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Doing business in Russia has long endured negative stigma including accounts of corruption and
unlawful criminal gangs (see video below). Those wise enough to look through theses often
embellished stories, nevertheless, have profited from Russia's vibrant economy which has seen
a decade of growth averaging over 6% per annum.
The current prospects for business in Russia remain just as bright. According to economic
forecasts, the annual growth of consumption is 1.7-1.8% per year, largely due to a new middle
class that will constitute 50-55% of the population by 2010.
Although we are by no means business specialists, we have put together a general overview of
business in Russia. Since legal and financial complexities can often be a barrier to those
considering new business ventures, our goal is to put things in layman's terms and provide links
to the best, most relevant resources. This information, nonetheless, is not exhaustive and we
encourage use of professional business consultants before making any important financial
decisions.
There are several options available to foreigners who want to start a business in Russia. These
include...
a. Register with state authorities as an individual entrepreneur (commonly referred to as a
sole proprietorship).
○ This is not a legal entity but an extension of the individual, meaning you are
personally liable for all obligations of the business, including debts.
○ Can be a suitable option for those providing consultations or similar types of
service.
○ Once registered as an individual entrepreneur, you become a Russian tax resident
and must submit a Russian Personal Income Tax Declaration.
○ Russian Tax Residents (employed or operating under a sole proprietorship) are
required to submit a report of their work (and other) income received in Russia.
○ If you live in Russia for less than 183 days (non resident status) you still must
report income received in Russia, but should be subject to exemptions when
paying income tax at home, thanks to Double Tax Treaties between Russia and
your country of residence.
○ The deadline for submission of personal income tax in Russia is April 30 of the
following year.
○ As of 2006, personal income tax rate is 13% for residents and 30% for non-
residents. (more Russia tax info below)
c. Finally, foreigners may create a Russian legal entity in the form of a Limited Liability
Company (LLC), a public or a private Joint Stock Company (JSC), or a Partnership.
○ The LLC and JSC can be founded by an individual or by a legal entity (either
foreign or Russian).
○ Creating a legal entity provides greater protection than registering as an individual
entrepreneur (sole proprietor) since assets and liabilities of the LLC and JSC are
legally isolated from those of the founder.
○ It is possible for one individual to create a legal entity. When registering under
sole ownership, however, the founding document, or Charter, differs from a
typical corporation. In such a company there is no management body such as the
Board of Directors. All decisions are taken by the sole founder, and as a result,
procedural requirements such as the General Meeting do not apply.
○ Foreign individuals and foreign companies can be founders and shareholders in
any number of companies.
For more information, look at this comparison table provided by VFBS, which outlines the main
types of legal forms you can choose to start your business in Russia.
To keep it simple, we've used an example provided by The World Bank. The example is for a
standardized company (a private LLC) set up in the city of Moscow.
1. Notarize foundation documents.
4. Register with the Federal Tax Service of the Russian Federation (former Ministry of
Taxation) at the local level for concurrent tax registration and registration with the State
Pension Fund, the State Fund of Social Insurance and the State Fund of Compulsory
Medical Insurance ("Funds").
5. Notarize Registration Certificate, Tax Payer Identification Number Certificate and Bank
SignatureCard.
7. Inform Ministry of Taxation of the Russian Federation of the company bank account
number and obtain a special letter of confirmation.
Russian business culture is quite distinct from that in western nations. This is due largely to a
history of collectivism, which has shaped a nation where co-operation and collaboration are
standard practice in businesses, and where fierce competition, even amongst rival companies, is
not as prevalent.
• PricewaterhouseCoopers Russia
• Sberbank
• Guta Bank
• Russian Standard, Ltd. - provides exporters to Russia with all types of mandatory and
voluntary certification for most products, ranging from nutritional supplements and foods
to medical and oil equipment.
• Rusmarket Business Portal - Business Directory for Russia, Ukraine and the CIS.
• RIN Project Yellow Pages - Detailed directory of over 350,000 organizations in Russia
and the CIS.
• The Moscow Business Telephone Guide - Business directory serving not only Moscow,
but the entire Russian market.
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Most of the information below has been provided by the Russian law firm VISTA Foreign
Business Support (www.vfbs.ru).
The form of legal presence in Russia influences all aspects of activity including possibility for
making deals and tax consequences of the deals, financial and tax accounting and reporting,
possibilities under customs, currency control legislation, ability to employ foreign nationals,
repatriation of income, application of international treaties and many others. Therefore, particular
attention must be paid to Russian business modeling to be made PRIOR setting up legal presence
in Russia.
There are several forms for a foreign investor to start business in the Russian Federation. Foreign
investor may set up (or register) a Russian legal entity in the form of limited liability company,
joint-stock company (which can be private or public) or partnership. The other way is to register
a representative or branch office of a foreign company in Russia.
In order to get more information on the different types of entities that you can establish in Russia
see the Comparison Table below:
Table 1: Starting Up a Business in Russia - Legal Entities
Russian legal entity Subdivision of a foreign company
Legal Status
LLC and PJSC are Russian legal entities. RO and Branch of a foreign legal entity
They may conduct any form of are not considered as a separate legal
commercial activity, provided it is not entity. RO and Branch are subdivisions of
prohibited by the Russian legislation. a foreign company. They are considered
For conducting any licensed type of as Russian non-resident entities for
activity it is necessary to obtain currency control purposes
license. RO is a subdivision Branch is a
The number of of a foreign legal subdivision of a
shareholders/participants in PJSC/LLC entity that foreign legal entity
can not exceed 50. Any Russian and represents the that may conduct
foreign companies and persons may be company’s commercial
founders and shareholder in any interests in Russia. activity.
number of Russian companies. The ROs officially are
company may be established by a not allowed to
single founder, as long as the founder undertake
is not a company owned by a single commercial
legal entity or individual. Some activity, in Russia.
peculiarities exist for the companies
with single founder. For more detailed
information please see Sole
ownership .
Authorized capital
Management structure
LLC and PJSC have a three-tier For both the RO and B ranch an executive
management structure consisting of (1) body (Head of RO or Branch) should be
the general meeting, (2) the board of appointed by the foreign legal entity.
directors, and (3) the executive body**. Such executive body acts pursuant to the
General meeting is the highest Power of Attorney issued by the foreign
management body and it must meet at legal entity.
least once a year.
Board of Directors effects general
supervision of the company’s business
activities which are not referred to the
competition of the General meeting
Executive body of a company may be
represented by both an individual and
collegial body. The executive body acts
pursuant to the Charter document and
doesn’t need a POA.
Shares/Units
Foreign Staff
* Effective 1 January 2004, the registration procedure for Russian legal entities is
simplified by the introduction of a “one window” approach to the process and Tax
authorities are responsible for the registration procedures.
** If there is one founder in the company the management structure differs from
the structure owned by several founders. See the information on Sole Ownership
Sole ownership.
As it was mentioned before Limited Liability Company or Private Joint Stock Company can be
founded by an individual (Russian or foreign) or by a legal entity.
The founding document at Sole ownership company is a Charter. Such company doesn’t have
some management bodies such as General Meeting of the Founders. There is no Board of
Directors. All the decisions are taken by the sole founder. Accordingly legislative requirements
on calling of the general meetings, and other procedural requirements do not apply to such
company. The management of the company is done by issue of written decisions of the fonder. If
the fonder is also a General Director in the company the decisions are made by issuance of
orders.
At the same time such company is a separate legal entity, its assets are legally isolated from the
assets of the founder.