For exports from Russia, it is recommended to register a subsidiary company rather than a branch

May, 30 2024

When choosing between establishing a subsidiary and a branch in the Russian Federation for export, it is recommended to give preference to the establishment of a subsidiary.

Branches of foreign companies in the Russian Federation have corresponding financial obligations as well as Russian organisations, subject to appropriate conditions. This includes the payment of VAT. When VAT payment is required, an input tax reduction is available. Thus, a branch of a foreign company has the opportunity to request a VAT refund from the Russian budget.

To carry out the registration of a legal entity at the address of a residential property, the consent of the owner of this object is sufficient. This information comes from Paragraph 4 of the Resolution of the Plenum of the Supreme Arbitration Court of 30.07.2013 № 61.

Based on experience – opening a subsidiary in the Russian Federation has more favourable conditions, instead of establishing a branch. The latter, as a rule, faces obstacles in matters of currency regulation, fulfilment of customs procedures and VAT recovery.

The transfer of goods within one legal entity does not guarantee their actual realisation. Thus, an additional question arises as to whether a branch can be used to export products of the main enterprise.

The export of goods from the Russian Federation with no obligation to re-import them falls within the scope of foreign trade activities. In the absence of a foreign buyer, accordingly, no export contract is concluded. Since the parent company and its branch are the same legal entity, this circumstance is an obstacle to the recovery of input VAT.

Advantages and disadvantages

Branches and subsidiaries have their own advantages and disadvantages, and the choice between them depends largely on the specifics of your business and strategic plans:



  • A branch has a greater degree of control from the parent company as it is not a separate legal entity;
  • branches usually have higher operational efficiency and less additional mark-ups in the distribution chain;
  • branches have the right to engage in commercial activities and have obligations to the government, including the payment of taxes.


  • Branches require an increased level of management and control by the parent company;
  • branches may be more vulnerable to legal and tax risks because they are linked to the parent company.



  • Subsidiaries are separate legal entities, which can provide a high level of protection for the parent company;
  • subsidiaries may have more flexible management structures and business models, making it easier to adapt to the local market and legislation.


  • subsidiaries usually have more additional mark-ups in the distribution chain compared to branches;
  • establishing and managing a subsidiary may require more time and resources.
Author of the article
For exports from Russia, it is recommended to register  a subsidiary company rather than a branch
Valentina Khlavich
Managing Partner
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