DOING BUSINESS IN RUSSIA IN 2018
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.
Accounting and tax regulations
Small business set up
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$40,640 | 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 |
| 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
Press the link headings below to read detailed, relevant, up to date information.
Benefits and problems
Benefits of Russia company registration
- 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;
- The paid up share capital is 10,000 roubles (approximately US$130) for a limited liability company;
- Russia is rich in natural resources, the revenues and jobs from which give the country’s middle class spending power;
- Russia has a diverse range of business opportunities due to its rapidly-growing middle class population;
- Russia is accessible by land and sea, meaning that businesses can select the most cost effective mode of transportation;
- Russia has the 8th 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;
- 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.
Problems with Russia company registration
- Each Russian company must have a resident director. Only the resident director may be the bank signatory;
- 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;
- Sanctions related to the Russian occupation of Crimea increase the compliance burden for western businesses when doing business with Russia;
- After company registration in Russia, quarterly financial statements must be submitted to local authorities;
- 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;
- Russia is not a member of the EU and therefore does not share the business benefits the EU has to offer;
- Russia is a vast landmass, which makes good transportation within the country expensive. Entrepreneurs must carefully anticipate transportation costs;
- 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;
- Russia’s corporate tax rate is relatively high at 20%.
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.
