Russia company registration

DOING BUSINESS IN RUSSIA IN 2019

Since 2003, Healy Consultants Group PLC has assisted our Clients with starting their company in Russia. Our services include i) Russia business registration ii) assistance to license the company iii) corporate bank account opening services in Russia and abroad iv) employee recruitment v) visa strategies and vi) office rental solutions.

Summary table of Russia company registration

Summary	Tax resident LLC	Fast Solution	Private JSC	Public JSC	Representative Office	Branch company
Also known as?	ooo	готовая компания	зао	oао	предста вительство	филиал
Best use of company?	Trading Company	Timely secure contracts	Raise capital	Raise capital	Promotion, market research	Trading Company
Legally tax exempt if properly structured?	No	No	No	No	No	No
Corporate bank account location?	Sberbank	Alpha Bank	Citibank	Standard Chartered	VTB	GazPromBank
Client must travel to Russia?	No	No	No	No	No	No
Can secure trade finance?	Yes	Yes	Yes	Yes	Yes	Yes
Limited liability entity?	Yes	Yes	Yes	Yes	No	No
VAT payable on sales to local customers	Yes	Yes	Yes	Yes	No	Yes
Withholding tax on payments to overseas shareholders?	Yes	Yes	Yes	Yes	Yes	Yes
Average total engagement costs?	US$17,860	US$37,650	US$16,660	US$16,660	US$18,760	US$19,760
Average total engagement period?	4 months	2 months	5 months	5 months	6 months	6 months

See full table

Accounting and tax considerations	Tax resident LLC	Fast Solution	Private JSC	Public JSC	Representative Office	Branch company
Statutory corporation tax payable?	20%	20%	20%	20%	20%	20%
Must file an annual Russia tax return?	Yes	Yes	Yes	Yes	Yes	Yes
Effective corporation tax rate on net profits of US$250,000?	20%	20%	20%	20%	20%	20%
Must file annual financial statements?	Yes	Yes	Yes	Yes	Yes	Yes
Investment income is legally tax exempt in Russia?	No	No	No	No	No	No
Access to double taxation treaties?	Yes	Yes	Yes	Yes	Yes	Yes
Monthly GST reporting to the Government?	Yes	Yes	Yes	Yes	No	Yes
Legally tax exempt entity?	No	No	No	No	No	No
Dividends received are legally tax exempt?	No	No	No	No	No	No
Company registration	Tax resident LLC	Fast Solution	Private JSC	Public JSC	Representative Office	Branch company
Resident director/partner/manager required?	Yes	Yes	Yes	Yes	Yes	Yes
Minimum number of shareholders/partners?	1	1	1	1	Parent company	Parent company
Minimum number of directors/managers?	1	1	1	1	1	1
Minimum paid up share capital?	US$130	US$130	US$130	US$1,300	US$0	US$0
Shelf companies available?	Yes	Yes	Yes	Yes	No	No
Time to incorporate a new entity?	6 weeks	2 weeks	7 weeks	7 weeks	8 weeks	8 weeks
Can easily convert to a local PLC company?	Yes	Yes	Yes	Yes	No	No
Can have preference shareholders?	Yes	Yes	Yes	Yes	No	No
Business considerations	Tax resident LLC	Fast Solution	Private JSC	Public JSC	Representative Office	Branch company
Can invoice local customers?	Yes	Yes	Yes	Yes	No	Yes
Can hire local staff?	Yes	Yes	Yes	Yes	Yes	Yes
Can rent local office space?	Yes	Yes	Yes	Yes	Yes	Yes
Secures a residence visa for business owner?	Yes	Yes	Yes	Yes	Yes	Yes
Good entity for trademark registration?	Yes	Yes	Yes	Yes	Yes	Yes

Russia has signed free trade agreements?	Yes, see this page
This country is a member of WIPO and TRIPS?	Yes
The country is a member of the ICSID?	Yes
Average customs duties suffered?	7.8%
Government foreign investment approval is required?	No
Average monthly office rental? (US$ per sq m)	US$50
Minimum statutory monthly salary?	US$115
Average monthly US$ salary for local employees?	US$565
Russia RUB deposit interest rate? (1 year average)	7-9.70%
US$ deposit interest rate? (1 year average)	1.40-1.70%
Overseas remittance currency controls?	Yes
Public register of shareholders and directors?	Yes
Banking considerations
Multi-currency bank accounts available?	Yes
Corporate visa debit cards available?	Yes
Quality of e-banking platform?	Excellent
Crowd funding available in this country?	Yes

