When setting up a subsidiary/company in Russia, foreign companies need to choose the right type of legal entity/business form for their business in Russia.

Our table shows the types of legal entities/business forms that foreign companies can set up in Russia, comparing the following parameters: general information, registration, registration fees, ownership requirements, legal address, assets, activity, mandatory corporate procedures, reporting, liability, foundation documents, additional procedures, antimonopoly regulations, and management.

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 activities. 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.
1.    The Branch can obtain certain types of licenses on execution of commercial activity. 1.    The Repoffice cannot obtain licenses for commercial activities. 1.    A Subsidiary Company can obtain licenses for certain commercial activities. 2. A Branch of an OOO cannot obtain licenses.
3.    Branches 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 cannot create subdivisions.

 3.    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).

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

Branch Repoffice OOO (LLC) Branch of an OOO
The first stage of the registration procedure and opening bank accounts usually takes 1.5 months. The first stage of the registration procedure and opening bank accounts usually takes 1.5 months. The first stage of the registration procedure and opening bank accounts usually takes 1.5 months. Registration may take up to 1 month.
Should be: Should be: Should be: Should be:
1.    Registered and accredited with the Tax Authorities in Russian Federation; 1.    Registered and accredited with the Tax Authorities in Russian Federation; 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 with non-budget funds (Pension Fund, Fund of Social Security); 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).

 

Registration fee

Branch Repoffice OOO (LLC) Branch of an OOO
State fee for accreditation Branch consists of RUB 120,000.

Minimal monetary contribution to the Branch funding consitst of RUB 10,000.

 State fee for accreditation of the Repoffice consists of RUB 120,000.

Minimal monetary contribution to the Branch funding consitst of RUB 10,000.

 State fee for registration of the Subsidiary company with the tax authorities consists of RUB 4,000. Minimal share capital consists of RUB 10,000. State fee for registration of changes into constituent documents of OOO consists of RUB 800.

 

Ownership requirements

Branch Repoffice OOO (LLC) Branch of an OOO
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 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

Branch Repoffice OOO (LLC) Branch of an OOO
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

Branch Repoffice OOO (LLC) Branch of an OOO
1.    Contracts with Russian clients for the respective services may be concluded by Branches on behalf of the Company. 1.    Contracts with Russian clients for the respective services may be concluded by 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.
1.    May be set up for uncertain term. 1.    May be set up for uncertain term. 1.    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

Branch or repoffice

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.

OOO (LLC)

  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).

Branch of an OOO

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

Branch, repoffice and OOO (LLC)

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.

  • Taxes to be paid by a Branch: VAT 18% 20%, property tax, income tax for foreign companies;
  • Taxes to be paid by a Repoffice: VAT 18% 20%, property tax;
  • Taxes to be paid by a Subsidiary company: VAT 18% 20%, income tax, property tax, unified social tax.

18.12.2018 VAT increase up to 20%. What needs to be done?
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.

Branch of an OOO

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 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  of the OOO.

Liability

Branch Repoffice OOO (LLC) Branch of an OOO
The Company will be liable for the activities of the Branch. The Company will be liable for the activities of the 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

Branch Repoffice OOO (LLC) Branch of an OOO
The activities of the Branches and Repoffices are regulated by the Regulations for the Branch that are approved by the Company. The activities of the Branches and Repoffices are regulated by the Regulations for the 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 Repoffice 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

Branch and repoffice

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.

OOO (LLC)

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 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.

Branch of an OOO

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.

Additional information

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