Setting up a branch / representative office in Russia

If you have a company abroad and want to set up a place of business in the Russian Federation, there are 3 ways how to do it:
- representative office
- branch
- subsidiary company

WHAT IS THE DIFFERENCE?

A representative office is a division that is created outside the location of the main organization to represent and protect its interests; for example, it concludes transactions on behalf of the foreign legal entity, monitors their execution, analyzes the market and conducts advertising campaigns. A representative office may NOT engage in commercial activities.

A branch is a similar separate structure, but with a wider range of functions. A branch can do everything the parent company does, but in another country. However, neither a branch nor a representative office is considered a full-fledged legal entity.

There are some restrictions for branches in customs and currency regulation, so often instead of branches, subsidiaries are created. These are organizations in the form of a limited liability company (known in Russia as OOO) or joint-stock company (in Russia, AO), whose controlling interest is held by an overseas firm. A subsidiary has its own liabilities and assets.

On the other hand, a branch and representative office has its advantages: namely, it is much easier for them to transfer funds to the parent and can be directly financed from the budget of the overseas business; and there is also reduced currency control by government agencies compared to an LLC. Plus, the director of a local subsidiary can do many things without prior approval from the members or the board of directors, and may be difficult to control.

HOW TO OPEN A REPRESENTATIVE OFFICE OR BRANCH?

We dedicated some articles to how to open a company, what you should take care of before and after creating it, what are possible ways to expand your foreign business into the Russian Federation, what are the most popular business sctuctures in Russia, but we only briefly talked about representative offices and branches. So let’s discuss them.

Their creation in Russia is give or take the same and associated with the ACCREDITATION, which is somewhat more complex and costly compared to registering an LLC.

To do this, the company should prepare the following:
- application for accreditation;
- constituent documents of the overseas firm;
- extract from the register of legal entities from the country of origin;
- proof of registration as a taxpayer in the country of origin;
- decision to open a branch in Russia;
- regulations on the branch/representative office;
- power of attorney granting the head of the branch/representative office in Russia the necessary powers;

The state fee for the accreditation in 2024 is 120,000 rubles; for entities from the Eurasian Economic Union, 4,000.

There are specific requirements for signatures, seals, apostilles, translations and the content of the documents, so we recommend contacting us if you plan to open a branch - if you submit the paperwork incorrectly, you will be denied and have to pay the fee again.

First, the company notifies the Chamber of Commerce and Industry. They must certify the staff of the representative office. A letter is written, to which documents on the activities of the representative office in Russia are attached. A fee is charged for certification services, which depends on the number of future workers and method of submitting data. Then the entrepreneur or their representative applies to the Federal Tax Service to accredit the representative office / branch. In addition, it will be registered with the Tax Service - you need to contact the Tax Service at the location of the representative office and collect the certificate.

After opening, the branch / representative office needs to open a current account in a Russian bank and order a seal.

To launch the full-fledged work, it is worth taking care of the personal accreditation of foreign specialists in the Chamber of Commerce and Industry and obtaining visas for their entry into Russia.

Like any other organization, the representative office must maintain separate accounting and tax records. International standards (IFRS) are allowed to be used for accounting, while tax records must be maintained strictly according to Russian standards. Therefore, it is worth considering outsourcing a company with relevant work experience.

Need legal help? Feel free to contact us:
Tel: +7 909 961-19-09
Email: legalsolutions@inbox.ru
Visit us: Moscow, Zubovskiy bulvar, building 4/1, office 308



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