Doing business in Russia
Russia is the country with one of the largest consumer markets, stretching over nine time zones and a very dynamic economy. It’s the biggest country in the world with the population of 143.4 million people, vast natural resources and a highly educated workforce.
Over the last decade Russia has been known to have a tremendous growth potential with many foreign nationals starting businesses in the country. Foreign investors doing business in Russia are attracted to the opportunities for growth and space for new ideas in the Russian market. Due to an enormous development, as well as the sheer size of the economy, Russia in 2012 became the leader in retail turnover in Europe. Russia today has a potential to grow into the largest European consumers market which is one of the reasons why more and more foreign investors are looking for an opportunity to enter the Russian economy.
Russia’s regions have diverse income and industrial structures and every foreign investor needs to investigate certain aspects of doing business in particular area.
Certain types of business activities can be conducted only on the basis of a special license issued by an authorized licensing agency.
In recent years Russia has begun active work on improving the country’s business climate by reforming its legislation and simplifying official procedures. Now the decision to start a new business in Russia, where profits are really high, is a great business opportunity for foreign investors. Russia remains a wonderland of opportunities for further growth with the business developing at a rapid pace.
Who Can Set up a Business in Russia?
There are some restrictions on foreigners operating businesses in some sectors, such as strategic sectors, air transport, gas supply, insurance companies and etc. Other from that, there are no limitations: any foreigner or foreign company can start a business in Russia. The Labour code is the main document regulating labour relations between employees and employers.
The form of legal presence
Before setting up legal presence in Russia, it’s necessary to create a precise business plan. Business modeling will prevent you from making mistakes and will help to choose the appropriate form of legal presence in Russia.
A foreign investor may choose one of several legal forms:
1. registering representative or branch office of foreign legal entity if you are already doing a main business abroad
2. forming a legal entity with participation of the foreign capital
In Russia the most common legal entities with foreign capital are limited liability companies and joint-stock companies. In all three cases, the liability of their shareholders for the company debts is limited to the amount of their contributions to the nominal capital of the company.
The charter capital of a limited liability company is divided into shares the size of which are determined by the founding documents and determines a minimum size of the company's property guaranteeing the interests of its creditors.
Charter capital contributions can be made in monetary form or in-kind. In-kind contributions require an independent appraisal.
The minimum amount of charter capital for a LLC is RUR 10,000.
3. Registering as an individual entrepreneur, who is running a business without formation of the legal entity (a foreign citizen can register with this status only if they have a temporary or permanent residence permit).
Taxation of Russian Companies
Particular activities in Russia can be subject to different tax regimes. Also different taxes can apply to the company depending on activities they carry on.
Most Russian regions have adopted regulations establishing tax concessions for certain investment activities.
There are two systems: the traditional (profit tax of 20 percent, VAT of 18 percent, property tax varies by region of registration of the entity but is approximately 2.2 percent) and the simplified system of taxation (no VAT, two types of unified 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.
Sale of goods, works, services, transfer of property rights, construction conducted by the company in Russia are subject to Russian VAT. Residents are subject to PIT on worldwide income, while non-residents are liable only with regard to Russian source income. A compulsory audit shall be carried out every year.
The steps to register a legal entity are follows.
1. Deciding on a business legal structure.
2. Forming the foundation documents.
3. Preparing the set of the required documents for registering.
4. Filing the required documents to the register office.
5. Receiving the incorporation documents.
6. Opening a bank account.
“Vetrov and Partners” Law firm has an experience in supporting foreign companies starting their business in Russia. We support our clients in all spheres of Russian law throughout Russia, the CIS and also internationally through partnership networks with leading local law firms in all major capital markets and jurisdictions. We have accumulated considerable practical experience based on a profound understanding of all the nuances of Russia’s legal realities, social, economic and political developments, the local culture and the mentality and insight expectations of ours clients.
“Vetrov and Partners” Law firm provide our clients considering doing their business in Russia with full range of legal services ensuring successful start and further operations.
«Vetrov and Partners» Law firm provides legal services in the following spheres:
1) Legal representation Services in Court
2) Intellectual property
3) Tax consulting
4) Support of transactions
5) Support of foreign economic activities
6) Due Diligence
7) Antimonopoly regulation
8) Registration services
Why choose our law firm?
a) Highly professional: a team of experienced and versatile professionals who can both provide answers to routine questions and successfully tackle highly demanding tasks. Our professional achievements, the trust of our clients go to prove that.
b) Stable: a law firm that has established traditions and fosters long-lasting and fruitful coopera-tion, as demonstrated by our strong team of professionals, wide range of regular clients and financial reliability.
c) Client-orientated: advisors and attorneys attentive to our clients’ needs help lighten their load. This is proved by our high standard of service and commitment to the timely identification of problems and to solving them.
d) Cost-efficient: our rates match the results we deliver. Our clients know from experience that the benefits greatly exceed our fees; our rates compare favourably with those offered by firms of a similar calibre.
e) Respected: lawyers who will not take on shady cases or deal with suspicious clients. Our cli-ents can be confident that we do not enter into any bargains with their competitors or submit to “persuasion” by the authorities. Our procedural opponents prefer to play fair with us.
If you have any further queries, please do not hesitate to leave your message in the Contact Us section. We will be most happy to assist foreign investors with structuring their presence in our country.
+7 (383) 310-38-76