Double Tax Treaty between Luxembourg & Russia

Damalion Russia desk

Doing business in Russia

Registering a company in Russia may seem like a daunting task for foreign investors with no prior business experience. At Damalion, we excel in assisting private investors and foreign companies to setting-up their business with the utmost efficiency and professionalism.

That is why DAMALION decided to partner with various local experts duly accredited who will deliver you tailor-made solutions to increase your chance of business success in Russia.

There are 3 fundamental steps that foreign investors go through to successfully register a business in Russia:
1. Prepare the documents that will be necessary in the succeeding business set-up process. Our experts will guide you through the process, from choosing a legal form to notarizing pertinent documents include passports, state registration, and many more.

2. Register a business involves the timely submission of the necessary documents to Russian authorities. Lastly, Damalion will help furnish needed elements so you can start operating a business in Russia.

3. The last step includes :

    1. a. company seal making,
      b. opening a bank account, and
      c. setting up of pension and social security funds.

Damalion will expertly guide you through all registration procedures, no matter how simple or complex they may be. Leveraging our extensive experience with Russia company registration, we will make the process as stress-free as possible for our clients. Through our network of business registration services, you are rest assured to save time and money for the long haul.

Damalion Online

We offer a comprehensive tool that offers efficiency and speed when connecting with outsourcing partners in Russia. Through our Damalion Online services, you can monitor administrative and financial activities 24 hours a day, seven days a week from anywhere in the world.

Business Launch

We articulated a pool of experts that will support you during the first few steps in setting up your company in the Russian market, so you can focus your attention on your core specialties. Damalion offers a comprehensive market analysis and help match you with potential partners.

Our Damalion experts will perform:

  • due diligence of acquisitions and assets, logistics support, establishing tax and management reporting, insurance related issues that you may need before launching a business in Russia.
  • assistance in the actual company registration process: you will have a dedicated Damalion expert to walk you through the steps that include the creation of chartered accounts, preparation of documents required for registering a company, branch, or representative office, and registration with the tax authorities.

During this stage, our experts will also guide you in choosing a bank and assistance in opening a bank account.

Accounting and Reporting

Our local experts commit to provide excellent accounting and reporting solutions to better support your business. They uphold to Russian Accounting Standards (RAS) to ensure that accounting and financial statements are well managed and updated at all times.

  • Administration of accounts payables and receivables
  • Bank account administration and cash management
  • Bookkeeping for important documents in strict compliance with existing legal requirements
  • Consultancy in matters related to VAT, including compliance, registration, and returning filings
  • Creation of customized management report
  • Inventory of fixed assets, leases, and loan administration
  • Liaison with Russian Tax Office and other legal authorities
  • Local tax consultation
  • Maintenance of general accounting and subsidiary ledgers
  • Monthly reporting of balance sheet, cash flow, closing of accounts, and profits and losses
  • Preparation and submission of  required annual financial statements
  • Preparation and submission of required corporate income tax return
  • Preparation of reports under the local GAAP and international IFRS/US GAAP standards
  • Reporting of consolidated management and statutory documents
  • Submission, reporting, and communication of legal documents to local authorities
  • Support during audits and skilled representation during inspections and tax controls
CFO Services

We understand the challenges that foreign investors deal with when setting up a business in Russia.

With limited resources, you may face challenges that may restrict you from developing an achievable strategic plan and creating the right financial management in place. Damalion will help you achieve your long-term strategic0 financial plans.

Our CFO Services provides you access to the professional skills you need to make wise business decisions, identify problems, and improve efficiencies without the added cost of hiring full-time personnel.

Our solutions are flexible in that we can provide you with as much or little financial support that you require, tailoring services that match the needs of your business.

Tax Consulting

Damalion will be at your service to support you with competent and expert tax consulting services for your business in Russia. We facilitate tax statement preparations and compliance solutions in major Russian cities, including Moscow, Saint Petersburg, and Tver to avoid errors and delays in submission of company reports to concerned state authorities. Damalion focuses on complete automation and optimization of your business tax compliance, risk reduction, and prevention of tax disputes.

