Answers to Many Common Questions About Setting Up Business Operations in Russia
It is not unusual to have numerous questions about moving or expanding a business to Russia. Here, you will find answers to many common questions and information about how to get help with concerns that more specific to your unique business.
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How long does it take to register a business in Russia?
From the time you file all the proper documentation with the correct offices in Russia, you will usually only have to wait a few weeks until your business is official. Most of the time involved in the process happens before the filing—in the preparation of the required documents. However, with the assistance of the Jus Privatum team, even this stage of the process can be expedited and you can be confident that the applications will be accepted the first time they are submitted.
We Take Our Time to Make Sure Your Documents Are in Order
When you work with Jus Privatum to open your branch office or to incorporate a legal entity in Russia, we will not rush you through the most important stage of the formation of your business. We will take the time to help you draft legally sound documents that will provide you with the best possible management and tax structures. In the preparatory stages, we will do the following:
- Explain the Russian corporate regulations that apply to your situation.
- Help you understand the main provisions of the required foundation documents and how they may differ from those in the U.S. and the EU.
- Work with you to draft your Russian foundation documents so that they work to your greatest advantage.
- Make sure all of the documents have been properly executed.
- Provide notarization, legalization, and translation services for all documents.
This undertaking will take some time, as we will make sure you understand the process and that you are making sound business decisions based on Russian regulations and restrictions. Once all of the documents have been prepared, we will begin the procedure of filing them with the appropriate government offices.
Timing of the Next Steps in the Process
The registration of a commercial company takes five business days from the date of filing. Once this step is complete, you will be able to apply for a bank account at a bank of your choosing. Because the bank application process can be complicated depending on the bank and your situation, this can take anywhere from one to three weeks or more to complete.
If you are registering a branch or representative office, the approval process is longer than for a commercial entity because more governmental departments are involved.
Depending on the business activity you intend to pursue, applying for a license can add additional time to the process.
Finally, if the CEO of your corporation is a foreign citizen, he or she will not be able to begin working in Russia until he or she has secured a work permit and visa.
Potential Causes of Delay
With careful planning, professional preparation, and precise translating, most delays can be avoided altogether. Some of the mistakes that can lead to delays include:
- Translation errors.
- Lack of mandatory provisions in foundation documents.
- Use of blacklisted registered addresses.
- Other errors in applications.
When you work with our attorneys, however, you can be sure that none of these delays will occur. We find that, when the process is delayed, it is usually because the client is slow to return documents or respond to requests. In that way, the amount of time it will take is generally up to the client.
How We Can Help With the Process
With our attorneys handling the paperwork and helping to ensure that the documents are drafted properly and in accordance with the law, the risk of the registration being rejected by the registration office is minimized. Our attorneys are also able to answer any questions the client may have at any stage of the incorporation process. We will help the client create a time plan for the smooth start of his or her business operations in Russia. The corporate practice at Jus Privatum includes the full scope of services related to company formation in Russia, including:
- Drafting a set of registration documents tailored to the client’s needs.
- Providing a reliable registered address in Moscow, the Moscow region, or St. Petersburg.
- Registering the company with the authorized Russian state tax inspectorate.
- Manufacturing of the corporate seal.
- Registering the company with the necessary state extra-budgetary funds, such as the social security fund and the pension fund.
- Opening a bank account.
When you partner with Jus Privatum to open your branch office or legal business entity in Russia, you can be sure that the process will go smoothly and as quickly as it possibly can. Connect with us via the link on this page to find out more.
What is the tax on dividend income?
Dividends received by Russian legal entities from Russian or foreign legal entities are taxed in Russia at a 13% flat rate. Tax on dividends from abroad withheld in the source country may be credited against Russian tax.
The standard 15% tax rate is applicable to dividends paid by Russian legal entities to foreign legal entities. The tax should be withheld by the Russian legal entity paying dividends. The tax may be reduced based on a relevant DTT, usually to 10% or even 5%.
What are the social contributions in Russia?
Annual salaries of all employees are taxed under the following rules (effective 2015):
- Contributions to the Social Insurance Fund: only the first RUB 670,000 is taxed (at a rate of 2.9%);
- Contributions to the Pension Fund: the first RUB 711,000 is taxed at 22%, and the excess is taxed at 10%;
- Contributions to the Medical Insurance Fund: a 5.1% rate applies to the total salary.
