FAQ

First of all you need to have a clear view that your business in Russia leads to permanent establishment (PE) or you just need to register a representative of your head office in Russia. After all marketing researches and business plans are done you can start to register legal entity in Russia.

Business by itself is not a piece of cake and starting business in other country is not so easy. In recent years, Russia has shown a steady positive trend in the ratings the business environment assessment. In the ranking of the World Bank Doing Business Russia is ranked 28 among 190 countries for 2020. If we compare, in 2010 it was ranked 124. In order to run business smoothly you need to have good strategy and reliable partners for operative and administrative work.

FTS is the Federal Tax Service of Russia. FTS is executive body and responsible for tax compliance, registration of companies in Russia and accreditation of Representative offices and branches of foreign companies in Russia.

In order to register a company in Russia, you should choose the form of legal presence. The most common form is a limited liability company. You should determine the number of shareholders, choose a local managing director, get a guarantee letter for the future company legal address, draft necessary documents (Article of Association, Charter, Decision of shareholders), make notary translation of some documents, apply with registration form to Notary office in Russia or abroad (in this case procedure is a little bit differ), pay state duty (4 000 rubles) and provide the package with documents to the Tax office (for Moscow it is Tax office No.46). After five working days from the date of submission you get your company registered.

The exact set of documents depends on the number and type of shareholders.
If a company is formed by foreign legal entities documents will be:
— Extract from the trade register or similar document with apostille and notary translation
— Minutes if there is more than one shareholder or Decision of the sole participant of a limited liability company
— Guarantee letter or another document confirming the company legal address
— Passport copy of managing director
— Receipt of state duty payment
— Application form notarized in Notary office
— Power of attorney for the person who will pick up ready documents from the Tax Office.

There is no restriction for foreign individuals to set up a company in Russia. But if a foreigner wants to manage his own company by himself and be managing director, he is obliged to get a work permit.

The main form of business entity in Russia is a limited liability company.
As well there is a form of joint stock company. Foreign companies may also set up a representative office or branch in Russia.

It is possible to make notary authorization abroad. In this case, you will get the application form and Power of attorney in English, get notary authorization in your own country, get an apostille, and send all documents to your representative in Russia. After that, papers should be translated and notarized by a Russian notary and submitted to the Tax Office.
But still, the easy way and sometimes cheaper way will be to come to Russia to authorize the application form in the Russian notary office.

The official term from the date of submitting documents to the Tax Office is five working days. But, please mind the time for drafting documents, translation documents of the foreign founder, and further steps to open a bank account in Russia to start the business.

You may apply to a recruitment agency, as well some legal companies can offer the service of a local managing director.

Yes, but only after getting a work permit.

A limited liability company’s minimum number of shareholders is one, and the maximum is fifty.
The minimum number of shareholders for a joint stock company is one, and the maximum number is not limited.

Yes, but with some restrictions. A foreign company with one shareholder can’t be 100% shareholder of a Russian company, the so-called "matryoshka rule."
Setting up insurance companies with 100% foreign shareholders is also impossible. In this case, the share of a foreign company can’t be more than 50%
Some types of business activity are strictly forbidden for companies with 100% foreign shareholders, e.g., working with radioactive waste, running a large telecommunications or publishing business, participating in defense enterprises, etc.

Company legal address is the address of its executive body and the place of the actual location of a company.

Following Russian legislation, there is no opportunity to register a company by virtual address. You may only register the company by actual address. There are providers of so-called nominee legal addresses. But in this case, you still do not have a 100% guarantee compared with an existing lease contract. The Tax Office has a right to check whether your company is located at this address.

The minimum registered capital for a limited liability company is 10, 000 Rubles.
The minimum registered capital for a joint stock company is 100, 000 Rubles.

Each company founder must pay their share in the company’s authorized capital within the period determined by the company statutory documents, but not later than four months from the company’s state registration.

EGRUL is the Unified State Register of Legal Entities. EGRUL contains information about legal entities, such as tax and registration ID, legal address, founders, share capital, executive bodies, managing director, types of economic activity, and changes in statutory documents. Extract from EGRUL for each company can be uploaded from the website of the Federal Tax Service. Unfortunately, the Federal Tax Service of Russia website is blocked in some foreign countries today.

