10/10/2014
Representative office of a foreign company in Russia
To establish a representative office in any region except Moscow it is necessary to come to an agreement with local authorities.
Representative offices may perform only representation and protection of the interests of the foreign Company.
It should be mentioned that in terms of both Russian Civil and Russian Tax Codes both branch and representative offices are not regarded as separate legal entities. Therefore, money transferred to their accounts shall not be regarded as gift, and unlike the situation with a subsidiary the head office will be liable for all the branch (or rep.) office’s obligations and entitled to all its revenues, property and profits.
However, not all types of business are available for such branch (rep.) offices – audit, banking, insurance and some other kinds of business may be handled by legal entities incorporated in Russia only. Branch and representative offices may not apply for simplified regime of taxation. All it gets as a result of doing business in Russia excluding the limited number of expenses and all the company gets through it from the source located in Russia is subject to Russian taxation.
The difference between a branch and a representative office is that the branch may carry out all the activities of the head office, while the representative is expected to only represent its interests. In fact there is no sanction for violation of this rule and the main difference between the two is the accreditation body: branch offices obtain accreditation at the State Registration Chamber of the Ministry of Justice (SRC), while representative offices both at the SRC and at the Russian Chamber of Commerce and Industry (RCCI).
Unlike LLCs and even JSCs branch and representative offices are quite expensive to create. For example the state duty for accreditation of a branch office is 120 000 RUR (about 4300 USD). And they do not last forever – every 1, 2 or 3 years the accreditation of а rерresentative office is prolonged for quite а comparable amount. Branches are accredited for up to 5 years, and the accreditation may be prolonged for the same period. But unlike the Federal Tax Service, the еmрloyееs of both the SRC and RCCI are highly qualified and cooperative. Moreover, their one-window principle ensures a solution to all the main issues with foreign personnel. An accredited branch or representative office will be entitled to accreditation of its personnel which includes visa support and is much easier than obtaining work permits for foreign personnel who will work in Russia for a subsidiary company. RCCI is also a place for finding business contacts.
That is why branch and representative offices are used to both start and handle business activities in Russia. And this makes this form quite a tool for expat – handled projects, which require substantial control of and money injections from the head office. At the same time the revenue may be forwarded to the head office directly as in contractual and other relations the branch or representative office director is considered а representative of the foreign company subject to a respective power of attorney.
Both representative and branch offices are considered created once they are included in the Unified register of the representative offices and the Register of branch offices accredited in Russia.
What should you do to open a branch office?
First of all, you need not be physically present in the Russia. You will need the following documents:
- Documents required for issuing a permission to a foreign company for the opening of a representative office in the Russian Federation.
- A foreign company seeking to open its representative office in the Russian Federation must submit to the RF Chamber of Commerce and Industry.
- A written application signed by the foreign company head specifying the name of the company, date of establishment, location, line of activity, management and control bodies representing the company according to its Articles of Association, goals of the representative office opening, information about business relations with Russian partners, development cooperation prospects, address, telephone number, fax of the representative office in the Russian Federation (or preliminary address and telephone/fax).
- Articles of Association or Incorporation papers of the company.
- Registration papers or an extract from the Trade Register or any other evidence of the fact that the company was registered according to the adopted procedure.
- The company’s decision to open a representative office in the Russian Federation.
- Representative Office Regulations that define the internal rules, rights and obligations of a representative office in respect to the foreign company (which has to be agreed on with the Department for work with foreign legal entities and their representative offices of the RF CCI).
- A recommendation letter of a bank serving the company, with the indication of information on the company’s financial reputation.
- Two recommendation letters from Russian business partners (one recommendation can be from a regional chamber of commerce and industry).
- Power of attorney for the head of a representative office drawn according to all required procedures.
- Details card about a representative office of a foreign legal entity in the Russian Federation.
If a foreign company already has an accredited representative office, to obtain a permit for opening other representative offices in the Russian Federation, a foreign company should produce only the documents specified in paragraphs 1, 4, 5 and 7.
The official documents listed in paragraphs 2, 3, 4, 6, 8, with corresponding seals of notary institutions of the country a foreign company was registered in, should be legalized in accordance with the Hague convention of 1961 by an apostil or through the procedure of consular legalization at a consular institution of the Russian Federation, unless it is otherwise stated by the international agreements of the Russian Federation.
Documents written in foreign languages should have a corresponding translation into Russian attached to them, which is authenticated according to the established procedure.
A representative of a foreign company acting as its spokesman at negotiations on the opening of a representative office, should submit a power of attorney for opening a representative office, authenticated by a notary, to the Chamber of Commerce and Industry of the Russian Federation.
If for the opening of a representative office a foreign company needs to have, according to the laws of the country of its registration, a special permit from state institutions, then the copy of such permit, authenticated and legalized by a notary, should be attached to the application.
A foreign company, in addition to the above information and documents, should provide any other information about its activities pursuant to the inquiry of the Chamber of Commerce and Industry of the Russian Federation.
All official documents issued or certified by the authorities of a foreign country should be notarized and apostilled in the country of origin or proceed through legalization by consulate. There are some international treaties providing for exceptions, e.g., a Bilateral Treaty between the USSR and Hungary as of 1958. Any document supplied in a language other than Russian should be accompanied by a notarized translation. Notarization of the documents may be made in the country of origin, while the translations are notarized in Russia.
After all the documents have been submitted, the mentioned accreditation authorities will inform if there are any problems hindering the accreditation, let the applicant correct them without re-submitting all the package and within 18 business days you will get an accreditation certificate and a permission (for rep. offices). This may be done in 5 business days subject to some additional fee.
The respective accreditation body may refuse to include the branch (representative) office in the respective register only if its activities violate Russian public order and moral, threaten public health or safety of the Russian state.
Once the office is accredited, you need to register the company as payer of taxes and obligatory contributions, arrange for an office and a bank account, pay the share capital, transfer other property and commence business activities.
