Types of business activity forms for foreign companies in Russia: comparative outline

ACCOUNTOR
Sadovnicheskaya naberezhnaya 79 Shpalernaya ul. 54 Moscow Stockholm
115035 Moscow, Russia 191015 St. Petersburg, Russia St. Petersburg Oslo
+7 495 788 00 05 +7 812 325 82 94 Kyiv Copenhagen
accountor.ru accountor.ru Helsinki Utrecht
info@accountor.ru info@accountor.ru
TYPES OF BUSINESS ACTIVITY FORMS FOR FOREIGN COMPANIES IN RUSSIA.
COMPERATIVE OUTLINE:
BRANCH – REPRESENTATIVE OFFICE (REP. OFFICE) – SUBSIDIARY
COMPANY (LLC) –BRANCH OF LLCIN RUSSIA

ACCOUNTOR
Sadovnicheskaya naberezhnaya 79 Shpalernaya ul. 54 Moscow Stockholm
115035 Moscow, Russia 191015 St. Petersburg, Russia St. Petersburg Oslo
+7 495 788 00 05 +7 812 325 82 94 Kyiv Copenhagen
accountor.ru accountor.ru Helsinki Utrecht
info@accountor.ru info@accountor.ru
Table of Content
General information 3
Registration information 4
Registration Fees 5
Ownership Requirements 6
Legal Address 7
Assets 8
Activity 9
Obligatory corporate procedures 10
Reporting 11
Liability 13
Constituent Documents 14
Additional Procedures –Anti-monopoly Regulations 15
Management 16

2015.11.11 Accountor – Branch – Representative Office (Rep. Office) – Subsidiary Company (LLC) – Branch of LLC in Russia 3
General information
Branch of a foreign company Repoffice of a foreign company Subsidiary company - OOO (LLC) Branch of an OOO
1. A Branch can perform
commercial and marketing
activities, represent the interests
of a foreign company and defend
them only within the confines of
the Parent Company’s activites.
1. A Repoffice can perform
marketing activities, represent
the interests of a foreign company
and defend them only within the
confines of the Parent Company’s
activities, but cannot perform
commercial activities.
1. A Subsidiary company can
perform marketing and any
commercial activities stipulated
by Russian legislation.
1. A Branch of an OOO can
perform commercial activities
on behalf of OOO.
2. The Branch can obtain
certain types of licenses on
execution of commercial activity.
2. The Repoffice cannot
obtain licenses for commercial
activities.
2. A Subsidiary Company can
obtain licenses for certain
commercial activities.
2. A Branch of an OOO cannot
obtain licenses.
3. Branches and Repoffices are not legal entities, but separate
subdivisions of a foreign Company (part of a foreign company which is
based somewhere other than the company).
Branches and Repoffices cannot create subdivisions.
4. A Subsidiary company is
an independent Russian legal
entity.
Subsidiary companies can create
their own subdivisions (Branches
and Repoffices).
3. A Branch of an OOO is not
a legal entity.
Cannot create its own
subdivisions.

Registration Information
Branches, Repoffices and Subsiduaries of foreign Companies should be: Branches of an OOO should be:
1. Registered and accredited with the Tax Authorities in Russian Federation;
1. Registered in the
constituent documents of the OOO;
2. Registered with non-budget funds (Pension Fund, Fund of Social Security);
2. Registered in the territorial
tax office;
3. Registered in the territorial
non-budget funds (Pension Fund,
Fund of Social Security).
The first stage of the registration procedure and opening bank accounts usually takes 1.5 months. Registration may take up to 1
month.

Registration Fees
State fee for accreditation of the Repoffice and Branch consists of RUR
120,000.
Minimal monetary contribution to the Branch funding consitst of RUR
10,000.
State fee for registration of the
Subsidiary company with the tax
authorities consists of RUR
4,000. Minimal share capital
consists of RUR 10,000.
State fee for registration of
changes into constituent
documents of OOO consists of RUR
800.