Russia business setup summary

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Benefits and problems
Benefits of Russia company registration
1. Russia today has the seventh largest economy in the world with a GDP of US$2.422 trillion. All the wealth rests with Moscow, which has Russia’s highest GRP (Gross Regional Product) of US$339,647m – almost double that of the next region;
2. The paid up share capital is 10,000 roubles (approximately US$130) for a limited liability company;
3. Russia is rich in natural resources, the revenues and jobs from which give the country’s middle class spending power;
4. Russia has a diverse range of business opportunities due to its rapidly-growing middle class population;
5. Russia is accessible by land and sea, meaning that businesses can select the most cost effective mode of transportation;
6. Russia has the 8^th largest workforce in the world. The mean monthly wage in the country is US$800 per month, which is affordable compared to EU countries where wages normally exceed US$2,000;
7. Compared to western countries, the cost of living in Russia outside of Moscow and St. Petersburg is very cheap when it comes to food, transport, utilities, rent, wages etc;
8. Russia has a unique and advantageous geographical location that allows the businesses to gain an access to the dynamic consumer markets of both Europe and Asia. Moreover, Russia is the 2^nd largest exporter of oil in the world with its top export destinations being China and the Netherlands.
Problems with Russia company registration
1. Each Russian company must have a resident director. Only the resident director may be the bank signatory;
2. Russia’s economy is extremely dependent on the price of oil and has suffered significantly due to OPEC’s recent action to lower the price of the world’s biggest commodity;
3. Sanctions related to the Russian occupation of Crimea increase the compliance burden for western businesses when doing business with Russia;
4. After company registration in Russia, quarterly financial statements must be submitted to local authorities;
5. Russia’s government plays a big role in daily business. Therefore, there exist administrative and legal barriers to business registration in the country. To start a Russian company, you will need professional help to navigate the legal and governmental obstacles;
6. Russia is not a member of the EU and therefore does not share the business benefits the EU has to offer;
7. Russia is a vast landmass, which makes good transportation within the country expensive. Entrepreneurs must carefully anticipate transportation costs;
8. Registering a company in Russia can become very complicated in some industries, as the Government restricts, and even prohibits, foreign investment in various industries including aerospace, natural gas, insurance, electric power, defence, natural resources, and large-scale construction;
9. Russia’s corporate tax rate is relatively high at 20%;
10. Russian is the official language for doing business in Russia. English is not widely spoken in the country even in the metropolitan cities of Moscow and St. Petersburg. As a result, non-Russian speaking multi-national entrepreneurs face massive communication barriers.

Best uses for a Russia company
- Technology research firms find Russia to be an attractive centre, thanks to the high technical skills of the country’s workforce. In addition, the Russian government has tax incentives in place for science and technology-related activities, including accelerated amortization rates and greater deductibility of R&D expenses for tax purposes;
- Setting up a business in Russia is favourable for companies belonging to the agriculture, textiles, chemicals, telecommunications, education and other related sectors. This is because the Advanced Special Economic Zones (ASEZs) in Russia offer special incentives to companies belonging to these industries. The ASEZ-incorporated companies are entitled to benefits, such as i) CIT and property tax benefits, ii) customs free trading zones, iii) project financing and iv) straightforward rules for hiring foreign employees.

Frequently asked questions

Can a foreigner start a business in Russia?
Yes, a foreigner can definitely start a business in Russia. They can choose one of the five available business entities: i) a limited liability company, ii) a joint stock company, ii) a partnership, iv) a branch, or v) a representative office.
One thing to note is the requirement for a foreigner to obtain a work permit to be able to be a director in a Russian company.
The registration procedure for all these entities is largely the same, however each type of entity has its pros and cons based on our Client’s field of business.
Is it possible to register a company without visiting Russia?
Yes, it is possible to register a company without travelling to Russia. The procedure is quite straight forward if you have a professional consultant guiding you and on the ground. Once you register your e-signature online, the registration package can be submitted to the Federal Tax Service of Russia to obtain the registration certificate for your business entity through your consultant or lawyer or accountant on the ground. The incorporation package will however require a signed incorporation decision from the entrepreneur(s) along with the charter and the founding agreement.
How can you register a company in Russia?
Below is a step-by-step breakdown of registering a company in Russia:
1. Decide the legal structure and its entity type, by choosing from a LLC, JSC, branch, individual enterprise, or partnership;
2. Reserve a name and decide the business location for the company. The registration and tax office depend on the location of the business;
3. Prepare, complete and sign the incorporation package. These documents include the company charter and the founding agreement. The details of the company, full name and abbreviated name, details of the founders, capital contribution of each member, and other management related details are also required. Each document will have to be submitted in the Russian language or as a legalized translation;
4. Submit the documents with the application form to the FTS centre corresponding to the business location;
5. Deposit the minimum capital requirement and obtain the deposit certificate from the bank;
6. Once you receive the approved incorporation documents, you can manufacture a company seal and apply for a corporate bank account.
How long does it take to register a company in Russia?
Once all the incorporation documents are prepared and compiled, the company registration process for a tax resident LLC can be completed within 6 weeks. A branch or a representative office of a foreign entity can be incorporated in 2 months.
What is the corporate tax in Russia?
The statutory corporate tax rate in Russia is 20%. Russian tax residents are taxed on their worldwide income, while foreign entities are taxed on income from their Russian operations.