Our tax compliance solutions consist of crucial activities, including:

  • Assistance on tax compliance requirements
  • Comprehensive tax review ( proactive audit of current tax situation, risks, and due diligence)
  • Filing and registration of corporate tax declarations ( land tax, payroll tax, property tax, transport tax, as well as pension and social security contributions)
  • Organization of personal tax declaration or personal income tax
  • Personal wealth management tax compliance
  • Representation during tax disputes
  • Tax accounting outsourcing
  • Tax and VAT registration
  • Transfer pricing compliance
IT Services

At Damalion, we combine our advanced and extensive understanding of the needs of foreign companies in operating businesses in Russia with expertise in the financial, tax, and legal sectors to deliver customized and efficient IT solutions that perfectly match your requirements and budget. From optimization and automation of your business processes to the design of customized IT infrastructures, you can trust that our team will provide impeccable support whenever you need us.

Human Resources

Our HR services aim to meet the highest expectation of your business by delivering full accountability, legislative adherence, and superior employee experience. We offer flexible support to your internal HR teams by conducting a variety of solutions, including personal files management, contract creation, to more specialize tasks such as HR consultancy to ensure you meet the statutory reporting and compliance requirements established in Russia.

Audit

Conducting financial audit is crucial to the financial health and growth of foreign legal entities operating in Russia. As accounting standards and regulations are different in Russia, foreign investors may find it difficult to deal with financial audits while operating in the country. Our experts here at Damalion comprised of auditing experts with extensive experience in performing financial audits for foreign companies. We provide the necessary resources and expert knowledge of Russian audit standards. Our rates are flexible and highly customizable to your needs and budget. Our auditing services include statutory audits, voluntary audits, and financial audits that are performed in accordance with Russian standards.

Transformation and Consolidation

  • Creation and expansion of methodological basis on accounting policies, chart of accounts, transformation, consolidation, formulation of internal accounting rules, separate accounting process)
  • Consultation on IFRS application
  • Implementation of seminars and trainings on IFRS in-house development application
  • Complex projects that include merging of tax and management accounting
Legal Services

The Damalion accredited team will provide you with extensive legal support when drafting and negotiating contracts for commercial businesses in Russia. We perform legal risk analysis for every transaction and ensure expert support during negotiations. As experts in the Russian market, we also provide advice on industry and trade secrets and ample support amidst corporate disputes.

Dispute Resolution

We take pride to partner with law professionals who have an in-depth knowledge of law and regulatory requirements in Russia. Our Damalion experts have extensive background in various industries that enable us to facilitate dispute resolution in a speedy and efficient manner. Their portfolio includes tax disputes, corporate disputes, bankruptcy proceedings, contractual disputes, and customer claims on products and services quality cases. They take a proactive approach in dispute resolution, considering all case elements and anticipating potential positions of all concerned parties. Our experts will facilitate all enforcement proceedings using the most effective techniques.

Transactions Under Russian and English Law

Our Damalion experts have dual knowledge and expertise in Russian and English law which in turn empowers them to create and document transactions both under Russian and English law.

They render professional advice and consultancy services in the establishment and liquidation of companies in Russia and overseas, formulate corporation reorganization plans, and structuring partnerships and joint ventures on behalf of foreign clients and companies. They may also help you in the incorporation of international holding companies, assist in mergers & acquisitions, and debt and equity financial transactions.

Commercial Contracts

Utilizing our commercial contracts solutions, you will highly benefit from our excellent proactive support at the very start of any commercial activity in Russia.

We offer expert recommendation on various commercial contracts and transactions, including lease, supply, services, rental, public utility, and distribution. We also conduct documentation audits for various business transactions and provide expert  recommendation in relation to changes to ensure compliance with existing Russian laws while safeguarding our clients’ best interest.