OGRN is the Main State Registration Number. OGRN is the registration number company gets once Tax Authorities register it. OGRN is not provided on paper from 2017. Once the company is registered, it receives the Sheet of entry into the Unified state register of legal entities containing information about the OGRN number.

INN is an Individual Number of Taxpayers. INN is the main Tax ID company, or individual gets once Tax Authorities register it. INN is not changed.

KPP is a Registration Reason Code. It determines the grounding of registration and registration number of the Tax Office by company legal address. KPP will also be changed if the company changes its legal address and Tax Office.

No, Russia has no separate registration number for VAT purposes. The company uses its Tax ID (INN) and KPP.

OOO is an acronym for a Limited Liability Company — LLC.

AO is an acronym for a Joint Stock Company — LLC.

A permanent establishment (PE) is a fixed place of company business activity in Russia.
For the Tax Code of Russia, a permanent representation of a foreign organization in the Russian Federation means a branch, representative office, department, bureau, office, agency, any other separate subdivision or other places of activity of this organization through which the organization regularly carries out business activities on the territory of the Russian Federation.

Following the Tax code of Russia, the following activities of a foreign company do not lead to the formation of a permanent establishment:

a) the use of facilities solely to store, display or supply goods or merchandise owned by a foreign company;

b) the maintenance of stocks of goods or merchandise belonging to the company solely for storage, display, or delivery;

c) maintaining a stock of goods or merchandise belonging to the company solely for processing by another enterprise;

d) maintaining a fixed place of business solely to purchase goods or merchandise or for collecting information for the company;

e) the maintenance of a fixed place of business solely to carry out any other activity of a preparatory and auxiliary character for the company.

No, if you don’t create permanent places of work in Russia.

A foreigner can be registered as Individual Entrepreneur only if he has a temporary residence permit (TRP- РВП) or residence permit (ВНЖ).

Self-employed status is a special tax regime for Russian individuals. Individuals may be registered in the Tax Office as self-employed and pay by themselves only 4% or 6% tax on professional income. Income of self-employed can’t exceed 2, 400 000 rubles per year. If a company has an agreement with the self-employed, it doesn’t pay taxes and contributions compared with standard employees. Not all types of business activity apply to self-employed.

In addition to Russians, citizens of states belonging to the Eurasian Economic Union (Belarus, Kazakhstan, Armenia, Kyrgyz Republic) can register as self-employed if they sell their goods and services on the territory of the regions of the Russian Federation.

To get a work permit in Russia, applying to the Ministry of Internal Affairs of Russia is necessary. There are two types of work permits: standard for one year and work permit for a Highly Qualified Specialist for three years.

Highly Qualified Specialist (HQS-ВКС)This is a foreign citizen with proven work experience in a specific specialty (in which he is involved in labor activities on the territory of the Russian Federation). HQS employees may apply for a 3-year term work permit and visa and a residence permit. The minimum salary for HQS employees should be 167 000 rubles per month (information on June 2023). HQS employee benefits to 13% personal income tax regardless of the number of days spent in Russia.

There are mainly three taxes for foreigners in Russia: personal income tax, transport tax, and property tax. You pay income tax if you have concluded an employment contract, and the transport and property taxes are paid only when you own a vehicle or real estate (a house, a room, an apartment, and so on) on the territory of Russia. Once the foreigner has an employment agreement, insurance contributions are paid by the employer.

SNILS is an insurance number of an individual personal account in the system of individual pension insurance.
Besides, SNILS is also used to identify an individual when providing state and municipal services. It is necessary when an individual applies for an e-signature and registers on the web portal "State Services" (Госуслуги).

To obtain SNILS, a foreign citizen can personally apply to any branch of the Pension Fund, Multifunctional Center of state services (MFC), or do it through the employer. Within five days, the employer will receive SNILS and give it to the employee. In the case of a personal appeal to the FIU or MFC, SNILS is assigned on the same day.

The tax legislation of Russia includes:
— the federal tax code;
— the tax laws of the constituent entities of the Russian Federation;
— regulatory legal acts of local government bodies on taxes and fees.
Tax legislation is based on the Constitution of the Russian Federation, which defines the general principles of taxation, the competence of the state, the constituent entities of the Federation, and local government bodies.

