What does a foreigner need to do when he decides to come to Russia to start a business? Are there any restrictions for foreigners to do business in Russia? How to register a company in Russia and get Russian invitation? Today we will discuss these questions!
There are four main ways for foreigners to do business in Russia.
First, registration of a legal entity.
Buying shares in a company and taking a stake in a joint stock company.
Opening a branch or a representative office of a foreign company.
Registration of a self-employed person.
In this article I will explain how to register a company in Russia. The most popular form of legal entity is a limited liability company, so let’s talk about how to register a limited liability company in Russia (ООО for short).
What are the restrictions on foreign companies operating in Russia?
Russian legislation provides for a number of restrictions on the activities of foreign companies. Such restrictions are rather numerous, I will give a few examples.
1) For example, in the field of land law, foreigners and foreign legal persons cannot have ownership rights to land located in the area of the border (the list of this area is determined by the President of the Russian Federation in accordance with the Federal Law of the Russian Federation on the state border) and in the port area.
2 ) foreigners, foreign legal persons and Russian legal persons with more than 50% foreign investment can acquire only the right to lease agricultural land
3) foreigners and foreign companies cannot establish private reconnaissance companies and security service companies
4) foreigners and foreign fishing vessels are prohibited from engaging in fishing
5) foreign citizens and organizations do not have the right to become founders of the media
6) special conditions are attached to the acquisition of shares in strategic enterprises by foreign investors. As a rule such transactions must be approved in advance by the authorities of the Russian Federation.
Foreign investors cannot engage in areas that involve the defense capabilities of the state. These areas include
– Recycling and repair of military equipment.
– All types of work related to radioactive substances.
– Television and radio broadcasts on a large scale.
– Publishing and printing activities (if the number of copies exceeds one million).
– Development and sale of all types of weapons
– Sale of gunpowder (pyrotechnic) equipment
– Engaging in space activities
Special rules are also established for foreign companies in the field of insurance, banking, air transport and taxation.
In which areas does the licensing system apply?
It is important to note that in order to engage in certain types of activities, a limited liability company must obtain a license. About 40 industries require a license. Examples of these industries include: medical industry, pharmaceutics, production of medical devices and their repair, auditing, architectural design and construction, railroad, maritime and inland waterway transportation of goods and passengers (if more than 8 passengers at a time).
What is a limited liability company?
A limited liability company (LLC), abbreviated as ООО in Russian, is a legal form of economic association, whose participants have only limited liability. The registered capital of a limited liability company is divided into shares, and the shareholders of the company do not bear the full responsibility of the company, but only the risk of loss in the proportion of the amount of the contributed capital. All issues related to limited liability companies are regulated by the Russian Federation Limited Liability Company Act. (Federal Law No. 14 of Russia “On the Law of the Russian Federation on Limited Liability Companies”).
The advantage of this form of limited liability company is the relatively simple procedure of state registration. Only the simplicity of the registration process for individual entrepreneurs is comparable to it. In addition, LLCs have the option to use a simplified tax regime. A foreigner can also become a single shareholder of the company. The Russian Limited Liability Company Act allows a natural or legal person to establish a one-person company with a separate capital contribution. However, a one-person LLC cannot invest in the establishment of a new one-person LLC.
The disadvantage is that the number of participants in a limited liability company may not exceed 50 persons. If the number of participants in the company exceeds the number specified in this paragraph, the company shall be reorganized into an open joint stock company or production cooperative within one year. If the company is not reorganized and its number is not reduced to the number specified in this paragraph within the above-mentioned period, the company shall be liquidated in a judicial procedure at the request of the legal entity registration authority authorized by the Federal Law, or other state or local self-government authorities. In addition, it is necessary to amend the constituent documents each time there is a change in the composition of the founders and their shares in the company.
What are the steps required when I want to register a company in Russia?
The procedure for registering a limited liability company is relatively simple. The main difference between the registration of a company by a foreigner and a Russian one is that foreign citizens need to prepare additional documents.
The steps for registering a limited liability company in 2019 include.
1) Determining the name of the LLC.
2) choosing a legal address.
3) determination of the scope of business of the company.
4) foreigners to determine the form of tax payment.
5) detailed registration of the company’s relevant documents.
6) the founder to pay the state fees for registration of the company.
7) registration procedures and obtaining the registration certificate.
Follow-up work after successful registration of the company.
8) After successful registration you need to prepare the documents required to open a bank account and go to the bank to open an account .
9) Payment of registered capital. After opening the bank account, you need to deposit the registered capital into the account. The minimum registered capital is 10,000 rubles. If the registered capital is paid in kind, an independent appraisal of the physical assets is required.
10) Ensure that the financial accounting of the company is carried out
11) Preparing and signing the employment contract of the General Director
12) Registration with the Pension Fund and the Social Security Fund
13) Obtain statistical code (3 working days)
14) Obtain the relevant industry license if you plan to engage in activities that require a license.
