A branch of a foreign company in Russia: rules, procedure and conditions for opening a branch

Contents:

• How to open a branch of a foreign company in Russia
• How to open a representative office of a foreign company in Russia
• The difference between a branch and a representative office

Opening a branch or representative office of a foreign company in Russia means transferring part of the ready-made business from abroad to Russia. In essence, the entrepreneur does not need to re-create the business structure in another country. It is enough to relocate a ready-made entrepreneurial project to another country and resolve a number of issues on the ground, for example:

• Hire staff at the new location. 
• Resolve logistical issues.
• Establish channels for the marketing of products.
• Rent an office and resolve other property issues. 
• Adopt a marketing strategy which suits the region. 

Read more about the peculiarities of registering a branch/representative office in Russia in this article. 

How to open a branch of a foreign company in Russia

A branch of a foreign company is a detached body of entrepreneurial activity, which has a number of distinctive features. Among them we can highlight the following:

• It is located in a different place from the location of the parent legal entity. 
• Partially or fully assumes the functions of the parent company. 
• Does not have the status of a legal entity within Russia.
• Has the right to open its own production facilities inside the country. 

In order to register a branch inside Russia, the management of the company must make the relevant decision in an official format. Next, the state control authorities must accredit the regional division. This is carried out by the Interdistrict Inspectorate of the Federal Tax Service No. 47 for the city of Moscow.

To obtain accreditation, the following documents are required: 

• Paperwork on the establishment of the parent company. 
• Extract from the register of foreign legal entities or other document which confirms the legal status of the company. 
• Document on tax registration abroad. 
• Certificate of incorporation of the parent company in the foreign country. 
• Bank account details. 

In addition, representatives of the parent company will also need to gather the following documents and perform the following steps: 

• Application according to Form 15AFP. The document is to be prepared in Russian, signed by an authorized representative of the parent company. 
• Submit data on the number of staff positions in the branch office to the Chamber of Commerce and Industry (CCI) of the Russian Federation. In all cases the information must be certified even if there are no staff present. To do so, you must send a free-form letter requesting that the information be certified. There is a charge for this service, the cost of which depends on how the documents are submitted.
• Pay a state duty of 120,000 roubles for each branch to be opened. 

It is important to bear in mind a number of typical mistakes that applicants for opening a branch in Russia sometimes make. These include: 

• Incomplete filing of documents. 
• Violation of the deadline for submitting a set of documents. 
• Inaccuracy of the same data in different documents. 
• Incorrect information. 
• Errors in filling in. 
• Non-compliance of the branch with the legislation of the Russian Federation in terms of the chosen type of activity. 

In order to avoid such situations, careful attention must be paid to the data indicated in the documents and to the list of business documents itself. If there are mistakes, the Federal Tax Service will refuse to issue accreditation. However, if the procedure ends in a positive decision, the representatives of the parent company will receive a document for inclusion in the register of accredited branches of foreign legal entities. 

Before a foreign branch starts operating in Russia, it is important to draw up and adopt a special regulation. It should reflect: 

• The full name of the parent legal entity and its branch. 
• The legal form of the foreign company. 
• The legal address of the branch in one of the regions of the Russian Federation. 
• The address of the parent company abroad. 
• The chosen type of business. 
• The purpose of opening a branch in Russia. 
• The management structure of the branch.

When opening a Russian branch, it is important to bear in mind that the domestic entity must be managed by an authorised body of the foreign parent company. This means that the foreign head must select and appoint a general director. His authority is confirmed by an official power of attorney. 

Once the accreditation and other preparatory procedures have been completed, the appointed director general can open a bank account and get ready to work on site. 

How to open a representative office of a foreign company in Russia

A representative office of a foreign company is a separate business entity which can only take over partial functions of the parent company. 

Most often, the procedure of opening a representative office of a foreign company is not very different from the steps to be taken in case of registering a branch. If we talk about them in more detail, these are:

Stage 1: Preparing a regulation on opening a representative office. 

The document is to be drawn up in a free form. It contains the same data as in the case of opening a branch. 

Stage 2. Making and issuing a decision on establishing a representative office in Russia.

It is necessary for obtaining the accreditation of a representative office. It is important to remember that the decision should contain up-to-date information and be made not earlier than 12 months before the date of accreditation. 

Stage 3. Preparation of application form 15AFP. 

The same rules apply to the establishment of a representative office as for branch registration.

Stage 4. Obtaining a document from the CCI certifying the number of employees. 

The following set of documents must be submitted to the Chamber of Commerce and Industry to obtain the official paper:

• A letter signed by the head of the foreign company. It should be written on the official letterhead of the foreign legal entity with contact details. 
• Page 5 of the 15AFP application form.
• Establishment documents for the parent company. 
• Extract from the Foreign Corporate Registry. 
• Document confirming the taxpayer status of the parent company. 
• Decision of the parent company on establishing a representative office in Russia.
• Regulations on the representative office. 
• Power of attorney for appointment of head of a representative office. 

Stage 5. Payment of State duty for opening a representative office in Russia. 

The amount thereof shall also be 120,000 roubles. 

Stage 6. Filing a full set of documents for the registration of a foreign company. 

In addition to the documents listed above, an inventory of the available business documents drawn up in two copies must be submitted to the State Body. 

It is important to know that the accreditation of representative offices in Russia is carried out by Interdistrict Tax Inspectorate No. 47 in Moscow. However, credit companies must apply to the Central Bank of the Russian Federation; international airlines must apply to the Federal Air Transport Agency.

Stage 7. Obtaining an accreditation decision. 

As a rule, about 15 working days pass from the moment the documents are submitted and the decision is issued. Accreditation for a representative office is open-ended. 

Step 8. Tax registration of the Representative Office. 

Step 9. Registration in the database of foreign companies’ Representative Offices in Russia with an appropriate number. 

Stage 10. Registration with the non-budgetary funds of Russia. 

These are first of all the Russian Pension Fund and Social Security Fund. 

Stage 11. Opening a bank account and ordering a seal. 

Stage 12. Getting the Representative Office ready for work. Inviting foreign persons – representatives of the company – to Russia by arranging visas.

The difference between a branch and a representative office   

As it becomes clear from the previous sections, foreign companies can operate through a branch or representative office in the territory of the Russian Federation. However, the heads of foreign legal entities are not always in a position to choose the legal form in which to operate.

The main common features of branches and representative offices are as follows:

• Are located outside the location of the main company. 
• They operate without forming a legal entity. 
• The parent company can endow them with their own assets. 
• Information on them can be found in the foundation documents of the parent company, as well as in the Unified State Register of Legal Entities. 
• The rules of operation may be stipulated in the main document, i.e. the articles of association, which are duly drafted and established. 
• Have general directors appointed by the management of the parent company in an established formal manner.

However, there are significant differences that distinguish a branch from a representative office. First and foremost, it concerns the fact that a branch may take over some or all of the functions of the parent company. This consists of:

• Placing production in the territory of Russia. 
• Trading goods or providing services in the country. 
• Distributing manufactured products in the sales markets. 
• Providing intermediary services. 
• Being a contractor or subcontractor.

Representative offices are deprived of these functions, as they can only carry out representational activities. This means that their work in Russia will be limited to supporting existing users and promoting products through marketing and advertising tools. 

If problems arise with the accreditation of branches and representative offices in Russia, you should seek professional help. The lawyers at the VALEN consultancy company will provide advice and the necessary assistance to resolve difficult issues.