Except for some provisions, Federal Law No. 236-FZ dated July 1, 2021 On the Activities of Foreign Entities on the Internet in the Russian Federation (further “Law No. 236-FZ”). The purpose of this law is to regulate how the presence of foreign IT companies in the Russian Federation is officially registered and establish the same conditions for Russian and foreign entities engaged in such activity.

Foreign entities operating on the Internet in the Russian Federation (further “foreign IT companies”) refer to foreign legal entities, foreign individuals, stateless persons performing any activity not prohibited in the Russian Federation, being the owner of an information resource accessed in a day by more than 500,000 users located in the Russian Federation meeting one of the following conditions:

  • The information resource provides and/or disseminates information in the state language of the Russian Federation, in the state languages of the republics within the Russian Federation or other languages of the peoples of the Russian Federation;
  • Advertising is posted on the information resource to attract consumers located in the Russian Federation;
  • Foreign IT companies process information about users located in the Russian Federation;
  • Foreign IT companies receive monetary funds from Russian individuals and legal entities.

The procedure approved by Roskomnadzor Order No. 130 dated July 16, 2021 is used to determine how many users access information resources on a daily basis.

In addition to owners of information resources meeting the criteria specified in Law No. 236-FZ, hosting providers, operators of advertising systems, and organizers of information dissemination on the internet are also recognized as foreign entities operating on the internet in the Russian Federation (Article 4(2) Law No. 236-FZ). Roskomnadzor is the agency that is to identify such entities in compliance with the procedure approved by the Russian Government (only a draft procedure has been developed so far).

A list of foreign IT companies subject to Law No. 236-FZ is to be posted on Roskomnadzor website as approved by Roskomnadzor Order No. 129 dated July 16, 2021.

Law No. 236-FZ requires foreign IT companies to:

  • From January 1, 2022 onwards set up a branch, or open a representative office, or establish a Russian legal entity and ensure their operations in the Russian Federation;
  • Post on the information resource an electronic form to send applications from Russian nationals and organizations as required by Roskomnadzor;
  • Open an online account on Roskomnadzor website to liaise with Russian state authorities;
  • Install one of the programs proposed by Roskomnadzor to determine the number of users who access the information resource on a daily basis (Article 8(10) Law No. 236-FZ).

The branches or representative offices, or the Russian legal entities established by foreign IT companies must ensure that they:

  • Accept and consider the applications from Russian nationals, organizations addressed to foreign IT companies, execute court decisions, claims from Russian state authorities against foreign IT companies;
  • Represent the interests of IT companies in courts;
  • Take measures in the Russian Federation to restrict access to information and/or delete information disseminated in violation of Russian laws.

The obligations provided for foreign IT companies under Law No. 236-FZ are set out to put in place mechanisms so that foreign IT companies can liaise effectively with Russian state authorities as well as compel them to comply with the requirements of Russian law, if necessary.

If a foreign IT company fails to comply with the provisions of Law No. 236-FZ as well as other claims, prohibitions, and restrictions provided by Russian law, the foreign IT company will be subject to the following measures:

  • Its users will be informed that the foreign IT company is in breach of Russian law;
  • The foreign IT company will be banned from advertising itself and its information resource;
  • The foreign IT company will be banned from advertising on information resource;
  • The foreign IT company’s transfer of funds will be limited as well as any payments from individuals and legal entities to the foreign IT company;
  • Ban on search results will be imposed;
  • Ban on collection and cross-border transfer of personal data will be imposed;
  • Access to the information resource will be partially or completely restricted.

The above measures (one or several simultaneously) will be imposed on the offending IT companies based on a decision issued by Roskomnadzor which will publish a list of foreign IT companies on its website and notify the relevant foreign IT companies in their online account. If a foreign IT company has no online account, the foreign IT company will be notified by email.

So, the basic requirement for foreign IT companies under Law No. 236-FZ is to set up a branch, open a representative office or establish a Russian legal entity, and ensure that they operate in the Russian Federation from January 1, 2022 onwards.

To fulfill the aforementioned requirement under Law No. 236-FZ, foreign IT companies can already now adopt decisions to set up a branch or open a representative office in the Russian Federation since applications for accreditation of a branch, representative office of a foreign legal entity and related documents are to be submitted to the appropriate tax authority within 12 months of the adoption of such decision (Article 21(2) Federal Law No. 160-FZ dated July 9, 1999 On Foreign Investments in the Russian Federation).

The accreditation application is to be signed by a representative of the foreign legal entity authorized as prescribed by Russian law.

The following documents should also be submitted together with the application for accreditation:

  1. The foreign legal entity’s foundation documents;
  2. An extract from the register of legal entities from the foreign legal entity’s country of origin or another document with the same legal force confirming the legal status of the foreign legal entity;
  3. A document issued by the competent authority from the foreign legal entity’s country of origin to confirm the foreign legal entity’s registration as taxpayer in its country of origin, specifying the taxpayer code (or similar taxpayer reference);
  4. Decision adopted by the foreign legal entity for establishment of a foreign branch, representative office in the Russian Federation;
  5. Foreign branch/representative office regulations;
  6. Power of attorney conferring the necessary powers and authority to the head of the foreign branch/representative office in the Russian Federation;
  7. Document confirming the payment of RUB 120,000 in duties for each branch/representative office (Article 333(1(5)) Russian Tax Code);
  8. List of submitted documents (2 copies).

A foreign branch/representative office is accredited by the appropriate tax authority within 25 working days of the date of submission of the application for accreditation and related documents. A certificate and datasheet are issued/sent to the accredited foreign branch/representative office on the forms approved by the Federal Tax Service of Russia within 5 working days of recording in the relevant register.

The Russian legal entity set up by a foreign IT company is established on the conditions and as prescribed by the Russian Civil Code and other federal laws subject to the exceptions under federal laws, namely Article 4(2) of Federal Law No. 160-FZ dated July 9, 1999 On Foreign Investments in the Russian Federation. Law No. 236-FZ does not specify the size of participation that a foreign IT company should hold in the Russian legal entity that it has established.

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We offer the following services to IT companies with foreign participation:

  • Registration of companies, representative offices, and separate subdivisions;
  • Tax advice for IT companies;
  • Inclusion in SME register.