First, determine the name of the limited liability company
In the first step the foreign investor needs to determine the name of the company. First of all the name of the company must be in Russian. You can also give the company a name in another language, but only if there is a version of the Russian name, even if it is a direct translation from the alphabet. In the Unified State Register of Legal Persons of the Russian Federation, no other name can be entered except for the Russian name of the company. However, in the Articles of Association it is possible to provide for any language version of the company name in addition to the Russian name.
*The full name of the company must include the name of the company and the name of the form of organization. For example, Общество с ограниченной ответственностью “Китайская торговая компания” (“China Trading Company” Limited Liability Company).
In addition, there are certain restrictions on the use of legal names. Noteworthy are the restrictions on the use of the words “Russia”, “Russian Federation”, “Moscow”, “Olympic”, “Paralympic”. (For example, the use of such terms as “Russia”, “Russian Federation” requires special approval). Also, it is not allowed to use the name of a state agency in the company name.
Secondly, choosing a legal address
Before registering the company, it is necessary to choose a suitable premises, which can be an office, warehouse or other building. At the same time, the address will be used as the company’s future address for external contacts.
You can obtain a legal address in three ways.
- you can rent a house ;
- you can purchase an address from a company that specializes in providing legal addresses for registered LLCs;
- you can register your company at the address of the residence of the founder or manager of the LLC.
Items 1-2 above require a letter of guarantee of the address from the lessor of the house or the management company. Item 3 requires a copy of the extract from the Unified State Register of Real Estate of Russia (ЕГРН) and the consent of the owner.
If you want to rent a house or buy a legal address, then I recommend you to always check how many legal entities are already registered using this address. The check can be done through the website of the Russian Federal Tax Service.
Third, determine the scope of business of the company
There is a detailed classification of economic activities in Russia, namely the All-Russian Economic Activity Classification Manual (Общероссийский классификатор видов экономической деятельности (ОКВЭД)). The manual contains a detailed list of all types of LLCs and other forms of economic organizations that may engage in the course of business activity.
Now that you have a preliminary plan of the types of business your company will perform in the future, you need to select the appropriate activity type code (код вида деятельности) from the economic activity classification manual.
When determining the type of economic activity, you can choose only one activity type code as the code for the main business of the company. And if necessary, you can also choose secondary codes.
Confirmation of the company’s business scope is necessary, because the amount of contributions to the Social Insurance Fund is determined by rating the professional risk factor of the company’s employees according to the company’s business scope. The higher the risk rating of the business activity, the higher the contribution base. Therefore, I do not recommend you to choose too many codes for secondary activities, because too many codes will lead to an increase in the amount of contributions to the Social Insurance Fund.
Fourth, determining the form of tax payment
The general tax system, abbreviated in Russian as ОСНО, defaults to the general tax system if it is not specified at the time of registration. It is understood that in case of choosing this tax system, all prescribed taxes will be paid: VAT, personal income tax, property tax.
The simplified tax system, referred to as УСНО in Russian, is relatively simple to use for the preparation of tax returns and calculation of tax payments. And the simplified tax system has two options to choose from.
– taxation at 6% of income
– 15% of profits (income minus expenses)
However, not all companies are subject to this tax system. A company is not entitled to declare the simplified tax regime if it is engaged in a range of business activities listed in item 346.12 of the Tax Code of the Russian Federation. The tax regime is also not applicable in the following cases.
– other companies hold more than 25% of the limited liability company’s shares
– The company has one or more representative offices
– The average annual number of employees exceeds 100
– the remaining capital and tangible assets exceed 100 million rubles.
If you want to choose the simplified tax regime at the very beginning of your company, you should submit the relevant documents for incorporation of the company in addition to the letter of notification of the use of the simplified tax regime to the tax authorities. Of course, it is possible to change to the simplified tax regime within 30 natural days from the date of submission of the company registration documents to the tax authorities for registration. Otherwise, you can only wait until the beginning of each tax year to submit the application for change. 
Fifth, preparation of documents related to incorporation
The founder has to submit the following documents.
A) If the founder (shareholder) is a natural person, he/she needs to provide.
1) Notarized passport of natural person – shareholder (foreign founder (shareholder) needs to have his passport translated and notarized in Russia)
2) Application for registration of legal entity Р11001
One of the most crucial documents for registration of a limited liability company is the application for registration of a legal entity Р11001. Registration is often denied by the registration authorities due to errors in filling out this application.
The application can be filled out manually, or it can be filled out via the Internet route. To avoid errors, I recommend filling it out via the Internet.
Specifically, the application form for registration of a legal person can be filled in through the special online registration system of the Russian Federal Tax Service (ФНС). Now it is possible to register a company through this system as well.