Liquidation or Maintenance: closure and Mothballing Options for Foreign-Owned Entities in Russia

When to Decide Between Closure and Maintenance

As 2025 comes to an end, many parent companies are revisiting their Russian structures. The question is no longer "stay or leave" — it’s how to remain compliant at minimal cost. For some, the logical path is a closure of foreign company in Russia. For others, maintaining a dormant or "mothballed" setup is a more efficient solution.
Each approach has legal, tax, and administrative implications that must be weighed before the year-end.

Understanding Liquidation Scenarios

A full liquidation of subsidiary in Russia typically takes 6−12 months and involves several stages:

appointing a liquidator and notifying authorities;
completing tax and payroll reconciliations;
closing bank accounts and deregistering with funds;
filing final accounting and tax returns.

Although liquidation brings a clean exit, it also triggers tax audits, potential scrutiny of past transactions, and costs associated with the process. For entities that no longer operate but still hold assets, liquidation might not be the most practical route.

When Mothballing Becomes the Right Choice

A mothballing company in Russia strategy — often called "legal dormancy" — allows a business to pause operations without full closure. The company remains registered but suspends commercial activity, staff, and active accounts.
This approach suits foreign headquarters that plan to return to the Russian market, or that need to keep licenses, contracts, or intellectual property valid.

The key advantage is predictable maintenance cost — bookkeeping, annual filings, and minimal director oversight.
However, dormancy still requires proper tax and statistical reporting. Failure to submit zero reports may result in administrative fines or forced liquidation.

“

For many clients, mothballing is a pragmatic middle ground. It preserves structure, avoids forced liquidation, and keeps the option open to re-enter the market when circumstances improve. What matters most is that even a dormant entity must stay compliant — you can’t simply ‘turn it off'

Ivan Masley, Head of Corporate Legal Services, Outsourcing Solutions

Comparing the Two Paths

1. Duration

Liquidation: usually takes 6−12 months to complete.
Dormancy / Mothballing: continuous status, can be maintained indefinitely.

2. Tax exposure

Liquidation: higher, as the process triggers a final tax audit and possible reviews.
Dormancy / Mothballing: minimal, since no operational activity is conducted.

3. Maintenance cost

Liquidation: one-off and relatively high due to legal and administrative procedures.
Dormancy / Mothballing: low annual cost, limited to accounting and compliance filings.

4. Re-entry to market

Liquidation: requires full re-registration if operations resume.
Dormancy / Mothballing: immediate restart possible once activity resumes.

5. Banking

Liquidation: all accounts are closed upon completion.
Dormancy / Mothballing: accounts remain open but restricted for operational use.

The right option depends on business intent. Companies planning a full exit should choose liquidation, while those preserving assets or considering a comeback can safely maintain limited presence.

Practical Checklist Before Year-End

For any foreign-owned entity Russia, it’s worth reviewing:

the company’s current obligations (reports, payroll, VAT);
cost of compliance vs. expected future use;
banking relationships and account accessibility;
tax position and possible audit exposure.

Based on this assessment, management can choose between full liquidation or a low-cost maintenance model — and enter 2026 with a clear structure and no hidden liabilities.

Our Note

At Outsourcing Solutions, we help foreign investors assess their Russian entities, prepare closure or maintenance roadmaps, and manage all compliance steps — from liquidation filings to zero-reporting routines. We’ll guide your team through the decision tree and ensure your business remains compliant, cost-efficient, and ready for whatever comes next.

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