Federal taxes include VAT, personal income tax, corporate profit tax, excise duties, etc.
Regional taxes are corporate property tax, etc.;
Local — individual property tax, advertising tax, land tax, etc.

The Tax Code of Russia prescribes five main regimes of taxation:
—  a general tax system (it is called "OSNO" in Russia);
—  simplified taxation system (it is called "USN" in Russia);
—  the patent system of taxation (it is called "PSN" in Russia);
—  the unified agricultural tax system.

This system applies only one tax instead of such customary taxes as:
— Corporate Profit Tax
— VAT (except for VAT on imports)
— Corporate Property Tax.
The simplified tax system in Russia has two types:

1. 6% tax from revenue
2. 15% tax from profit (revenue minus expenses)

20% for most goods, including imported goods and services.
10% for certain goods
0% for export sales

The main corporate profit tax rate in Russia is 20%.

To register a Branch of a foreign legal entity in Russia, you need to get accreditation for the Branch of your foreign company in Russia.

A company must approve the Resolution of a foreign legal entity to open its Branch, appoint a Head of the Branch in Russia, get a legal address, prepare necessary documents with notary translation to Russian, and apply to the Federal Tax Service. Also, during the accreditation process, the company must certify the number of foreign employees of your Branch in the Chamber of Commerce of Russia, even if you will have only local employees. A company must pay state duties 120,000 rubles to the Tax office and 18,000 rubles to the Chamber of Commerce once.

It takes 15 working days from the day of application to get accreditation.

The main difference between establishing a Branch and a Rep-office of a foreign legal entity is business activity. By Russian Civil law, a Representative office can’t conduct commercial business activity but can only have the representation function of its Head office. The Branch can bear commercial activity on the territory of Russia.
A Branch can perform all or part of the functions of a legal entity, including a representative office. Rep-office only represents and protects the interests of a legal entity.

We can highlight not only one main difference but several, including:

•  Branch is a united entity with a foreign legal entity. The Head office bears full responsibility for the obligations of the Branch. LLC is an independent legal entity, and the liability of participants is limited to the shares they own.
•  The Branch can’t be registered at the Customs office and can’t import or export goods; LLC is free to do this.
•  The Branch office is a non-resident of Russia regarding currency control regulation and is more flexible in sending and getting funds. LLC is a resident of Russia, and all international payments are subject to currency control
•  The branch office can receive foreign currency from Russian clients on its account. LLC can receive only Rubles.

First of all, in order to close your business in Russia, it is necessary to make an official decision on liquidation and appoint a liquidation commission. The further liquidation procedure will depend on the form of your legal presence and will be slightly different for LLCs, Branches, and Rep-offices.

For LLC, it is necessary to submit notification about liquidation to the Tax authorities within three working days after deciding on liquidation.

The liquidation commission is engaged in the liquidation procedure, including reconciliation with suppliers, customers, employees, government, etc. It should provide public official notification about the starting process of liquidation. So, all counterparts may apply to the legal entity in case of liabilities. After two months from the official publication date, the company may start to submit interim and final liquidation statements.

The Federal Tax Service of Russia’s official website has a VAT — Internet company office. Suppose a foreign company provides electronic services to Russian counterparties. In that case, it is obliged to register through the Internet Company VAT Office resource, pay tax quarterly, and submit reports to the Russian tax authorities.

Electronic services in Russia include:

• sale of software and games via the Internet
• sale of music, films, and books via the Internet
• provision of advertising services via the Internet
• provision of trading platform services
• providing access to Internet search engines
• provision of services for providing access to social networks
• provision of services for storing and processing information via the Internet

A foreign company submits an application for registration as a VAT taxpayer when providing electronic services online on the official website of the Federal Tax Service.

• provision of hosting services, domain names, cloud storage
• services of the administration information systems and Internet sites

The full list of services can be found in Article 174.2 of the Tax Code of the Russian Federation

VO code is code of currency transaction. In Russia in terms of currency control regulation all transactions of non-residents and between residents and non-residents are subject to currency control. For individuals, a currency resident is a citizen of Russia or a foreigner who has a Russian residence permit. It doesn’t matter how much time you spend in Russia. Even if you haven’t visited for several years, under currency laws, you remain a resident as long as you retain citizenship. All others are considered non-residents.
Legal entities registered in Russia are currency residents. Legal entities registered under the laws of foreign states, including its branches and representative offices in Russia, are currency non-residents.
If you are a non-resident, you always need to use the VO code once you make a payment. If you are a resident of Russia and pay a non-resident, you also need to use the VO code.
VO code is stated in the special Instruction of the Central Bank and depends on the nature of the transaction. For example, if you are resident and pay to non-resident for services which are already executed VO code will be {VO20200}.
You may download the list of VO codes by the following link.

