Russia provides many investment opportunities for foreign businessmen wanting to set up companies in the country. The Russian Civil Code allows foreign investors to set up new companies or to open branch and representative offices. Enterprisers selecting to open subsidiaries may opt for a limited liability company.
The subsidiary is a company in which the majority shareholding votes belong to the foreign entity, usually called parent-company. The major advantage the subsidiary has is that the liability of the shareholders is limited to their capital contributions.
A single shareholder is sufficient to start a subsidiary in Russia. The minimum share capital will depend on the type of structure the foreign investor decides to register. One can choose a limited liability company or a closed joint stock company that require a start-up capital of 10,000 rubles or an open joint stock company that needs a minimum share capital of 100,000 rubles. Certain requirements must also be met with respect to the company’s management structure of these types of companies.
According to the Russian Civil Law and Tax Code, the branch office is not a separate legal entity, but an extension of the foreign company in Russia. In case of branch offices, the parent company will be held liable for their obligations and will receive all their profits. In order to be able to conduct business operations, a Russian branch office must register with the State Chamber of Registration and with the Branch Tax Inspectorate within the Federal Tax Service.
Compared to the registration procedure of a subsidiary, a branch is more expensive to register in Russia. Branches in Russia cannot apply for certain licenses for business activities, while subsidiaries may apply for many more. In terms of taxation, the subsidiary may benefit from numerous tax advantages mostly due to the extended double taxation network Russia has. However, a Russian branch office will only have to pay taxes on the income it makes in the country.
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