russian Federation and individuals - non-residents of the Russian Federation who receive income from the sources on the territory of the Russian Federation. A foreign citizen is a tax resident of the Russian Federation if he/she resides on the territory of the Russian Federation not less than 183 days of the calendar year.

| | |