Accreditation of Branches and Representative Offices of Foreign Companies
In order to do business in Russia, foreign investors generally create a Limited Liability Company (LLC), a branch or a representative office. The registration of a branch/representative office in Russia is related to the accreditation procedure, which is more complex and costly compared to registering an LLC.
Nevertheless, many companies choose this way of doing business, why?
What are the differences between branch and representative offices?
A representative office is a division of a foreign business entity created in order to represent and protect its interests. The representative office concludes deals on behalf of the foreign business entity, supervises their implementation, and ensures its interests are protected. Normally representative offices are created for non-profit activities.
Branches have all the functions of a representative office, but in addition can also conduct business (manufacture and sell goods, render services, etc.).
However, neither branches nor representative offices are a business entity under Russian law.
What documents are required to open a branch/representative office?
- Accreditation application;
- Company documents of the foreign business entity, with an apostille and notarized translation;
- Extract from the register of foreign business entities or equivalent legal document/s certifying the legal status of the foreign business entity, with an apostille and notarized translation;
- Document/s confirming the registration of the foreign business entity as a taxpayer in the country of origin, indicating the taxpayer code (or taxpayer code equivalent), with an apostille and notarized translation;
- Resolution to establish a branch or representative office in Russia, with an apostille and notarized translation;
- Regulation on foreign branch, representative office;
- Power of attorney to confer the necessary powers to the head of the foreign branch or representative office in the Russian Federation, with an apostille and notarized translation;
- Document confirming payment of state fees.
What are the advantages of doing business through a branch/representative office?
The most significant advantage of doing business through a representative office is the reduction of currency control by the public authorities. For example, there is no need to obtain a currency transaction report when sending funds to the mother company.
What is the cost of accreditation?
State fee is applicable of RUB 120,000 (about EUR 1,700).
Certification of the number of employees in the Chamber of Commerce of the Russian Federation costs from RUB 5,000 to 15,000 (EUR 70 to 250), depending if there are any foreign employees hired by the branch/representative office.
Additional costs include notary services, translations and apostilles.
How long does accreditation take?
It takes a relatively long time to prepare and complete the required documents in the proper manner. Registration itself takes about 45 days. It takes about 3-5 days for the Chamber of Commerce of the Russian Federation to certify the number of employees, and another 25 working days to register with the tax inspectorate.
Denial of accreditation
Possible reasons for the denial:
- The required documents for accreditation are not presented, submitted outside of the required timeframe, or they do not meet the requirements for their completion;
- Incorrect information is presented;
- The objectives of creating the branch or representative office are contrary to the Constitution and laws of the Russian Federation.
Possible difficulties during the branch/representative office accreditation process
Even though the accreditation procedure does not seem complicated, many difficulties can arise. There are many requirements for documents related to the contents, signature, seal, apostille, and translation. Failure to comply with these requirements will result in the denial of accreditation, in which case the state fee is not refundable.
What is the accreditation procedure?
The procedure for obtaining accreditation is as follows:
- Submission of documents to the Chamber of Commerce of the Russian Federation to certify the number of employees working at the branch/representative office of the foreign business entity;
- Submission of documents to the Federal Tax Service Inspectorate No. 47 in Moscow;
- Receipt of a certificate of registration in the State Register.
VALEN provides a full range of services related to the accreditation of branches and representative offices of foreign companies. We provide support at all stages of the accreditation procedure:
- Consultating on all matters related to accreditation;
- Selection of legal address and preparation of documents to confirm it;
- Preparation of necessary applications;
- Submission and receipt of documents in the registering authority.
A foreign company interested in expanding the scope of its commercial activities decided to enter the Russian market, and therefore applied to VALEN Group for assistance in setting up a limited liability company.
In addition to establishing a legal entity on the territory of the Russian Federation, it was necessary to provide the client with assistance in the subsequent employment of a foreign citizen as General Director of the established company in strict accordance with the rules of Russian employment and migration legislation, as well as to afterwards change the sole executive body of the LLC to a management company.
Besides, as soon as the Russian company was incorporated, the client expressed a desire to enter into a transaction for the purchase and sale of shares in the authorized capital of the established LLC, at that the buyers of the shares were 2 foreign citizens. Thus, the number of LLC members increased to 3.
VALEN Group lawyers:
- successfully registered a limited liability company;
- collected and submitted the entire package of documents for obtaining permits necessary for legal employment;
- prepared all the necessary documents for the change of the sole executive body to the management company;
provided full assistance in concluding the purchase and sale of shares.
An international travel platform from Sweden, which was interested in expanding the scope of its commercial activities, has decided to enter the Russian market, and therefore has applied to VALEN Group for assistance in registering a limited liability company.
The case was sophisticated by the fact that the beneficiaries of the company planned to form a limited liability company with two foreign directors acting jointly, three members of the Board of directors, all of whom are foreign citizens.
VALEN Group lawyers:
- have prepared the constituent documents and the forms required for filing with the Federal Tax Service;
- provided support for the client in the state body.
A foreign company, which is a leader among manufacturers of components for commercial refrigeration equipment in the CIS countries, applied to VALEN Group with a request for accreditation of a representative office of this company, incorporated under the legislation of a foreign state, in order to legally carry out business activities on the territory of the Russian Federation.
The complexity of the entire accreditation process was due to the fact that the founders of the foreign company were persons who were not residents of the country of company’s incorporation, as well as due to significant restrictive measures taken in connection with the spread of coronavirus infection which have significantly complicated the entire process.
VALEN Group lawyers:
- prepared a comprehensive set of documents for the accreditation of the representative office in accordance with the requirements of the current legislation;
- submitted a set of necessary documents to the authorized state executive authority;
- received a document confirming the accreditation of the representative office, as well as all the necessary documents from the extra-budgetary funds of the Russian Federation;
- performed actions to open a current account of the representative office in a Russian bank.
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