Non-residents are:

• legal entities registered under the legislation of foreign states (including their branches and representative offices located on the territory of Russia;
• individuals who are foreign citizens without a residence permit in Russia;
• citizens of Russia who permanently reside in foreign countries.

Non-resident status differs for tax and other purposes, e.g., for currency control. For tax purposes, a tax resident is an individual spending in Russia for at least 183 days within 12 consecutive calendar months, regardless of citizenship.

The standard unified rate of insurance contributions in Russia is 30%.

From 2023, contributions to pension, health, and social insurance have been combined into a unified payment without a breakdown by type of insurance.

There is a limited value base for calculating insurance contributions in Russia, which the Russian Government approves every year. From January 1, 2023, the base is 1,917,000 rubles on an accrual basis. Until this amount is reached, contributions are calculated at a rate of 30%. If the maximum base is exceeded — 15.1%.
There are benefits for IT companies and companies registered in the register of small and mid-sized companies in Russia. They pay insurance contributions at a reduced rate.

An employee in Russia doesn’t pay any taxes by themselves under the labor agreement. Insurance contributions are paid by the employer only. The standard rate is 30%. The employer also pays personal income tax directly to the Tax authorities. The employer deducts income tax from the employee’s gross salary and pays tax to the budget as a tax agent. The employer also submits all tax returns on personal income tax from salary and insurance contributions.

Dividends from individuals and legal entities are subject to income tax at a rate of 13% for tax residents of Russia. Dividends of foreign individuals (non-tax residents of Russia) and legal entities are taxed at a rate of 15%. There is no need to pay insurance contributions on dividends. Income tax is withheld at the time of transfer of dividends unless otherwise provided by double taxation agreements. In this case, the company paying dividends acts as a tax agent. All legal entities pay income tax on dividends, even using a special tax regime, such as a simplified taxation system.

A tax return is an official statement of the taxpayer, which contains information about the objects of taxation, income received and expenses incurred, sources of income, the tax base, tax benefits, the amount of tax payable, and other data that serves as the basis for calculating tax.

There are two options for submitting tax returns: (i) on paper and (ii) electronically.
Not all tax returns can be filed on paper. Companies in Russia should submit VAT tax returns only electronically. An exception is established only for tax agents who are not payers or exempt from fulfilling a VAT payer’s duties.

In addition to tax returns in Russia, companies can’t submit financial statements on paper. Legal entities in Russia submit annual financial statements only electronically.

Russia has double taxation treaties with 84 countries (information on November 2023). The complete list of double taxation treaties you may find on the web page of the Ministry of Finance of Russia. From August 8, 2023, Russia suspended certain provisions of double taxation agreements with 38 countries, including the USA, Canada, most European countries (Germany, France, Italy, Spain, Poland, Bulgaria, Ireland, Finland and Cyprus), as well as Australia, Great Britain and Japan.

IT companies in Russia have several benefits, including reduced tax rates of corporate profit tax and insurance contributions and exemption from VAT. To use the benefits, the IT company should meet some specific requirements. Find out more about the benefits for IT companies in Russia

Russian Tax Code provides two types of tax audit: field tax audit and desk tax audit. The field tax audit is carried out on the territory of the taxpayer and cannot last more than two months. Tax authorities can officially extend the term up to 4 or 6 months. The audit period does not exceed three calendar years preceding the year of the decision to conduct the field audit. In the case of the field audit, companies or individuals usually provide originals of the documents.

The desk tax audit takes place in the office of the Tax authorities. In this case, Tax authorities make requests for documents and information to the taxpayer via a particular form called a Tax claim. Duration of filed audit is no more than 3 months. Usually, scanned copies are fine for the tax authorities, and all documents can be submitted electronically.

As well Tax authorities may conduct the counter tax audit. They may audit some companies and request confirmation documents and information from their counterparts.