Remuneration of foreign nationals temporarily staying in Russia is covered by (1) pension insurance contributions at a rate of 22% within the threshold of RUB 711,000 and a 10% top-up charge on remuneration paid in excess of the threshold; and (2) social insurance contributions at a rate of 1.8% within the threshold of RUB 670,000. The only exception made is for highly qualified specialists (with a respective work permit).
What is the profits tax rate in Russia?
The maximum profits tax rate for all taxpayers in the Russian Federation is set at 20% (2% is paid to the federal budget and 18% is paid to the budgets of constituent regions). The amount payable to the budgets of constituent regions may be reduced by the regions. Russian legal entities pay tax on their worldwide income. Foreign legal entities pay tax on Russia-source income derived through a PE (at 20%) and are also subject to withholding tax (WHT) on income from Russian sources not related to a PE (at rates varying from 10% to 20%, depending on the type of income and the method used to calculate it).
What categories of foreign employees have to exam in Russian language, history and fundamentals of Russian law?
Under recent amendments to Russian immigration law, regular foreign employees entering Russia on a visa basis and regular foreign employees entering Russia on a non-visa basis must pass an exam in Russian language, history and the fundamentals of Russian law in order to obtain work permits. Citizens of the countries of the Eurasian Economic Union and HQS are exempt from this requirement. The exam may be only taken in a number of certified educational institutions in Russia.
What are the work permit requirements in Russia?
Work permit requirements shall apply only to HQS and regular foreign employee entering Russia on a visa basis. Under Russian immigration law, these categories of employees have the right to work in Russia only if they hold individual work permits. Also, as it is worth noting that employers of regular foreign employees entering Russia on a visa basis must obtain employment permits (i.e. have permission to employ foreign personnel).
4 Employee Categories for Russian Work Permits
- Regular foreign employees with visa.
- Regular foreign employees, non-visa.
- Foreign employees from Eurasian Economic Union (EEU) countries.
- Highly qualified specialists (HQS).
Employment and work permits are generally issued for one year and specify a particular Russian region. An HQS work permit shall be generally issued for three years and may be valid for several Russian regions. Work permits require reapplication upon expiration. Contact our Russian business attorneys for more information.
What are the quota requirements in Russia?
Foreign employees from the countries of the Eurasian Economic Union, HQS and regular foreign employees entering Russia on a non-visa basis are exempt from the quota system and can be hired even if the given year’s quota has already been met. Regular foreign employees entering Russia on a visa basis are generally formalised within the quota annually approved by the Russian Government.
Companies intending to hire foreigners must submit a request for a quota every year before the respective deadline set in the region where the foreigner will be working. Failure to apply for a quota in a timely fashion may result in significant difficulties in employing foreign nationals. The Russian government issues a list of professions not exempt from quotas every year. The list usually includes senior management of Russian companies and branches/ representative offices, as well as less common professions such as IT security specialists or engineers.
What is a Highly Qualified Specialist?
Highly Qualified Specialists (“HQS”) are foreign employees entering Russia on a visa basis and/or entering Russia on a non-visa basis (excluding citizens of the Republics of Armenia, Belarus and Kazakhstan) whose income in Russia makes them eligible for the privileged status of “Highly Qualified Specialist”. HQS status is available to foreign employees earning a salary of at least 167,000 RUB (about USD 2,450) per month (the employer must inform the immigration authorities about payments made to HQS on a quarterly basis). HQS employees work in Russia on the basis of their personal HQS work permits while their employers do not need to formalise employment permits.
Are there any employment restrictions for foreign employees ?
There are no restrictions on how many foreign employees can work in a given Russian company or how long they can be employed in Russia. However, restrictions are in place regarding the types of activities in which foreign employees can be engaged (e.g. a foreign individual cannot work in a public service position).
What are the mandatory requirements for the content of employment contracts in Russia?
A written employment contract with terms of employment must be concluded with every employee in Russian. The Labour Code establishes mandatory requirements for the content of employment contracts. The following conditions must be included in an employment contract:
- place of employment;
- job function;
- employment commencement date;
- salary payment terms and conditions;
- work hours and vacation entitlement; etc.