Starting a Business in Russia

Find out about the various business structures available in Russia and how to get a venture started...

Who Can Set up a Business in Russia?

Any foreigner or foreign company can start a business in Russia; in general there are no restrictions. However, there are restrictions on foreigners operating businesses in some sectors:

  • Credit organisations
  • Strategic sectors - there is a special law "On Foreign Investments in Companies of Strategic Importance for National Defense and Security of the Russian Federation" No. 57-FZ), which extensively lists sectors that are considered restricted for foreign investors (the law lists over 40 sectors)
  • Insurance companies
  • Air transport
  • Gas supply

Types of Business Structure

There are four ways for foreign individuals and entities to set up a business in Russia:

  1. Limited liability companies
  2. Joint stock companies (two types: closed and open)
  3. Branch or representative offices of foreign companies (the former can be engaged in commercial activities, while the latter cannot)
  4. Individual entrepreneurs (a foreign citizen can register with this status only if they have a temporary or permanent residence permit)

The Legal Process

Below is information about the legal process and procedures for setting up a business in Russia.

Authorities involved

  • Notary (certifies the application for registration)
  • Tax authority (where the application and other documentation are submitted for registration of a company)
  • Statistics committee (this committee assigns codes based upon its determination of the company's activities)
  • Social funds (pension and social insurance)
  • Federal service on financial markets (in the case of a joint stock company because it registers the issuance of shares)
  • State registration chamber for registration of branches and representative offices

Required documents

For limited liability companies and joint stock companies:

  • Resolution of the founders to incorporate
  • Charter of the company to be founded
  • Application for state registration
  • Extract from the trade register or certificate of incorporation and charter (by-laws, articles of association) of the founding company (in case the founder is a legal entity)
  • Copy of the passport (in case the founder is a natural person)

For representative offices or branches:

  • Extract from the trade register or certificate of incorporation and charter of the foreign company
  • Resolution on the opening of the representative office or branch in Russia
  • Regulations on the representative office or branch
  • Recommendation letter from the bank servicing the foreign company (letter on good standing)
  • Recommendation letters to Russian partners
  • Power of attorney for the head of the representative or branch office

Common problems

The founders must personally submit the documents for registration of a corporate entity, in cases where the founder is a legal entity, the CEO of the founding company shall submit the documentation (there is the possibility to submit the documentation by post; however, the usual seven day processing time could take multiple months or even be entirely lost in the process).

If the company wants to initially appoint a foreigner as a general director of a local entity (corporate, branch, or representative office), it may not do so because of work permit issues (so a transitional, temporary Russian citizen stand-in must be used at the time of founding because the procedure for applying for a work permit for a foreigner can take from one to four months).

Taxation of Russian Companies

There are two systems: the traditional and the simplified system of taxation. The simplified system can only be used by companies with less than 60 million RUR in turnover and corporate entities where foreigners own not more than 25 percent of the company.

Traditional system

  • Profit tax of 20 percent
  • VAT of 18 percent
  • Property tax - this varies by region of registration of the entity but is typically approximately 2.2 percent

Simplified system

  • No VAT
  • Two types of unified taxation - six percent on all revenues or 15 percent on revenues less recognisable expenses
Information provided by LegaLife Law Firm LLC Myasnitskaya 24/1, office 73, Moscow 101000, Russia Tel.: +7 495 9883783, fax: +7 495 9883789 Website Email: marina.zinovieva@legalife.ru, jeff.mohney@legalife.ru Copyright © 2013 LegaLife Law Firm LLC All Rights Reserved