Ownership
Requirements
The Branch and the Repoffice of the foreign company can be established
only by the one Head (mother) company. No any other forms of
ownerships are allowed.
The Subsidiary company may be
founded by one or more persons
(individuals or legal entities). The
maximum quantity of persons
may be up to 50. In case of
exceeding of 50 persons, the
limited liability company shall
transform into the opened joint
stock company or production
cooperative.
The Branch of OOO may be
founded only by the OOO solely.

Legal Address
All the Branch of a foreign company, Repoffice, a Subsidiary company and Branch of OOO should have official address / office space in Russia. The
legal address is to be registered with the Russian tax authorities and confirmed by the Guarantee letter of the landlord.

Assets
1. The Company may provide
assets and finance Branch without
any limits (obligatory min. is about
RUR 10.000,00, to be stipulated in
the articles of association of the
Branch).
1. The Company may
provide assets and finance the
Repoffice without any limits, no
obligation to set the minimum
limits in the articles of
association.
1. The Company should pay
the share capital of the
Subsidiary company (min. is RUR
10.000,00). Share capital can
be formed by monetary funds as
well as by the other assets.
The Branch of OOO has no own
assets. Title to the property (fixed
assets, intangible assets) acquired
through the Branch (created by
Branch) belongs to the OOO.
2. Branch can receive funds
from third parties as the result of
its commercial activity.
2. Repoffice cannot receive
funds from third parties as a
result of commercial activity.
2. The Company having 51%
and more shares in the charter
capital of the Subsidiary
company may invest to the
assets of the subsidiary
company and use preferential
taxation only in form of
contribution to the charter
capital or gratuitous financing.
3. .The Subsidiary company
may receive funds from third
parties as a result of its
commercial activity.

Activity
1. Contracts with Russian clients for the respective services may
be concluded by Branches and Repoffices on behalf of the Company.
1. Contracts with Russian
clients for the respective
services will be concluded by the
Subsidiary company.
1. Contracts with Russian
clients for the respective services
will be concluded by the Branch of
the OOO in the name of the OOO.
2. May be set up for uncertain term.
2. May be set up for uncertain
term, but not after the termination
of the OOO.

Obligatory corporate
procedures
In case of changes in Branch/Repoffice activity (change of name,
address, head of the Branch, etc.), the respective changes are to be
adopted by the decision of the parent company and registered with the
accreditation and state authorities on Russia.
1. The founder of the
Subsidiary company is obliged to
adopt an annual shareholders’
decision each year to approve
the financial results of the
company.
2. In case of changes in the
Subsidiary company’s activity
(change of name, address,
managing body (general
director), etc.), the respective
changes ate to be adopted by
the shareholder’s decision of the
founder and registered with the
tax authority.
3. Shareholder’s decisions
on payment of dividends to the
founder are to be adopted by the
founder quarterly, semiannually
or annually (as stipulated by the
Subsidiary company’s charter).
In case of changes in the activity of
the Branch of the OOO (change of
name, address, managing body
(director), etc.), the respective
changes are to be adopted by the
shareholder’s decision of the OOO
and registered with the tax
authority.

Reporting
Developing an independent accounting policy.
Independent taxpayers.
Liable to pay income tax, VAT, property tax, personal income tax, mandatory payments to the Pension Fund
and the Fund of Social Insurance (FSS).
Reports are required to be provided the location of the organization.
The Branch, Repoffice and Subsidiary company submit reports to the off-budgetary funds (Pension Fund,
Social Security Fund) on the regular basis as follows:
1) Pension Fund – for the first quarter (not later than May, 15), semiannual (not later than August,15), for
nine months (not later than November, 15), annual (not later than February, 15);
2) Social Security Fund - for the first quarter (not later than April, 15), semiannual (not later than July, 15),
for nine months (not later than October, 15), annual (not later than January 15).
3)
The Branch, Repoffice and the Subsidiary company submit tax reports quarterly and annually.
Annual tax reports to be submitted at the end of the financial year (01.01 - 30.03).
Quarterly tax reports to be submitted within one month (28-30 days) following to the reporting quarter.
Can have their own balance sheet.
Do not have the right to develop an
independent accounting policy.
Branch is not a tax payer, can only
fulfill obligations of its OOO to pay
some taxes. In such cases, the
Branch must file tax returns to the
tax office for its location.
Income taxes – Income tax is
attributable to the regional and
local budgets, the OOO pays
separately for its registered and
where the Branch is registered.
The tax office at the location of the
Branch and the OOO must be
submitted advance payments.
Property tax – if the Branch is on a
separate balance and has a
taxable estate, the OOO must pay
Branch taxes based on the location

