Russia is a large economy and the European Union is Russia's most important foreign trade partner. In the first half of 2013 imports from European countries to Russia increased by 3.6 percent. Every year new foreign companies step into the Russian market to sell their products and services to increase their revenues and profits. This article is intended to give you a rough overview about corporate forms that can be established in Russia and their specifics and can be used as a first orientation on the way of choosing the optimal corporate form for the Russian market.
There are different corporate forms a foreign company may choose to become present in the Russian market. Namely these are the representative office, the branch and the subsidiary. As Russian legal system and bureaucracy is rather complicated the proper legal form should be chosen with a long term view because it will be difficult to change the corporate form later on.
About 10 years ago the representative office was the most popular choice for foreign companies opening a business in Russia. Representative offices are considered as a permanent establishment of a foreign company in Russia. They are no Russian companies and usually have no business activity. Nowadays the perception of the local market participants is that a foreign company gives the Russian market only a minor priority and is not sure about the long-term business strategy in Russia.
Another corporate form available is the branch. As well as the representative office the branch is conceived as a foreign entity established in Russia. The branch can have business activities like trade, service and import of goods. The branch is also subject to the currency control mechanism. That local firms doing business with the branch or representative office must issue comprehensive documentation for deals exceeding value of USD 5.000. Because of this local Russian firms avoid to do business with branches and representative offices, if possible.
The most popular corporate form in terms of business appearance and operability is the subsidiary, which can appear as a Limited Liability Company (LLC) or Joint Stock Company (JSC). Between those the LLC is regularly the preferred form as it is easy to register and the capital requirement is low (RUB 10.000 or USD 350). The subsidiary is a company by Russian law and therefore not subject to currency control. It can import goods and have trade activity. Between local businesses the subsidiary is the preferred corporate form to do business with.
With respect to taxes the three legal forms are similar. Representative offices and branches are considered as a taxable permanent establishment in Russia. Therefore they have to calculate payroll tax and social securities fees and furthermore need to issue financial accounting statements at the end of each quarter and up to 15 other reports to be issued to different Russian authorities.
There are big differencing with regards to the start-up financing of representative offices or branches and subsidiaries. Representative offices and branches are uncomplicated from the currency control point of view as they are considered as foreign companies. However, subsidiaries, being a company by Russian law, are subject to currency control. Payments from and to abroad for financing purposes require a legal reason and may take several working days, as the bank executing the transfer needs time to check all documents.
Which corporate form to chose depends pretty much on the business activities you plan in Russia, be it active trade-, service- or simply marketing activities. You also should arrange a meeting with a Russian business consultant as there are a number of other considerations to be done before deciding registering your company.
There are different corporate forms a foreign company may choose to become present in the Russian market. Namely these are the representative office, the branch and the subsidiary. As Russian legal system and bureaucracy is rather complicated the proper legal form should be chosen with a long term view because it will be difficult to change the corporate form later on.
About 10 years ago the representative office was the most popular choice for foreign companies opening a business in Russia. Representative offices are considered as a permanent establishment of a foreign company in Russia. They are no Russian companies and usually have no business activity. Nowadays the perception of the local market participants is that a foreign company gives the Russian market only a minor priority and is not sure about the long-term business strategy in Russia.
Another corporate form available is the branch. As well as the representative office the branch is conceived as a foreign entity established in Russia. The branch can have business activities like trade, service and import of goods. The branch is also subject to the currency control mechanism. That local firms doing business with the branch or representative office must issue comprehensive documentation for deals exceeding value of USD 5.000. Because of this local Russian firms avoid to do business with branches and representative offices, if possible.
The most popular corporate form in terms of business appearance and operability is the subsidiary, which can appear as a Limited Liability Company (LLC) or Joint Stock Company (JSC). Between those the LLC is regularly the preferred form as it is easy to register and the capital requirement is low (RUB 10.000 or USD 350). The subsidiary is a company by Russian law and therefore not subject to currency control. It can import goods and have trade activity. Between local businesses the subsidiary is the preferred corporate form to do business with.
With respect to taxes the three legal forms are similar. Representative offices and branches are considered as a taxable permanent establishment in Russia. Therefore they have to calculate payroll tax and social securities fees and furthermore need to issue financial accounting statements at the end of each quarter and up to 15 other reports to be issued to different Russian authorities.
There are big differencing with regards to the start-up financing of representative offices or branches and subsidiaries. Representative offices and branches are uncomplicated from the currency control point of view as they are considered as foreign companies. However, subsidiaries, being a company by Russian law, are subject to currency control. Payments from and to abroad for financing purposes require a legal reason and may take several working days, as the bank executing the transfer needs time to check all documents.
Which corporate form to chose depends pretty much on the business activities you plan in Russia, be it active trade-, service- or simply marketing activities. You also should arrange a meeting with a Russian business consultant as there are a number of other considerations to be done before deciding registering your company.
About the Author:
Learn more about start-up of a business in Russia. Stop by the site of Rusconsult24 where you can find out all about our consulting-, company registration- and bookkeeping services in Russia.
Comments
Post a Comment