Russia is the largest European foreign trade partner. During the first six months of year 2013, imports to Russia grew by 3.6 percent. Year by year new companies enter the Russian market to sell their good and services with the aim to increase profits and revenues. With this article, we want to give you a first rough overview about the mostly used corporate forms for establishing a business in Russia. It shall give you an orientation path to go towards your new company in Russia.
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.
At the end of the century, the representative office foreign companies chose mainly the representative office for market entry. After Russian law representative offices are conceived a taxable long-term establishment of a foreign company in Russia. They are usually used to execute marketing activities in Russia and arrange for agreements between a Russian local firm and the mother company abroad. Usually representative offices do not execute business activities like import and trade. Russian local businesses perceive the representative office as giving only a minor priority of a foreign mother to the Russian market. This and a large bureaucracy related to currency control make the representative office rather unpopular between local firms.
The second corporate form here to mention is the branch. As a representative office, the branch is not a separate legal entity but is a part of the foreign company. Branches usually have business activity, and they can import goods to execute trade activities in Russia. As representative offices and branches are considered as part of a foreign company, they are subject to a currency control mechanism. All payments for goods and services to local businesses exceeding USD 5.000 require comprehensive documentation to be issued by the Russian company. This makes representative offices and branches quite unpopular.
The most popular choice of a corporate establishment in Russia is the subsidiary. The subsidiary can be established as a limited liability company (LLC) or joint stock company (JSC). Usually the LLC is the preferred variant as it is easy to register with the local authorities, and the capital requirements are very low (RUB 10.000 or USD 350). A subsidiary is a company under Russian law. It can execute full business activity, import goods and is not subject to the currency control mechanism. The LLC is the highest acknowledged corporate form among Russian business participants.
Representative offices, branches and subsidiaries, are considered permanent taxable establishments in Russia. They need to calculate taxes for payroll, determine social security fees, issue financial accounting statements at the end of each quarter and another 15 reports that need to be sent to various Russian authorities.
There is 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.
Depending on your products and services and your derived business strategy for the Russian market the one or the other corporate form might more fit your business plans. Besides of choosing the right legal form, there are other considerations that have to be done before starting your business in Russia, and it is recommended to visit an business consultant in Russia, as well.
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.
At the end of the century, the representative office foreign companies chose mainly the representative office for market entry. After Russian law representative offices are conceived a taxable long-term establishment of a foreign company in Russia. They are usually used to execute marketing activities in Russia and arrange for agreements between a Russian local firm and the mother company abroad. Usually representative offices do not execute business activities like import and trade. Russian local businesses perceive the representative office as giving only a minor priority of a foreign mother to the Russian market. This and a large bureaucracy related to currency control make the representative office rather unpopular between local firms.
The second corporate form here to mention is the branch. As a representative office, the branch is not a separate legal entity but is a part of the foreign company. Branches usually have business activity, and they can import goods to execute trade activities in Russia. As representative offices and branches are considered as part of a foreign company, they are subject to a currency control mechanism. All payments for goods and services to local businesses exceeding USD 5.000 require comprehensive documentation to be issued by the Russian company. This makes representative offices and branches quite unpopular.
The most popular choice of a corporate establishment in Russia is the subsidiary. The subsidiary can be established as a limited liability company (LLC) or joint stock company (JSC). Usually the LLC is the preferred variant as it is easy to register with the local authorities, and the capital requirements are very low (RUB 10.000 or USD 350). A subsidiary is a company under Russian law. It can execute full business activity, import goods and is not subject to the currency control mechanism. The LLC is the highest acknowledged corporate form among Russian business participants.
Representative offices, branches and subsidiaries, are considered permanent taxable establishments in Russia. They need to calculate taxes for payroll, determine social security fees, issue financial accounting statements at the end of each quarter and another 15 reports that need to be sent to various Russian authorities.
There is 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.
Depending on your products and services and your derived business strategy for the Russian market the one or the other corporate form might more fit your business plans. Besides of choosing the right legal form, there are other considerations that have to be done before starting your business in Russia, and it is recommended to visit an business consultant in Russia, as well.
About the Author:
Want to find out more about the start-up of a business in Russia, please visit our web site which informs comprehensively about all aspects of the corporate forms forms you can chose from including accounting and bookkeeping in Russia, financing, work permit and work visa..
Comments
Post a Comment