Legal Support on Complex Investment Activities in Russia

Our law professionals provide foreign investors a wide range of legal support services to ensure stable and safe business growth in Russia.

We facilitate smooth negotiations and formulate tax and corporate financial schemes, as well as provide sound advice on issues including, antitrust, urban planning, and other regulatory requirements.

Our Damalion experts will be with you every step of the way when creating contracts, including real estate transactions, construction agreements, and execute due diligence of assets and counterparties.

Anticorruption, Internal Investigations, and Audits by State Authorities

We managed to bring you the expertise and resources needed for all kinds of internal investigations on fraud, anticorruption, anti-money laundering, employment sanction problems, and trade sanctions.

Our experts will also design and implement the necessary preventive measures such as sound corporate governance, compliance strategies, risk management programs, and anti-trust regulations to protect your operations in Russia.

Employment and Immigration Law and Personal Data Protection

Our network provides consulting services to Russian and foreign companies on issues pertaining to employment, immigration, and data protection topics.

Damalion helps in the creation of employment contracts, resolution of employment and administrative disputes, and employment of foreigners and secondments.

Whenever we are mandated, we will also assess and evaluate information systems and personal data processing activities to ensure your company adheres to requirements of Russian legislation in relation personal data. We also develop recommendations on bringing information systems and processing activities in full compliance with Russian requirement and develop drafts of necessary documents.

Russian Legal Business Structures

If you are an investor looking to open shop in Russia, you need to determine the legal structure of which your business should take form. Here are the types of legal business types that foreign investors can choose from.

DIRECT SALES

This is any foreign legal entity that sells imported goods to customers based in Armenia, Belorussia, Kazakhstan, Kyrgyzstan, and Russia, or collectively known as the Eurasian Economic Union (EEU). Direct sales company will not be subject to Russian taxes and will not be mandated to set up a physical presence in Russia through traditional legal forms.

Local consumers in Russia are held responsible for clearing imported foods through customers and for paying respective customs duties and taxes (excise duties, import VAT), and other processing fees.

Import duty rates are established by the Unified Customs Tariff of the EEU. Typically, import duty rates may vary from 5% to 20% and applicable to goods coming from countries given most favored nation status. When goods are imported from developing or less developed countries but with favored status, custom rates are usually reduced. Import VAT is to be paid on the customs value of imported goods and increases in proportion to the value of import customs duty.

Technological equipment copies that are not locally manufactured in Russia may be exempt from import VAT when entering Russia. Some imported goods that enter any EEU nations are assessed with non-tariff regulations such as licensing, quotas, and certifications.

Clearing feeds at customs depend on the total value of imported goods but may not exceed RUB30,000 or equivalent to USD484.

Disposal charge is to be paid on imported vehicles. The actual rate of disposal charge will depend on factors, including engine power, vehicle weight, and seating capacity, to name a few.

Since the establishment of the EEU in 2014, member nations are becoming tightly integrated, as evidenced by free movement of goods and services, capital and labor guarantee, and fair treatment across all legal entities.

DISTRIBUTORSHIP CONTRACT

Foreign Legal Entities (FLEs) are entitled to execute distributorship contracts with Russian companies, which in turn allows the Russian companies to sell FLEs’ goods locally.  If such an agreement is agreed upon, the FLE will not be subject to tax in Russia. The Russian distributing partner will assume the responsibility of clearing imported goods through customs, as well as paying custom duties and import VAT. In essence, distributorship contracts are vertical agreements from an antitrust point of view and must adhere to prevailing antitrust regulations.

REPRESENTATIVE OFFICE OR BRANCH

A foreign legal entity (FLE) may choose to establish its presence in Russia via a representative office (RO) or branch. By rule, the RO and branch will not be categorized as Russian legal entities, but instead parts of an FLE. With that in mind, the foreign head office will be responsible for all actions and obligations of their RO or branch in Russia. A RO is only limited to preparatory or auxiliary services for the head office, while a branch may run activities that are similar to that of the head office, including the signing of sales contracts.

