Consulting
- Our specialists and our partners-experts from Government and ministries will provide consultations and briefings on the most important aspects of Russian legislation for business related to:
- Property Law;
- Migration Law;
- Customs Law;
- Labor Law;
- Environmental Law;
- Accounting and Audit;
- Taxes;
- Besides accounting, audit and tax consultations we also make financial reports that guarantees high quality and transparency.
For your references general information on:
Russian taxes overview
- Russian taxes on usual corporations may be grouped as follows:
- corporate income tax
- Indirect taxes
- payroll taxes
- property taxes
- Individuals are liable for:
- Individual income tax
Other taxes and duties are applied on specific products, activities and certain procedures carried out by notaries and governmental authorities.
Overview of Russian Corporate Law
Russian law in general is based on statutes. Only laws and sublaws (so-called instructions issued by a relevant ministry on the basis of an authorization under a law) are regarded as source of law. Case law is not a source of law. In practice, however, judges use precedents or prior rulings on cases of a similar nature when considering their decisions. If certain situations are not regulated by laws and sublaws then the judge, when considering his ruling, normally refers to court practice. Nevertheless, when drafting adjudications he may refer only to laws and sublaws and not to case law on similar matters, with the exception of Constitutional Court rulings.
Company law comes under the umbrella of civil law. The main source of company law is the Civil Code of the Russian Federation. Where appropriate, the Code makes references to statutes, most importantly to the Federal Law 208-FZ of December 26, 1995 'On Joint-Stock Companies' and to the Federal Law 14-FZ of February 8,1998 'On Limited Liability Companies'.
The Civil Code, which was introduced by the Federal Laws 52-FZ of November 30, 1994, 15-FZ of January 26, 1996 and 147-FZ of November 26, 2001, provides a complete list of legal entities in Russia.
- The Code distinguishes between commercial and non-commercial organizations. Commercial legal entities may take any of the following forms, which are collectively known as 'economic partnerships and corporations':
- public joint-stock company (otkrytoe akcionernoe obshchestvo, OAO)
- private joint-stock company (zakrytoe akcionernoe obshchestvo, ZAO)
- limited liability company (obshchestvo s ogranichennoj otvetstvennost'ju, OOO)
- additional liability company (obshchestvo s dopolnitel'noj otvetstvennostju)
- general partnership (polnoe tovarishchestvo)
- limited partnership (komanditnoe tovarishchestvo)
- industrial cooperative (proizvodstvenyj kooperativ)
- state and municipal unitary enterprise (gosudarstvennoe i municipal'noe unitarnoe predprijatie).
In addition to the above-mentioned legal entities, individuals, simple and silent partnerships (which are not considered legal entities) may engage in commercial activities.
Non-profit organizations may take the form of institutions, public associations, consumers cooperatives, social funds and religious associations.
The most important forms of legal entities are the limited liability company, the private joint-stock company and the public joint-stock company. In all three cases, the liability of the shareholders, as far as company debts is concerned, is limited to the amount of their contribution to the nominal capital of the company.
Foreign investors may establish companies which are fully foreign owned in any form, with the exception of unitary enterprises. Foreign companies may also register representative offices (for auxiliary and preparatory activity) or branch offices (for commercial activity). Please refer to the table comparing the most commonly used types of entities and offices.
The form of legal presence in Russia which your business takes will influence every aspect of the work that you do. Your choice of legal presence will have an impact on the deals you are capable of making and the tax consequences of those deals. It will affect your financial and tax accounting and reporting. It will affect what you are capable of doing as far as customs are concerned, currency control legislation, your ability to employ foreign nationals, the repatriation of income, the application of international treaties and a whole range of other aspects. Therefore, particular attention must be paid to Russian business modeling PRIOR to setting up a legal presence in Russia.
Licensing and Certification
Russian legal entities and branches (including entities with foreign ownership and branches of foreign legal entities) may carry out any activity which is not prohibited by legislation. For instance, Russian legislation does not allow foreign companies and private Russian companies to own and sell some strategic objects, weapons and ammunition and nuclear products. Some activities also require that special permission licenses are obtained and some products may require certification.
