Establishment of branches and opening of representative offices of foreign companies in Russia

Dec, 07 2019

Contents:

Any company from abroad which is going to sell its goods and services in Russia must have here its office of some type. There are three structures that are most often chosen by foreigners: a branch, a representative office, or a limited liability company. Each of them has its own characteristics, advantages, and limitations, so in certain situations, each of them may be the better choice.

The first two, unlike an LLC, are structural units of a holding company, and to legalize them in Russia, one is required to pass the accreditation (not registration) process.

What are these?

Let’s start by defining a branch and representative office.

A branch is a separate structural unit of a holding firm, which is intended capable of performing all of firm’s economic functions, and to represent it in Russian Federation. Such unit does not become a separate legal entity. To operate in Russia, branches of foreign firms pass the accreditation at the State Registration Chamber. And upon completion, they get a certificate, including all foreign citizens who will work there. It will be entered into the state register accredited on the territory of Russia. A branch can conclude contracts in Russia (acting as a representative of a holding company), and perform other representative functions, besides, a branch can be engaged in production, trade, or providing services, in fact, act as a separate company.

They are capable of concluding deals on behalf of parent company, Unlike a branch, a representative office does not engage in trade, production, and does not provide services. They can be both commercial and non-commercial.

Why a branch, not an LLC

But what does this form of representation give for a holding company, and why is it often chosen over the creation of a separate LLC, although a branch accrediting process takes even longer than registering a new one, and the LLC has more rights and powers? The answer is a simplified system of capital input (investments in development) and withdrawal (profits received abroad), and reduced requirements for currency control.

Step by step procedure

Now let’s take a closer look at the accreditation process for a foreign company branch in Russia.

Submit documents to Russian CCI. This is required to get official confirmation for every foreigner-employees who is going to work in a new branch.

After receiving documentary confirmation from the CCI, submit all the documents required to the Interdistrict Inspectorate of the Federal Tax Service No. 47. These include the following list: 

  • Filled out an application; 
  • A complete package of constituent documents for a holding company (document must be translated and notarized); 
  • Acknowledgment of legal status of a holding firm in its home jurisdiction, for example, extract from a register (document must be translated and notarized); 
  • Acknowledgment a taxpayer status of the holding firm in its native jurisdiction, with a taxpayer code, (document must be translated and notarized); 
  • The decision of the board of directors of the holding firm to register a branch in the RF (document must be translated and notarized); charter of the new branch; 
  • Power of attorney to the head of the branch in Russia (with a notarized translation into Russian); documents confirming that payment of the state duty.

After that, you get a confirmation and your branch is entered into the Unified Russian State Register. That’s All! Now you can legally develop your company in Russia.

Time and cost

As for the timing, the entire accreditation procedure takes about 30 days (of which 3 days will be spent on checking the data on employees in CCI and 25 days for checking in local tax service).

For the entire procedure, you will need to pay approximately 150,000 rubles (approximately $2,000 at the current exchange rate as of 19.02.2021). This includes the state fee of 120 thousand rubles, payment for the CCI’s services for the employees-foreigners verification 18 thousand rubles, and also various expenses for the localization of documents, notary certification, apostilles.

Problems and causes of failures

This procedure is generally simple and fairly quick, but certain problems can still arise. So, for instance, according to the requirements of local legislation, documents must be drawn up according to certain requirements, translated into Russian, notarized. The documents must have appropriate signatures, stamps, etc. And if your documents are issued in violation of these rules, you may be denied accreditation (this is the most common reason for refusals).

The second possible reason for refusal is that the documents contain false or inaccurate information. You may also be refused if the purpose of creating a branch is contrary to the laws of the Russian Federation.

In any case, if you are refused, you will have to start all over again and the contribution of 120 thousand rubles will not be returned to you.

Services of the VALEN company

So, as you can see, the process is quite simple, but still, there are some nuances here, particularly, in the paperwork, and if you ignore them, you can lose money and time. Therefore, for everything to go smoothly and quickly, we recommend the services of our specialists. We are ready to advise you on any issues related to the branch accreditation, and go through the entire process with you, from start to finish, and then assist in accounting matters and communication with the local tax authorities. Contact the professionals!

Author of the article
Establishment of branches and opening of representative offices of foreign companies in Russia
Valentina Khlavich
Managing Partner
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