The Russian customs usually determine the Russian buyers of imported goods, which also empowers them to question the right of a branch to declare foods prior to customs clearing. It is typically difficult for branches of FLEs to clear goods through customs. Branches may only import goods for internal use and not for commercial resale.

ROs and branches of FLEs are required to obtain accreditation from the Federal Tax Service of Russia- the official accreditation agency of the country since 1 January 2015. The Federal Tax Service grants accreditation to FLEs’ ROs and branches, except for foreign banks and civil aviation companies as they receive accreditation from the Central Bank of Russia and Federal Aviation Service of Russia respectively.  ROs and branches by FLEs accreditation run for an unlimited time period.

Any foreign legal entity planning to open a RO or branch in Russia must furnish certain documentation and pay the necessary accreditation fee of RUB 120,000 (USD1,900). The Federal Tax Service of Russia evaluates FLE applications and awards accreditation within 25 to 30 business days. FLE ROs and branches are issued with a certification and accreditation number. Moreover, a tax registration certificate will be issued by the Federal Tax Service of Russia.

RUSSIAN SUBSIDIARY

FLE can set-up its presence in Russia by incorporating a Russian subsidiary company. The most common legal forms for foreign companies in Russia are the Limited Liability Company (LLC) and Joint Stock Company (JSC).

  • In an LLC set-up, participation units are not considered securities by the Russian securities legislation. On the other hand, JSC are considered as securities which requires them to register with the Central Bank of Russia’s department that takes care of admission into the financial markets.
  • A JSC may be a publicly traded or non-publicly traded company.
  • FLEs usually take the form of LLC for their wholly owned Russian businesses. LLC Law shares similar provisions with the JSC Law, though there are a few distinctions between the two.
  • One participant- individual or entity- is needed to set-up an LLC and JSC.
  • A solely owned legal entity will be unable to set-up another LLC or JSC as a subsidiary.

JOINT STOCK COMPANIES

JSC is a legal entity that issues shares to produce capital for its operations. A shareholder of a JSC is no responsible for all obligations, with his or her losses restricted to the size of their shareholding activities. There are different types of shares available in this set-up. For each share of a specific class, the dividends and voting rights are equal.

  • Public and non-public JSCs may issue common and preferred shares and bonds.
  • Public and non-public JSCs are subject to statutory requirements and regulatory restrictions. The requirement for public disclosure is lenient compared to non-public JSCs
  • Shareholders can determine voting duties at the general meeting, pricing of shares, shareholders voting coordinations, liquidation of JSC
  • Governing bodies of a JSC are the general shareholders meeting, board of directors, and executive body
  • A JSC executive body will manage and supervise daily activities and operations, as well as reports directly to the board of directors and general shareholders meeting
  • During a shareholders meeting, the board of directors can allocate executive body powers to a management company or a manager
  • If a foreign legal entity is tasked as the manager or managing company, it must have a branch or RO in Russia, from where it assumes its managerial functions over the Russian company

LIMITED LIABILITY COMPANY

Rules, regulations, and provisions are similar to those under the JSC Law. By rule, LLC participants are not responsible for the LLC’s obligations. Any losses by the participants are limited to the size of shares of their respective participation units.

  • Transfer of participation units to third parties are not allowed by the LLC charter
  • Participants have the right to withdraw from LLC at any time. The LLC is required to give the withdrawing participant a portion of the LLC’s prorated net assets their respective participation units.
  • Disposal or participation units must be duly notarized by a Russian notary public

ECONOMIC PARTNERSHIP

Economic partnership is a legal form designed for innovative companies, such as venture capital companies. The law on economic partnership was enforced on 1 July 2012.