- Licensed activities are listed not only in the Law 'On Licensed Activities' No 128 FZ of August 8, 2001, but also in several other laws and include:
- banking, insurance, investment
- customs brokerage, transportation, logistics, vehicles, aircrafts repair and maintenance
- medicine and pharmaceuticals, production of medical equipment
- education
- telecommunications
- notary services
- construction and maintenance of dangerous objects
- all activities related to weapons (non-strategic), drugs, poisons
- travel agency
- some other similar activities.
Medicines, detergents, medical equipment, telecommunication equipment and some other products require certification before their import and sale in Russia.
Customs
Customs relationships are governed by the Customs Code, Law No 31-FZ of May 28, 2001 and a number of subordinate laws and instructions which detail the provisions of the Customs Code.
As a general rule, goods may be imported and exported by all entities and offices. Representative offices of foreign legal entities, naturally, may import only for personal use and often apply a temporary importation regime. As far as branches of foreign legal entities are concerned, goods for further resale may not be imported by branches within a contract between a foreign and Russian legal entity, i.e. there should be no international trade deal.
Some relief from customs duties and import VAT may be obtained under temporary importation and similar customs regimes. The relief may be total or partial (with payment of a percentage of customs duties and import VAT for the period of importation). In theory, paid duties under temporary importation regime are refundable upon export however in practice this refund does not usually happen. Goods under temporary importation should be exported in the condition as they were imported.
The importation of a number of goods requires certification and the examples are provided above. Media software cannot be separated by value for customs duties and VAT purposes. Some equipment, e.g. telecommunication, may be imported only by licensed companies. Importation of goods as a contribution to charter capital are exempted from customs duties and VAT. There are also other exempted goods, mostly socially or economically important.
Russian Labor Legislation Overview
Labor legislation is composed of the Labor Code and a number of sublaws and regulations. The Labor Code strictly governs almost all aspects of labor relationships and its provisions are obligatory for employers and employees, i.e. even poor working conditions although agreed between employer and employee and fixed in a labor contract become void.
Labor legislation strictly regulates reasons and conditions for employment, dismissal and change of employment conditions, work and holiday terms, extra or special regime work and business traveling compensations, treatment of employees under 18 years old, women on maternity leave, etc. First and foremost, labor legislation seeks to protect the interests of employees.
The Russian labor legislation provides for a rule under which labor relationship entered into outwith the Russian Federation but taking place in the Russian Federation must be regulated by Russian labor legislation. Therefore, a foreign employee who has entered a labor contract with a foreign company which later assigns this employee in Russia, must be employed in accordance with Russian labor legislation. Where a labor contract, concluded between a foreign employee and a foreign company, contradicts Russian labor legislation, the latter is applied.
This also means that the labor activity of such foreign employees must be documented in the same way as the labor activity of Russian employees. Hence, the employer company must compile personnel record documentation for enrolling foreign employees.
Russian Migration Legislation Overview
Russian legislation, while establishing equal rights for Russian and foreign employees, stipulates certain restrictions concerning the work activity of foreign nationals in Russia. On July 25, 2002 the President of the Russian Federation approved Federal Law "On the legal status of foreign nationals in the Russian Federation" # 115-FZ. The Law defines the legal status of foreign nationals in the Russian Federation and also covers issues of their entry, exit, stay and employment.
The Law sets out the procedure according to which each foreign citizen must obtain a personal work permit for conducting labor activity in Russia (under either a labor or civil law contract). It is the employer company that is obliged to obtain a work permit for a foreign employee. In addition to this, the employer company must also obtain an employment permit in order to gain the right to employ foreign citizens.
