Any time you are working with a government entity—no matter where in the world you are—there will be fees and taxes to pay. Russia is no exception, but with proper advanced planning, you can be prepared for the payments you must make and establish your business in a way that makes the most sense for you from a tax structure standpoint. When you work with the corporate legal team at Jus Privatum, you can be sure there will be no surprise costs down the road.
Legal Fees You Will Have to Pay
The preparation, notarization, and filing of each document will come with a fee, which you can expect anywhere you are doing business. When you plan and budget for the fees, they do not have to break the bank. At Jus Privatum, we will inform you of all of our fees up front so you will know what to expect. The following are some of the services that will require payment of a fee:
- Drafting of foundation documents and company incorporation documents.
- Any additional post-registration procedures.
- Provision of a registered address for a newly created company.
- Notarization and legalization of the founder’s documentation in the land of a foreign founder’s residence.
- Russian state duty for company registration.
- Translation of the foreign documents into Russian.
- Notarization of certified true copies of documents paid in Russia to the local notary.
- Bank commissions related to account opening.
- Share capital amount to be transferred to the company’s new bank account.
There may be additional filing fees and document fees, depending on the type of office or business entity you are opening in Russia.
Payment of Business Taxes in Russia
Tax requirements in Russia are not based on what kind of business you form—LLC, JSC, partnership, etc.—as much as the status of your tax residence. This will be a major topic for discussion in the planning stage of your business. The advisors at Jus Privatum are knowledgeable on the subject and will help you make the best decisions for your purposes. The following are some special tax requirements and benefits for you to consider:
A foreign company can be recognized as a Russian tax resident if the foreign company’s business activity in Russia can be recognized as a permanent establishment for taxation purposes. A permanent establishment (PE) is broadly defined as “a branch, division, office, bureau, agency, or any other place through which a foreign legal entity regularly carries out its business activities in Russia.” Foreign legal entities pay tax on profits attributable to a PE. Additionally, since 2015 a foreign company can be recognized as a Russian tax resident, if the tax authority has sufficient evidence that the activity of the company is conducted mainly in Russia—in particular, if board meetings take place in Russia and the CEO is mostly acting within the territory of the Russian Federation. When this is determined, the foreign investor will be required to pay taxes on profits based on the filing and payment schedules established for Russian legal entities.
If your business meets the qualifications of a small or medium-sized business in Russia, you will be able to follow a simplified tax regime of a 15% tax on income minus expenses, or 6% tax on gross revenues. There are some restrictions on which foreign legal entities can qualify for this structure:
- Legal entities may own no more than 25% of the shares in the Russian company; one or more individuals must hold at least 75% of the company.
- There are no branches and representative offices listed in the incorporation documents.
- Annual revenue does not exceed 80 million rubles (approx. $1.2 million), subject to annual review).
- The annual balance value of tangible and intangible assets is no more than 100 million rubles.
- The business has no more than 100 employees.
Jus Privatum can help you determine if you can qualify.
Certain types of business ventures can qualify for tax incentives from the Russian government. These include mining, exploring of minerals, participation in major investment projects (e.g. the Skolkovo Innovation Centre or the International Financial Centre project), or establishing a business within one of the special economic zone.
Reporting and audits
Russian legal entities should prepare a balance sheet, cash flow statement, profit-and-loss account, summary of accounting policies, and other documents according to the Russian accountancy standards for each year. Representative offices and branches should report only their income and expenses and applicable taxes for such incomes. An annual audit is mandatory only for the following forms of companies: public and listed companies, certain financial companies, insurances, investment funds, and some others. Modern software options are now available to make the reporting process easier for foreign investors.
Put the Knowledge of Jus Privatum to Work for You
While the fees you will owe are fairly straightforward, determining your tax structure can be complicated. At Jus Privatum, we want your business to be as profitable as it can be and we will discuss all of your options with you to help you make the best tax decisions. Connect with us through the link on this page to start discussing your options.