+ Taxes to be paid by a Branch: VAT 18%, property tax, income tax for foreign companies;
+ Taxes to be paid by a Repoffice: VAT 18%, property tax;
+ Taxes to be paid by a Subsidiary company: VAT 18%, income tax, property tax, unified social tax.
In accordance with Russian laws, if a company does not carry on an activity, “nil” accounting, tax and statistical
reports should be submitted.
Therefore, Branches, Repoffices and Subsidiary companies should file reports on a regular basis (the terms
of submission depend on the kind of the reports) to the Russian authorities. However, please be aware that
Russain tax authorities are reluctant to accept "nil" reports. In practice “nil” reports may entail a field tax audit.
of the Branch to the local tax office
and the OOO must submit advance
payments.
VAT – payinging the tax and report
on it are the obligations of the OOO.
Does not have to submit reports to
an inspection of the Branches
ofthe OOO.

Liability
The Company will be liable for the activities of the Branch and Repoffice.
The Subsidiary company will be
liable for its activity by itself,
except in several cases provided
by the legislation.
The OOO will be liable for the
activities of its Branch.

Constituent Documents
The activities of the Branches and Repoffices are regulated by the
Regulations for the Branch or Repoffice that are approved by the
Company.
The activity of the Subsidiary
company is regulated by its
foundation documents (Charter)
adopted by its founders.
The activity of a Branch of an OOO
is regulated by the foundation
documents (Regulations) adopted
by its OOO.

Additional Procedures –
Anti-monopoly
Regulations
Branch of a foreign company Repoffice of a foreign company Subsidiary company - OOO (LLC)
Branch of an OOO
No anti-monopoly regulations No anti-monopoly regulations
In case the founder (the
Company) of a Subsidiary
company contributes asserts in
the charter capital of the
Subsidiary other than monetary
funds, the founder should get
approval on establishing a
subsidiary from the Federal
Antimonopoly Service provided
that the total assets of the
founder (or their group) exceeds
RUB 3 billion or the sales figures
of the founder (or its group)
during the last calendar year
exceeded RUB 6 billion.
No anti-monopoly regulations

Management
Branches and Repoffices are managed by the Head of the
Branch/Repoffice, as appointed by the Company and duly authorized by
a respective power of attorney issued by the Company defining the
scope of powers of the Head. The power of attorney may be issued at a
maximum for the accreditation period of the Branch or Repoffice with
the right to extend it for the next accreditation period.
The Regulations for the Branch/Repoffice will also define the scope of
powers of the Head.
The Head of the Branch/Repoffice will report to the Head office of the
Company.
A Subsidiary company may have
a two-level or three-level
management structure.
In the former case, the
management bodies will consist
of the General meeting of
participants of the Subsidiary
company and the executive body
(either sole General Director or
Executive Board/Directorate).
The executive body will be
appointed by the General
meeting of participants.
In the latter case, the
management structure will
consist of the general meeting of
participants of the Subsidiary
company, the Board of Directors
(or Supervisory Board) and the
executive body (either sole
A Branch of an OOO is managed by
the Director of the Branch by
virtue of the POA appointed by the
General Director of the OOO.

General Director or Executive
Board/Directorate). Usually, the
executive body will be appointed
and supervised by the Board of
Directors, while the Board of
Directors will be elected by the
General meeting of participants.
In either case, the scope of
powers of each management
body will be defined in the
Subsidiary’s foundation
documents, approved by its
founders (participants).
The term of activity for the above
bodies is to be stipulated in the
Subsidiary company’s
foundation documents.

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