- A foreign national doesn't need a work permit if he/she has:
- Temporary Residency
- Permanent Residency
- Types of Russian visas
- Personal Registration
Temporary Residency
A temporary residing foreign citizen is a person who has obtained a Temporary Residence Permit (TRP). This is a document providing the right for a foreign citizen to reside in Russia before obtaining a residence permit. A TRP is issued for 3 years and should be issued within 6 months from the application date. A TRP can be issued to a foreign citizen within the quota established by federal government.
Rights and obligations of a temporary residing foreign citizen
- A temporary residing foreign citizen cannot change as he or she wishes the place of residence
- within the region where he/she obtained a temporary residence permit, or to reside outside the region where he/she obtained a temporary residence permit.
- A temporary residing foreign citizen does NOT need a work permit to work on the territory of
- the region where he/she obtained a TRP but has to obtain one to work outside of this region.
- If a foreign citizen wants to leave Russia he/she should apply for a single exit/entrance visa each time he/she leaves.
Permanent Residency
A permanently residing foreign citizen is a person who has obtained a Residence permit in Russia. After obtaining a Temporary residence permit and residing on its basis for no less than a year, a foreign citizen may apply for a residence permit. A residence permit is issued to a foreigner for 5 years and can be extended for another 5 years. A residence permit enables a foreign citizen to work in Russia without a work permit and to travel in and out of Russia without a visa.
- A foreign national doesn't need a work permit if he/she:
- is an employee of the diplomatic representations, worker of the consular institutions of foreign states in the Russian Federation
- is an employee hired to assemble and maintain equipment imported into Russia by a foreign company
- is a journalist accredited in the Russian Federation
- is a student studying in Russia and working in his/her spare time
- is a lecturer or teacher invited by an educational organization
In circumstances other than those mentioned above, the Russian Government adopts an annual employment quota limiting the number of foreign nationals coming to work in the Russian Federation.
Types of Russian visas
A visa is a document issued on the basis of the invitation for an entry to the Russian Federation. The visa determines the period a foreign citizen may stay in Russia. All foreign individuals except for citizens of the Commonwealth of Independent States (most of the former Soviet Union Republics) need to have a visa to enter and stay in Russia. Citizens of Turkmenistan and Georgia also require a Russian visa.
| Type of visa | When it is required | Inviting authority | Ground for issue | Term of visa |
| "Work" visa | When a foreign citizen comes to Russia to work for a Russian company or subsidiary company of a foreign legal entity. | Employer company. | Foreign individual's Russian Work permit. | Such visas are issued for a period of 12 months and are usually registered in Russia for 6 or 12 months. This visa can be extended for another 12-month period by leaving Russia, provided that foreign individual's Russian Work permit did not expire and the new Work permit was obtained in time. |
| "Foreign employee" (work) visa | When a foreign citizen comes to Russia to work for a representative or branch office of a foreign company. | The authority with which a representative or branch office is accredited. | Foreign individual's personal accreditation card and work permit | Usually such visas are issued for a period of 12 months and are usually registered in Russia for 6 or 12 months. This visa can be prolonged for another 12-month period without leaving Russia. |
| "Business" visa | When a foreign citizen comes to Russia for meetings, negotiations, participation in exhibitions and takes part in personal development and retraining programs. | It should be the authority (company) where the foreign citizen actually travels for business. | Invitation issued by an inviting authority (company). | "Business" visa may be issued up to 12 months but it allows the foreign citizen to stay in Russia for not more than 180 consecutive days. |
Personal Registration
All foreign nationals who have entered the Russian Federation are required to register within 3 working days from the day of their arrival. They should be registered at the address where they are planning to live for the duration of their stay. To do so, the inviting company should provide a form which has been filled in by the owner of the property where the foreigner is to stay and legalized at the local DEZ (House-Managing Service) or local REU (Department of Repair and Exploitation). This document (form) should bear the signature of the Head of the DEZ or REU, as well as the full name and title of this person in block capitals, in order for it to be valid.
If a foreign citizen has changed the place of his/her stay in the Russian Federation, he/she has to register at the new address within 3 working days. The registration of children under 18 takes place at the same time as the registration of their parents.