Exclusion of “Mass registration at address” as a Basis for Business Checks: What Does It Mean for Organizations?

The Federal Tax Service (FTS) of Russia has proposed an important initiative that could significantly change the rules for businesses. As part of a new draft order, it is planned to exclude mass registration at address as a basis for verifying the accuracy of information about companies included in the Unified State Register of Legal Entities (USRLE). This initiative has already attracted the interest of entrepreneurs and experts, as it could simplify the process of registering new companies and increase trust in existing ones.

What is Mass Registration at address?

Mass registration at address refers to the registration of a large number of companies at the same legal address. Currently, addresses with numerous registered companies are viewed as suspicious by tax authorities. This creates additional challenges for bona fide entrepreneurs who may be suspected simply because of their place of registration.

How Does It Affect Business?

Mass registration at address may signal that a company is attempting to evade regulatory scrutiny. If some of the suspicions are confirmed during an audit, it can lead to serious consequences for companies working with such kind of firms. For example, they may face denials of VAT deductions or disallowance of expenses from their tax base.

Advantages of the FTS Initiative

If the FTS draft is adopted, it could lead to the following positive changes:

1. Simplified Registration 

   The removal of restrictions on registration at mass addresses will allow entrepreneurs to open new companies more easily, without the fear that their address will be defined as a suspicious one.

2. Reduced Risks for Businesses 

   Excluding mass registration at address as a basis for checks will lower the probability of companies being marked for unreliable information in the USRLE. This, in turn, reduces risks for businesses working with organizations registered at such addresses.

3. Trust building 

Businesses will be able to interact more confidently with companies registered at mass addresses when selecting counterparties.

Expectations and Outlooks

The draft order is expected to be adopted soon, creating new opportunities for business development in Russia. However, even with a simplified registration, it is essential to remain vigilant and thoroughly check potential partners. This will help avoiding potential issues and protecting  company’s reputation.

In conclusion, the FTS initiative to exclude mass registration at address as a basis for business checks could become a significant step towards improving the business environment in the country, fostering entrepreneurship, and boosting economic growth overall.