  • This legal form can be established with two or more participants, with both individuals and companies actively participating in the operations of the business
  • Number of participants cannot exceed 50. In case there are more than 50 participants, the organization must be restructured as a JSC within a year
  • Share capital is divided into contributions from participants in the form of money, property rights, securities, and other rights with monetary value
  • Participants can manage the partnership and allocate income and expenses
  • Participants select a sole executive body that will function as a general director or president for the partnership.

FOREIGN INVESTMENT LAW

Based on the Foreign Investment Law, the property rights of foreign investors to their investments and profits will be respected at all times. Investments from foreign businessmen will be under federal and regional regulatory bodies.

According to the Foreign Investment Law, foreign investors’ rights to run a business in Russia and to take profits generated in Russia cannot be less ideal than the rights of local Russian investors, although certain limitations are applicable in certain cases. Restrictions in place aim to safeguard the constitutional, health, human rights systems and the lawful interests of Russian citizens, as well as to guarantee excellent state of defence and security.

Foreign investors are to be receive equal treatment as Russian investors. FLEs will be subject to the same licensing, notification, and permission requires as those of Russian investors.

  • A foreign investor has full rights in recovering losses due to unlawful action or neglect by state authorities
  • Any protect owned by a foreign investor o company by foreign participation may not be seized to be nationalized unless otherwise stated in Russian federal and international laws
  • The Foreign Investment Law also offers protection among foreign investors from less than favorable changes to Russian laws if investors hold at least 25% of share capital

Foreign investors are protected from :

  • Newly established laws altering the prices of federal tax rates, customs obligations, and contributes to non-budget state funds.
  • Current amendments led to an increase in tax burdens
  • Any form of prohibition or limitation on foreign investment entities introduced in Russia

By rule, foreign investors are protected during the first seven years of an investment project’s payback period which starts from the date when a foreign investor began finding the project.

The Russian government sets limitations to activities of non-Russian investors in companies that have high strategic importance and value to Russia. These are companies that carry out activities such as:

  • Those related to geophysical processes and hydro-meteorological events
  • Those that utilize causative agents of infectious diseases (with a few exceptions)
  • Subsoil explorations and mineral resources extraction land plots of federal ownership and significance
  • Aerospace
  • Natural monopolies or companies with dominance in the local market
  • Harvesting natural aquatic resources
  • Utilization of nuclear and radiation-emitting materials and radioactive waste
  • Utilization of bugging equipment and encryption activities
  • Military-technology activities

Foreign states, international organizations, and offshore companies cannot enter into business transactions that involve control over Russian strategic companies. In some instances where transactions are allowed, they will not be permitted to purchase more than 50% participation units or shares from strategic companies or from becoming a part of the regulating of strategic companies. Furthermore, foreign investors are barred from business transactions that would allow them to capture more than 25% of the book value of a property of strategic companies.  Finally, non-Russian investors are allowed to gain control over strategic companies after obtaining approval from certain Russian state authorities.

If you’re seriously considering investing or setting up a business in Russia, our expert Damalion network will assist you in obtaining the necessary business license and full land ownership in the case of real estate-related projects.

Choosing the right type of structures for your business in Russia

Russia is not only the largest country, but it also houses the 11th biggest economy in the world. It presents excellent business opportunities due to its dynamic and attractive economic landscape.

The world’s largest nation delivers unique opportunities that could make a businessman’s international expansion extremely successful. It is a member nation of the BRICS group, consisting of countries namely Brazil, India, China, and South Africa- countries with promising economic markets that challenge the traditional French, Italian, German, and Spanish group.

If you decide to start a business in Russia, you are definitely in for an unforgettable and fruitful business experience. Here are important pointers that you need to remember when setting up a business in Russia.

Contact us now to register your company in Russia

Our Damalion Russia Desk will answer you shortly. Please fill in this form to describe your need

14 + 9 =

Want to know more about Damalion Russia Desk?

Damalion offers you from bespoke advice provided by directly operational experts in the fields that challenge your business.

We advise you to give information at its best, so we can qualify your demand and revert to you under the next 8 hours.